CHICAGO -- Sears Holdings Corp. cut its second-quarter loss by more than half as profit margins perked up at its Kmart chain, the retailer led by billionaire Edward Lampert said Thursday.
Still, the company's results fell short of expectations. Weak shopper spending and increased competition, especially on food, led to a revenue decline.
Sears shares dropped $6.22, or 9.2 percent, to $61.03.
Kmart, long considered an also-ran behind heavyweights like Wal-Mart Stores Inc. and Target Corp., had shown signs of resilience as the economy headed south.
But in the three-month period that ended in late July, the bigger competitors fought back, particularly at cheap-chic Target, which put a heightened emphasis on selling groceries. At the same time, big supermarket chains also began dropping prices, hammering Kmart on both sides.
"Competition really did ramp up this quarter," said Morningstar analyst R.J. Hottovy. "And retailers are fighting each other for a share of consumers' wallets."
For the three months that ended in late July, the owner of Sears and Kmart lost $39 million, or 35 cents per share. That's better than last year's loss of $94 million, or 79 cents per share last year. Excluding one-time adjustments the current quarter's loss amounted to 19 cents per share.
Thursday's results were the fourth quarterly loss for the retailer in the past two years.
Revenue slipped slightly to $10.46 billion, down from $10.55 billion last year.
Analysts surveyed by Thomson Reuters expected the company to post slightly better results, predicting a loss of 18 cents per share with revenue of $10.62 billion. Those estimates typically exclude one-time items.
Interim CEO W. Bruce Johnson said the company's long-struggling Kmart brand was able to improve its profit margins during the quarter.
Revenue at stores open at least a year, declined 1.4 percent at the brand as the discount chain recorded lower sales of food.
It was the first in four quarters for the discount chain that briefly received surprising boost from shoppers looking for discounts.
The measure fell 2.8 percent at Sears as shoppers spent less on lawn and garden items, tools and consumer electronics.
Revenue at stores open at least a year is considered an important measure of retailer performance because it excludes stores that open or close during the year
Sears operates nearly 4,000 stores and is based in Hoffman Estates, Ill.