Dive Brief:

• Sears Holdings has extended its partnership with Citi to offer a co-branded Mastercard credit card tied to Sears' Shop Your Way loyalty program, pushing out its current agreement to 2025, which Sears could then extend another two years. The deal comes with a $425 million payment to the department store retailer, most of which has already been paid, Sears said in a press release and regulatory filing.
• Under the amended agreement, Sears gives up its right to purchase program-related assets in certain circumstances, including on termination of the program unless Sears elects for the two-year extension after 2025, according to the filing.
• The agreement also extends the rewards available to users through the Sears Shop Your Way program, including points that can be redeemed on purchases at Sears and Kmart. Craig Vallorano, head of Citi Retail Service, said in a statement that 70% of customer spending through the Sears credit card occurred at retailers other than Sears. Sears CEO Eddie Lampert said there was a "strong volume of card issuances in 2017." The cards, according to Sears' website, come with an interest rate of nearly 27% for consumers. 

Dive Insight:

For years now, Lampert has made the department store retailer's loyalty program the linchpin of the business and its future.

"Shop Your Way is fueling our transformation, 2017 was a year of great success for members who earned $800 million in Shop Your Way points," Robert Naedele, Sears chief commercial officer, told attendees at the retailer's annual investor meeting earlier in May. Members who engage with the program do so at greater rates than shoppers who do not. They buy more frequently, refer friends and become brand advocates.

But Sears, which last year laid off the senior vice president overseeing Shop Your Way, doesn't have much to show for that loyalty, so far. The company's comparable sales declined by more than 13% in 2017. In fact, Sears has posted positive same-store sales growth just once since 2008 — in 2010 — according to data from Retail Metrics.

Then again, we don't know how Sears would be performing right now without Shop Your Way. Sears peers, including Macy's and Kohl's have also made their respective loyalty programs key to their strategies.

The deal with Citi, along with extending the credit card program, brings Sears some much-needed cash. It is one among several moves lately to boost Sears' liquidity in an effort to rebuild Sears' bottom line and keep operating outside of bankruptcy. The retailer has also exchanged debt to push out maturities, borrowed from Lampert's hedge fund, auctioned off properties online and is contemplating selling its Kenmore brand and other assets to Lampert's fund.