Sears' 2Q profit drops 62 percent

[August 28, 2008]  NEW YORK (AP) -- Sears Holdings Corp. said second-quarter profit fell 62 percent drop as the retailer continues to struggle to attract customers to its stores despite a high-stakes restructuring. The company also said that it expects that its sales and gross profit margins will continue to be pressured as it sees no near-term improvement in the economy.

The Hoffman Estates, Ill.-based retailer, which operates Kmart and Sears, Roebuck and Co. stores, said Thursday that it earned $65 million, or 50 cents per share, in the three-month period ended Aug. 2. That compares with $173 million, or $1.15 per share, in the year-ago period.

The second-quarter 2008 results included the positive impact of the reversal of a $62 million reserve because of the overturning of a Feb. 2, 2007 adverse jury verdict related to the redemption of certain Sears, Roebuck and Co. bonds in 2004.

Excluding the item, earnings per share were 21 cents for the second quarter of 2008.

Revenue declined to $11.76 billion from $12.26 billion in the year-ago period. Same-store sales, or sales at stores opened at least a year, dropped 6.2 percent in the U.S. Same-store sales are considered a key indicator of a retailer's health.

Analysts surveyed by Thomson Reuters expected 33 cents per share on revenue of $11.7 billion.

Led by financier Edward Lampert, who acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005, Sears is in the midst of a high-stakes restructuring aimed at reconnecting with shoppers and reinvigoriating same-store sales, which have now fallen for the past 10 quarters.

Meanwhile, a slew of executives have departed the retailer,which is continuing to search for a permanent chief executive to replace interim CEO and President W. Bruce Johnson.

"Our second-quarter results reflect the continued effects of a slowing economy, which contributed to the earnings declines we have experienced since the third quarter of 2007," said Johnson in a statement. He added that while it was a difficult quarter, he said that the company was successful in reducing domestic inventory levels by $500 million which he believes should lead to lower markdowns and help improve gross margin rates in the second half of the year.

The company reported that same-store sales declined 6.7 percent at Sears, while at Kmart, same-store sales dropped 5.6 percent. Same-store sales fell across most categories at both Kmart and Seers' U.S. stores, but continued to be offset by gains in sales of consumer electronics, the company said.

[Associated Press; By PABLO GORONDI]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.