In 1973, the just completed 110-story Sears Tower in downtown Chicago was the tallest building in the world and the symbolic new headquarters of the nation’s most powerful retailer. Sears, founded in 1886 as a seller of watches, dominated the second half of the 20th century retail landscape with its popular catalog and vast department store network.

Meanwhile, three hundred miles north in Detroit, the S.S. Kresge Company was beginning its second wave of success with its new discount format Kmart, which in 1977 would replace its previously popular Kresge 5 and 10 Cent stores.

In coming years, retail sales at Sears and Kmart would become neck and neck. Soon after, Wal-Mart would rise up from the South to make it a three-way race. With its vast selection and everyday low prices, Wal-Mart pushed past both in 1990 with annual sales of $32.6 billion, edging out Kmart at $32.1 billion and Sears at $31.9 billion, according to figures reported in the Chicago Tribune.

Since then, Wal-Mart has remained a powerful player in the retail industry. Meanwhile, Sears and Kmart's now combined enterprise is on a death watch as sales continue to fall and losses mount after years of missteps and failed turnaround plans. As Sears Holdings continues to close stores, open new lines of credit and sell valuable brands, some analysts say it's only a matter of time before the once-dominant retailer files for bankruptcy.

“Anybody who was shopping in the 1990s, 80s or 70s knew Sears and Kmart,” Candace Corlett, president of consulting firm WSL Strategic Retail, told Retail Dive. “Both are such legends in 20th century retail.” Assessing their image today however, Corlett remarked, “I think it is a blank slate. It is more of a retro image. There is nothing left to distinguish them. They have relied on their heritage rather than participate in new ventures to attract new customers.”

The beginning of the end

When Sears, Roebuck & Company merged with Kmart Corporation in March 2005, both retailers were already on shaky ground. Sears was in the midst of an identity crisis; It had already sold and moved out of its magnificent Chicago tower and after almost a century in operation closed its storied catalog operation. Also regaining its footing, Kmart had emerged from a Chapter 11 bankruptcy in 2003.

Optimists thought these venerable retailers might be stronger together by leaning on Kmart’s off-mall locations and leveraging Sears’ customer service skills and heavyweight brands like Kenmore. Yet, almost from the start, the union didn’t produce, as other retailers like Kohl’s, Wal-Mart and Target continued a forward march and Amazon became a major disrupter. Since the marriage, the two chains have lost nearly half of their sales.

In fiscal 2006, the first full year after the merger, Kmart had net sales of $18.65 billion, with an operating income of $948 million. By 2015 revenue had fallen 45% to $10.19 billion, as it posted an operating loss of $292 million. Sears Domestic (Sears Canada was reported separately) had net sales of $29.18 billion in 2006, which tumbled 48.7% to $14.96 billion by 2015. Its operating income in 2006 was $1.32 billion and in 2015 there was an operating loss of $708 million.

Store counts dropped from 1,388 Kmart units in 2006 to 941 in 2015. For Sears Domestic there had been 2,030 stores in 2006, comprising 861 mall stores, 74 Sears Essentials/Grands and 1,095 specialty stores. In 2015 that was down to 705 mall stores and 26 specialty stores. More stores were shuttered in 2016, and another 150 closings were recently announced for 2017.

For the nine months ending on Oct. 29, 2016, Sears Holdings’ sales fell nearly 10% to $16.08 billion, with a net loss of $1.6 billion.

Instead of coming up with a winning plan to rebuild store traffic, Sears has relied on financial moves to keep it going, Greg Portell, lead partner in Retail Practice at consulting firm A.T. Kearney, told Retail Dive. “Successful transformations make some big cuts and some big move and growth reemerges. Here after three or four of those little cuts where they haven’t been able to get growth going, we start to lose faith,” said Portell. “There is certainly a place for financial reengineering. But when Sears goes back to it numerous times it is an indicator they don’t have a real business solution.”

Sears executives insist they are taking actions to restore the company to profitability. Its multi-point plan includes shutting unprofitable stores, reducing space in existing stores, scaling back weak categories like electronics and pharmacy and cutting operating costs. 

“Despite the challenges that we face, both real and perceived, we have a plan to deliver for our members and turn the company profitable,” said Jason Hollar, chief financial officer of Sears Holdings, on an analyst call in December. “We are completely focused on execution and look forward to reporting progress.”

Turnaround initiatives fall flat

Attempts to rally interest in Sears and Kmart have focused much around bolstering its joint Shop Your Way rewards program and using technology to improve convenience. The retailer has made a big push for its curbside pick-up program, guaranteeing a wait of five minutes or less. 

Shedding its real estate and trimming inventory has also been a centerpiece of the strategy as it shifts to an integrated retail model, using Shop Your Way as the lynchpin. Shop Your Way has been so pivotal in Sears’ thinking that in 2014 it gave the new Kmart president the additional title of Chief Member Officer. Shop Your Way members receive daily deals with simultaneous discounts on apparel, jewelry, home departments and more. The more members shop, the more points they earn toward discounts. They can also obtain Surprise Points, which are issued to nudge lost shoppers back in.

While loyalty programs have helped to retain customer interest and drive traffic at other struggling department stores, WSL’s Corlett pointed out, “It doesn’t help if people don’t shop a lot to build rewards.”

And people aren't shopping at Sears or Kmart anymore. In a sad way, the desolate aisles at Kmart make for a "delightful" shopping experience, Corlett said. "I look at these employees and feel sorry. There are no lines. There is no confusion – just a lot of emptiness," she said. "I think it is depressing to shop in emptiness. There is something disconcerting about minimalism. You want your mass merchants to be chockablock full of stuff to buy.”

In recent years, the company has also experimented with merchandising initiatives, although to little avail. Themed brand shops such as Hello Kitty and Outdoor Life opened at Sears, and Kmart expanded licensed apparel lines to include a collection from Adam Levine, Maroon 5 frontman and coach for The Voice.

Last summer, Sears also launched "Showcase," a shop-in-shop apparel boutique experience aimed to feature popular international fashion brands. None-the-less, the retailer has continually failed to reinvigorate its brand's image as a cool place to buy clothing. Early last year, a survey released by Prosper Analytics & Insights revealed that just 1% of American shoppers called Sears their favorite place for apparel. According to the data, Sears dropped 53% year over year, and at the end of 2015, Sears ranked 15th overall among women's apparel favorites, behind nonprofit chain Goodwill.

Getting a lifeline

As the company bleeds, Sears Holdings Corporation’s chairman and CEO Edward Lampert continues to toss financial lifelines through his hedge fund ESL Investments. Just this month, the company announced it had obtained a $200 million secured standby letter of credit facility from the firm with the option to expand the amount to $500 million. It also secured a $500 million real estate-backed loan.

“This company is being kept alive by a hedge fund manager,” Jim Cramer, host of CNBC show Mad Money, said while discussing Sears recently. And that could be at the core of the problem.

“Eddie is a real estate man and he looks at the real estate more than the merchandise, which is hurting in all areas,” Walter Loeb, retail veteran and president of consulting firm Loeb Associates, told Retail Dive. “There is no passion in this anymore. This is a very sad situation. Sears used to be the attraction in the mall.”

Confounding onlookers most is Sears’ desire to sell its most prized possessions. The company spun off its Lands’ End unit in 2014, and its Kenmore, DieHard and its Home Services business are being shopped around.    

Most recently, Sears sold its powerful Craftsman brand for $900 million to Stanley Black & Decker, a move in the opposite direction of what most retailers are doing, WSL's Corlett said, “Others are acquiring proprietary brands. Sears is going counterculture and selling proprietary brands.” Many analysts have described the sale as the final death knell for the company.

The sale of Craftsman “is a desperate move,” said Loeb. “Selling iconic brands is devastating to the store. We are going to see a shrinking company with further losses.”

Behaving like a Bankruptcy

Corporate optimism aside, many analysts and other onlookers believe a bankruptcy is inevitable for Sears.

“Everyone seems obsessed about whether Sears is going to 'file' or not 'file,' while for all practical purposes they are currently going through the equivalent of a bankruptcy restructuring process in public with ESL leading the [debtor-in-possession] financing,” Don Ingham, a managing director at Tenth Avenue Holdings, told CNBC.

“The main thing that they might be able to accomplish by an actual filing would be to accelerate the closing of unprofitable stores in a more efficient manner, but this could come at the cost of losing control of the process of maximizing the value of some of the assets,” said Ingham, whose firm has a stake in both Sears’ equity and debt.

Save for an 11th-hour store revival plan, A.T. Kearney’s Portell said it is only a matter of time before Sears Holdings ends up filing for bankruptcy. 

“What is the business model going forward? How do the financial benefactors want to play this out?” are the main questions the company needs to sort out, Portell said. “It is probably around those financial engineering exercises whether that plays out in six months, 12 months or 18 months. It is more of a financial decision at this point, that yes, could end in bankruptcy.”