Sears may never be profitable again, Wall Street analyst says

Key Points
  • Susquehanna analyst Bill Dreher voices his concern whether Sears "will ever return to profitability" in a note to clients.
  • Shares of Sears fell about 6 percent on Wednesday, adding to their loss of more than 55 percent in the past six months.
  • Sears pre-announced its third-quarter earnings Wednesday, conceding that the department store chain's total same-store sales plunged 15.3 percent during the period.
  • Sears also announced Wednesday that it is selling 140 Sears properties to help free up cash for its withering pension fund.
A sign announcing the store will be closing hangs above a Sears store in Chicago, Illinois.
Scott Olson | Getty Images

One Wall Street analyst is beginning to doubt whether Sears Holdings will ever be profitable again, as the 124-year-old retailer struggles for liquidity and same-store sales evaporate.

"Sears' operational performance is clearly NOT improving, and we grow increasingly concerned whether the company will ever return to profitability," wrote Susquehanna analyst Bill Dreher in a note to clients Wednesday. "Further highlighting the company's weakened position is the reality that manufacturers are increasingly demanding tighter payment and/or withholding products."

Shares of Sears sank 6 percent on Wednesday after the company warned that its same-store sales fell more than 15 percent in the third quarter and that it will sell more than 100 properties to help keep its pension afloat.

In light of the disappointing sales news, Dreher cut his third-quarter adjusted earnings per share estimate to a loss of $4.46 from a loss of $3.23, while also reducing his year-end outlook to a loss of $11.07. Dreher noted that the 15 percent decline in same-store sales in the third quarter comes on the heels of two quarters of more than 11 percent declines in comp sales.

Sears did not immediately respond to CNBC's request for comment.

Sears also announced Wednesday that it had struck an agreement with the wardens of its underfunded pension fund — the Pension Benefit Guaranty Corp. (PBGC) — to allow for the sale of 140 Sears properties in an attempt to free up some cash.

"While the ongoing initiatives should help alleviate some pressure going forward, we believe these are only temporary fixes and Sears' long-term success remains in doubt," he added. "Sears is still in violation of the agreement with the PBGC, and will have to continue to sell assets in coordination with the PBGC's approval."

The PBGC is a federal oversight group that guarantees individual pensions should a company go bankrupt. PBGC has the right to involuntarily terminate Sears' pension if the company fails to put up enough collateral.

WATCH:  Sears Holdings same-store sales to drop 15.3%

Sears Holdings same-store sales to drop 15.3%
Sears Holdings same-store sales to drop 15.3%