Sears shares tumble to their lowest price since Kmart merger

Edward Lampert, chairman and CEO of Sears Holdings
Gregory Bull | AP

Sears shares tumbled more than 9 percent on Thursday, sending the company's stock to its lowest price since its merger with Kmart back in 2004.

The decline piled on to a 7 percent drop in Sears' shares a day earlier, when Fitch Ratings called attention to the chain's "significant" cash burn. Sears shares were last trading below $8, highlighting the severe financial strain the company is under as sales continue to erode.

In a downgrade of Sears' senior unsecured notes on Wednesday, Fitch said the company's interest expense, capital expenditures and pension plan contributions are expected to total $800 million for 2016. They could potentially hit $1 billion in 2017.

The ratings agency expects Sears to burn through $1.6 billion in cash in 2016, and $1.8 billion in 2017. Those numbers assume $250 million in annual working capital benefits from closing stores and trimming down inventories.

Meanwhile, Fitch anticipates Sears will report a loss of $950 million to $1 billion in 2016 and 2017. That would be wider than 2015's $836 million loss.

Fitch noted that Sears has injected almost $12 billion in liquidity into its business from 2012 to 2016, in an attempt to plug the hole it created through continuous sales declines. The retailer's recent financial maneuvers include selling its Craftsman business to Stanley Black & Decker and closing 150 unprofitable Sears and Kmart stores.

But with Sears' real estate portfolio shrinking to an estimated 190 unencumbered Kmart and Sears stores, Fitch said the company is running low on assets.

The agency's report came just days after Moody's downgraded Sears' corporate rating.

"Although Sears has been able to fund its continued cash shortfalls through planned asset monetization, and additional financings, a meaningful business turnaround in fiscal 2017 is critical given the continued reduction of its asset base," Moody's Vice President Christina Boni said in a statement.