Executives are abandoning ship during the critical holiday season. The latest round of store closures is in the works. And a key apparel account just recorded another quarterly sales decline.
Yet despite the slew of negative headlines leading into Sears' fiscal third-quarter earnings report Thursday, the department store chain has reason — and likely, the resources — to hang on after the holidays and through early 2017, when retail bankruptcies are typically filed.
As CEO Eddie Lampert continues to inject funds into the company, the chain has been able to purchase inventory for its stores, while garnering returns for his hedge fund ESL. The company also has roughly 250 unencumbered Kmart and Sears stores that it could sell off, potentially generating some $2.4 billion in proceeds, according to Fitch Ratings.
While such maneuvers are seen by many as temporary ways to plug the hole in Sears' operating losses, they should continue to buy it time. At a national real estate conference in New York City this week, chatter swirled that late 2017 would be the earliest date Sears would file for bankruptcy in order to protect the $2.7 billion in assets it sold to Seritage Growth Properties and through joint venture deals last year.
Those people formed this thesis upon a piece of the U.S. bankruptcy law called "fraudulent conveyance," which would give Sears shareholders a two-year window to go after Seritage's assets if the department store chain were to file for bankruptcy. The two-year anniversary of that spinoff falls this summer. In the short time Seritage has been a publicly traded entity, its shares and market capitalization have already surpassed those of Sears.
"There isn't anything right now ... that says it's going to be any different than what people are expecting it to be, which is just another bad quarter," Philip Emma, head of North America research at Debtwire Analytics, told CNBC.