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What: Shares of struggling retailer Sears Holdings (NASDAQ:SHLD) collapsed by 37.8% in June, according to S&P Capital IQ data. A lackluster earnings report, along with the commencement of a rights offering for Sears' spinoff of its real estate assets, weighed heavily on the stock.  

So what: Sears posted a smaller loss than anticipated during the first quarter, losing only $2 per share, $0.59 better than the average analyst estimate. But revenue plunged by 25.4% year over year, as comparable-store sales continued to slide (a 14.5% drop at Sears stores and a 7% decline at Kmart locations).

The company's balance sheet also further deteriorated during the quarter. Sears' cash on hand fell to $286 million from $831 million at the same point last year, and the company's total debt, including pension obligations, rose to $6.22 billion.

Sears' precarious financial position led management to earlier this year announce a spinoff of its real estate assets into a REIT, and the rights offering for Seritage Growth Properties was announced one day after the company's earnings report. Sears expects to raise around $2.7 billion from the move, which would go a long way toward shoring up the company's finances. But investors are clearly worried Sears will simply blow through this additional cash.

Now what: Sears has shown no sign that its retail operation is improving, and spinning off its real estate means Sears' most valuable asset, which was likely holding up the company's stock value, is now gone. What's more, Sears' costs will rise as it leases the stores that it previously owned, putting further pressure on the balance sheet.

What remains after the spinoff is a failing retail company, albeit one that generated about $31 billion of revenue in 2014. Sears posted negative free cash flow of $1.66 billion last year; at that rate, the influx of cash from the REIT spinoff won't last long. There's little reason to believe the company can turn around its stores anytime soon, and while the spinoff buys Sears some time, it will likely only act to delay the day of reckoning.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.