Rolling the dice on the future of Sears by Nin-Hai Tseng @FortuneMagazine April 4, 2012, 4:16 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE – It can almost be said that Sears Holdings Corp. SHLD is one of the best and worst stocks today. The Hoffman Estates, Ill.-based retail conglomerate has been battered amid declining sales and profits. But as CEO Eddie Lampert scrambles to raise cash and calm investor fears, shares have more than doubled so far this year, making the stock one of the top performers in the S&P 500 in 2012 after falling sharply last year. Analysts and traders have speculated about the fate of Sears Holdings countless times since Lampert combined Sears and Kmart in 2005. Investors have endured wild swings in the stock as the retailer has navigated its way through the recession, only to emerge battered and bruised, but still intact. However uncertain the future of the once successful mail-order brand, there are certain scenarios more likely to transpire than others: Bankruptcy Anything is plausible, but no serious analysts are saying Sears will go under. If anything, the stock’s remarkable surge partly signals that investors think, indeed, anything could happen but likely not bankruptcy. A full turnaround Again, this is unlikely, at least anytime soon. For six years in a row, sales have declined at stores open for at least a year. The retailer lost $3.1 billion in 2011 amid criticism that stores had gotten too shabby and customer service lagged. Sears has been ramping up efforts to reverse its sliding sales. However, it is counting on certain strategies that haven’t quite taken off. Most recently the retailer unveiled a loyalty program called Shop Your Way Rewards, which provides customers freebies for repeat purchases so long as they agree to share personal shopping data with the company. This might sound promising, but such efforts alone will certainly not turn the company around. Even the Kardashian Kollection, introduced last summer, can’t make a dent in the red ink. MORE: Look which fund manager is back on top In a way, Sears has the economy against it. And as the retailer looks hard at how it needs to do business differently, it will need to fiercely re-evaluate the way it runs its extensive appliance, hardware and home business. Last month, the company hired an executive from Sony SNE to restore its flagging home-appliance business. It remains to be seen what comes of that. Sears has suffered disproportionately from the recent economic downturn, partly because of the retailer’s popularity among lower-income households — those being pinched the most — and its historical strength in sales of home appliances, according to a January report by Morningstar analyst Paul Swinand. He forecasts that 2012 could be another rocky year for the retailer. Higher gas prices and a continually slow housing market could weigh on Sears, even if the company can leverage some of its assets. Going private Not a bad idea, but pretty much a long shot at this point. Earlier this year, speculation swirled that Bruce Berkowitz’s Fairholme Capital, Sears’ second-biggest shareholder, and Lampert could take the company private. The stock rallied on rumors, which came days after a major business lender stopped making loans that Sears’ suppliers relied on to sell goods to the company. Speculation of a leveraged buyout also came around the time Lampert, Sears’ biggest shareholder who owns about 60% of the company directly and through various related entities, bought roughly $159 million worth of shares of Sears for his ESL Investments hedge fund. A Sears spokesperson said the company doesn’t comment on market speculation, but it’s hard not to wonder if Lampert might want to buy up shares to eventually make the company all his and go private. After all, shielding Sears from the pressures of shareholders could make it easier for executives to really give the company a complete makeover. But going private seems virtually impossible, at least in the near term, while Sears works to make vast improvements in its business. Slow liquidation This is likely where Sears is headed as it buckles down in survival mode. Last week, The New York Post reported that Lampert was quietly shopping around a Sears property, the clothing retailer Lands’ End, to private equity firms as part of a plan to raise up to $2 billion in cash. To stay afloat with enough cash flow, the retail chain has been trying to sell off or spin off its stores – something that Credit Suisse analyst Gary Bather says will likely continue “in a controlled liquidation of its chain.” In February, the retailer said it planned to sell 11 stores, spin off its Sears Hometown, among other efforts that altogether are expected to add about a $1 billion cushion to its balance sheet. While the move sent its stock soaring more than 20% and put rumors of bankruptcy to rest, it’s likely that Sears will eventually fall short of cash again. After all, it was only two months earlier when it secured $350 million by closing up to 120 Kmart and Sears stores and reduce inventory. MORE: Eddie Lampert stages a comeback “Selling one’s best stores and operating assets is not a success story, it is a survival strategy,” Bather wrote to clients in a March 19 report. In a later report on March 29, he added that he expects Sears to fall about $850 million short of cash flow in 2013, leading to sales including Lands’ End to finance operations. He notes that Lands’ End and Sears Canada “are the most separable assets in the chain.” Needless to say, Sears can’t run a business by selling off its assets. It will eventually need to address fundamental problems of its chain, or else face the worst.