Dive Brief:

• Bruce Berkowitz, chief investment officer at investment management firm Fairholme Capital Management, and president and director of Fairholme Funds, a SEC-registered investment company, is stepping down from Sears Holdings’ board of directors effective Oct. 31, Sears said in a press release Monday.

• Berkowitz joined the board of Sears Holdings in February last year and has been among the few defenders of Sears’ turnaround efforts. 

• As the holiday sales season approaches, the embattled retailer once again got an infusion of $100 million from CEO Eddie Lampert’s hedge fund, with the opportunity to borrow an additional $100 million from subsidiaries owned by Lampert’s fund, ESL Investments, between now and Dec. 1. 

Dive Insight:

Berkowitz’s championing of Sears’ turnaround effort has been sorely tested as the retailer has continued to falter, relying on its real estate holdings to prop up its declining retail business, which includes its Sears and Kmart stores and sites. Sears has so far borrowed $499.4 million through a real estate-backed loan dating back to January. The new $100 million requires Sears to put up additional properties or other assets as collateral.

In a conference call in June, Berkowitz noted the importance of Sears’ vast real estate holdings to his firm’s investment, although that usually means turning the property into something other than a Sears location. "It’s very hard to come across an example where someone acquired real estate from Sears and did not succeed after redeveloping the location for higher and better use," he said, adding later, "we stated from day one that it’s always been our belief that the real estate within Sears was the margin of safety in the investment. We were never certain on the retail; that’s not our expertise and I think we’ve proven it’s not our expertise. But the company is now moving faster and faster to right-size its operations."

But that appears to be a nearly impossible task. For the second quarter, the ailing department store retailer posted a sales decline of more than $1 billion, to $4.4 billion from $5.7 billion in Q2 last year. Sears also reported a net loss of $251 million, or $2.34 per share, which was a significant improvement over a comparable loss of $395 million, or $3.70 per share, in the year-ago period. Sears’ comparable store sales fell 11.5% in Q2 — a steep drop-off from the prior-year Q2’s decline of 6.8%. 

Neil Saunders, managing director of GlobalData Retail, described Sears’ earnings report as a "miserable set of numbers" in a note emailed to Retail Dive. One big problem for the retailer is that, as it closes stores, its comparable store-sales continue to decline — which is the opposite of what should happen. Customers just don’t seem interested in either Sears or its Kmart chains. "This is hardly surprising as store environments across much of the estate are now so profoundly unappealing that many consumers seek to actively avoid them, let alone making a conscious decision to shop there," Saunders said.

In March, Sears expressed diminished hopes in its ability to continue operating, according to its annual report filing with the Securities and Exchange Commission. That alone might make vendors nervous, but many analysts have also signaled that the company is spiraling out of control.

It’s not for lack of trying. The company has shuttered hundreds of stores, and has also opened smaller-format appliance stores in Fort Collins, CO, and in Pharr, TX. Sears has even started selling Kenmore appliances on Amazon and continues to invest in its Shop Your Way omnichannel program. Nevertheless, the blow is one of many Sears has suffered recently.