Sears' 2Q Profit Drops 62 Percent

Patrons shop in a Sears store at Westfield's Great Northern Mall in North Olmsted, Ohio in this file photo. Sears posted a 62 percent drop in its 2nd-quarter profits Thursday.

(AP Photo)

Beleaguered retailer Sears Holdings Corp. reported a hefty drop in second-quarter profit as sales slumped, despite a restructuring aimed at drawing back shoppers who've taken their checkbooks elsewhere.

The company led by financier Edward Lampert also delivered a downbeat outlook, predicting sales and gross profit margins will feel continued pressure from the sluggish economy.

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

"While they now have the excuse of a slower economy to hide behind and they used it as such in their release, results were weak," Credit Suisse analyst Gary Balter told investors in a research note. "Despite the weakness, the company is clinging to the belief that its second half will be stronger, helped by massive expense cuts and by pulling inventory lower. ... We have seen this picture before and it is not a happy ending."

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Sears said Thursday that it earned $65 million, or 50 cents per share, in the three months ended Aug. 2. That's down 62 percent from a year-ago profit of $173 million, or $1.15 per share. 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 revenue 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 as customers shun the retailer for its competitors. Its once hefty war chest of cash on hand has shriveled thanks to massive share buybacks and the value of much of its property holdings has dwindled as the commercial real estate market continues to wane.