Sears 2Q Profit Plummets 62%

Hoffman Estates, Ill. Sears Holdings Corp. said second-quarter profit fell 62% as the company continued 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 amid a sluggish economy.

The company said Thursday that it earned $65 million in the three-month period ended Aug. 2, compared with $173 million 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, adverse jury verdict related to the redemption of certain Sears, Roebuck and Co. bonds in 2004.

Revenue declined to $11.76 billion from $12.26 billion in the year-ago period. Overall same-store sales dropped 6.2% in the United States. Same-store sales declined 6.7% at Sears, and 5.6% at Kmart. Especially hard hit were categories such as home appliances and tools that have been hurt by the housing slump.

"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,” interim CEO and president W. Bruce Johnson said.

He added that while it was a difficult quarter, the company was successful in reducing domestic inventory levels by $500 million. Johnson believes that should lead to lower markdowns and help improve gross margin rates in the second half of the year. The company said it intends to further reduce domestic merchandise inventories to better align current levels with expected sales.