Well both companies are still profitable, they have just seen their market share eroded away and their sales revenue in a continual decline for a better part of a decade. I'm not really sure whether or not this merger will be fruitful in the long-term. But at least in the short-term the combined company will have reduced costs and its larger size will give it significantly more buying power and market presence, but still pale in comparison to Walmart and Target.
What sucks for Sears and KMart is that the bottom of the market segment has been thoroughly taken over by Walmart and Target... as well as newer entrants like Kohl's. Specialty stores like Best Buy and Bed Bath and Beyond have taken over a lot of both companies old core businesses, electronics, appliances, and home decor and small appliances. This stuff WAS very profitable for a store like Sears. But not with everyone and their mother selling TVs and washer/dryer sets the margins are much much smaller. Unlike JCPenney, Sears really does not have the brand equity to move upmarket as a department store. For many people, and to some extent that includes me, there are still memories of dumpy stores (who hasn't been in a Sears that hasn't been in some state of construction?), Toughskins jeans, and bad polyester perma-press men's wear. Not to mention the complete absence of popular name brands until almost 15 years ago for most things.
I still doubt the long-term success of a Sears/Kmart merger. They have a few good things going, namely Craftsmen tools and garden equipment and Martha Stewart... but is that enough?
Stop drop and roll will not save you in hell. --- seen on a church marque in rural Virginia