As another way to generate cash, Lampert has sold off several of the better Sears stores, says Columbia Business School professor Mark Cohen, who was CEO of Sears Canada until mid-2004 and chief marketing officer and president of soft lines in the U.S. before that. A lot of the remaining stores are in economically challenged areas, or in older, declining malls. "Most retailers have come out of the recession with some manifestation of recovery," says Cohen. "But Sears continues to decline, and there's no reason why it should show any positive performance because there's been no strategy or investment. This has been an asset strip."

In fairness to Sears, capital spending has picked up 23.4% over the past two years, to $432 million last year, points out David Trainer of New Constructs. Trainer still considers Sears a dangerous stock because of poor returns on investment and because shares look expensive, given the company's prospects, after such strong performance this year.

Sin No. 2: Prices that are too high

Another problem for Sears is that it rarely offers regular discounts and low pricing like Wal-Mart and Target (TGT) do. "Lampert decided that price doesn't matter; he's going to go for profit margin," says Davidowitz. "In retail, you don't start with profit margin, but in Lampert's world you do. So Sears was not price-competitive and still isn't." Again, customers noticed and went elsewhere.

"We believe it is not just solely about price when it comes to value to our customers," responds Sears spokeswoman Kimberly Freely. Sears also provide value through special offers inside a membership program, a guarantee to process returns in five minutes, free shipping on some products at certain times and "best in class brands at both Sears and Kmart."

Sin No. 3: Hiring CEOs without solid retail experience

Sears needs a CEO with solid retail experience to shake things up by clearly defining a direction and trying out new concepts in test stores, says Davidowitz. Instead, the CEO who joined in February 2011, Louis D'Ambrosio, comes from Avaya, a tech company. Before that, he worked with IBM (IBM). "He has no retail experience, and there's no reason to believe he is anything more than the latest puppet," says Cohen, at Columbia Business School.

Before that, Sears had an interim CEO for a few years, W. Bruce Johnson, who was promoted from inside the company, where he was in charge of supply chain and operations -- more of a tactical than a strategic leadership position. Sears has also had a lot of top management turnover in recent years, which also makes it more challenging to set a clear strategy, says Morningstar's Swinand.

In defense of Sears, it recently put Ron Boire, a solid retail veteran, in the position of chief merchandising officer. Boire had been the CEO of Brookstone and the president of U.S. Toys, North America for Toys R Us. He had also worked in Sony's (SNE) consumer division.

Sin No. 4: Regular sales declines

A combination of the sins above, plus a weak economy, has led to the cardinal sin in retail -- regular sales declines. The key metric to watch in retail, says Davidowitz, is "same-store sales." This gauges sales at stores open more than a year, to strip out the effect of store openings and closings. "That is the most important thing in retail. It proves your viability," says Davidowitz.

Unfortunately, Sears' same-store sales have been in decline for six straight years. The trend continued in the fourth quarter, when U.S. same store sales fell 5.2%. "In other words they are shrinking their market share," says Davidowitz. As a result, the company lost $4.52 per share last year, after accounting adjustments.

Click here to become a fan of MSN Money on Facebook

In its most recent conference call, Sears outlined several tactics it believes will help reverse the negative trends. It's "arming" sales associates with iPads so they can better help customers figure out which products are right for them. This makes sense with big-ticket appliances. Sears is rolling out a shoppers' loyalty program, and new Kenmore and Craftsman products. It's revamping store layouts to mix up merchandise so that customers who go in for one thing pick up other stuff as they move through stores. Work clothes, for example, have been moved closer to tools.

Stocks mentioned in this article include: CIT Group (CIT) and Sears Holding (SHLD).