Ashley M. Heher
August 28, 2008 - 2:56 p.m.

CHICAGO (AP) - Beleaguered retailer Sears Holdings Corp. reported a hefty drop in second-quarter profit considered in the state of sales slumped, despite a restructuring aimed at drawing back shoppers who've taken their checkbooks elsewhere.

The company led by means of manager of revenue Edward Lampert also delivered a downbeat outlook, predicting sales and gross profit margins will feel continued pressure from the drowsy economy.

The performance — the latest in a string of dismal news for the Hoffman Estates-based operator of Sears and Kmart supplies, left some analysts unimpressed.

"While they things being so have the excuse of a slower economy to be concealed behind and they used it as such in their release, results were faint," Credit Suisse analyst Gary Balter told investors in a investigation note. "Despite the weakness, the company is clinging to the belief that its second moiety bequeath be stronger, helped by massive expense cuts and by pulling schedule lower. … We have seen this picture control and it is not a happy ending."

Sears said Thursday that it earned $65 million, or 50 cents per contingent, in the three months ended Aug. 2. That's down 62 percent from a year-ago profit of $173 million, or $1.15 per parcel out. Excluding the effect of the reversal of a $62 million reserve item, earnings per share were 21 cents for the second quarter.

Revenue fell to $11.76 billion from $12.26 billion a year earlier. 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 earnings of 33 cents per share on reward of $11.7 billion. Those estimates typically exclude one-time items.

Led by Lampert, who acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005, Sears has spent much of the past several years struggling with declining sales while customers escape from the retailer in favor of its competitors. Its once hefty war chest of cash on hand has shriveled thanks to massive share buybacks and the worth of much of its property holdings has dwindled as the commercial real estate market continues to wane.

Meanwhile, a slew of executives have left the retailer, which is continuing to inspection for a permanent chief executive to replace interim CEO and President W. Bruce Johnson. The company offered no update Thursday on the search performance.

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

Same-store sales — a key metric of retail health — fell 6.7 percent at Sears and 5.6 percent at Kmart. That's a marked improvement from the first quarter, when the company saw comparable-store sales decline 9.8 percent at Sears while falling 7.1 percent at Kmart. The company said categories such as home appliances and tools especially hard-hit.

And the gang before-mentioned Thursday that it intends to further reduce domestic inventories to better align the levels with expected sales — a move that mirrors that that other retailers are doing.