Sears shares were down more than 36 per cent in midday trading Wednesday.
The 125-year-old retailer has been hit particularly hard as brick-and-mortar stores have struggled to maintain massive showrooms and compete with e-commerce giants.
But if Sears is now in touch with banks to secure the financing needed for a bankruptcy filing, as CNBC reported Wednesday morning, that could send the surest signal yet that such a move may not be far off.
On Tuesday, Sears also brought in restructuring expert Alan Carr as a company director, broadening the six-person board to seven and adding further guidance on how to steer a large company through a bankruptcy filing.
Just weeks ago, Sears chief executive Eddie Lampert devised a last-minute plan to save the retailer.
The company has a total of about US$5.6 billion in outstanding debt and is down to about 820 Sears and Kmart stores. When Lampert took over as head of the company five years ago, there were 2,000 stories. Lampert bought Sears in 2004 and merged it with Kmart, in which he had a controlling stake, the next year.
Lampert - Sears' largest shareholder and creditor and the owner of the hedge-fund ESL Investments - asked creditors last month to refinance US$1.1b in debt before the October 15 payment, according to a filing with the US Securities and Exchange Commission.
He also called on the company to sell off US$3.25b in real estate and assets. Those include Sears Home Services and the company's flagship Kenmore brand, which Lampert offered to buy in August for US$400m.
Lampert himself has had a controversial tenure as chief executive. While much of his focus revolved around Sears' online presence, upkeep on physical stores has diminished. Lampert's strategy has often involved keeping Sears afloat with loans.
In the September SEC filing, Lampert's hedge fund said it "must act immediately to have sufficient runway to continue its transformation" if Sears could ever pull off a turnaround.
Matt Kopsky, an analyst at Edward Jones, noted that Sears has not turned a profit since 2010 and that it has already sold off a majority of its brands, including Craftsman tools.
The company owns roughly half of its real estate and has sold off most of its more valuable properties. The other half is leased, and there would be little cost savings from rent restructurings of those stores since Sears already pays well below market rents.
Were Sears to liquidate, the remaining stores - which average roughly 140,000 square feet - would flood the market with "a lot of empty boxes," Kopsky said. That kind of liquidation would be especially difficult for lower-tier malls and shopping centers hard-pressed to find tenants in low-demand areas.
Kopsky credited Sears' plunging share price to Wall Street pricing in an upcoming bankruptcy. Share prices of JCPenney, Kohl's and Bed Bath & Beyond were up as of midday Wednesday, which Kopsky said was an indication that the market believes Sears will file for bankruptcy and that those retailers will benefit in the near term.
Larry Perkins, founder and chief executive of SierraConstellation Partners, a firm that advises companies going through bankruptcies and other transitions, said that Sears bringing in bankruptcy advisers "is not a sure sign by any means, but it's certainly a leading indicator."
"This has been the slowest moving train wreck happening for literally years," Perkins said.
Typically at the point of bringing in advisers, a company is evaluating a range of alternatives, including other restructuring plans or the selling off of assets.
But even as Sears appears to near its "inevitable conclusion," Perkins said its final demise will set a precedent for an iconic American brand that fell from the height of retail dominance.
"It's sad, it's really sad to see the end of an era," Perkins said. "Maybe it's the phoenix rising from the ashes, but we'll see."
