Sears Q3 Net Plummets on Margin Erosion

A $223 million decline in gross margins ate away Sears Holdings Corp.’s profit for the third quarter while an investment gain in the same quarter of 2006 made for a difficult year-over-year comparison.

The Hoffman Estates, Ill.-based retailer said Thursday that net income came in at $2 million, or 1 cent a diluted share, for the quarter ended Nov. 3. This compares with net income of $196 million, or $1.27, in the prior-year period. Sales fell 3.4 percent to $11.5 billion from $11.9 billion last year.

“We are very disappointed in our performance for the third quarter. We cannot blame our results entirely on the retail and macroeconomic environments. We have much on which to improve and are working hard to do so,” said Aylwin Lewis, president and chief executive officer, in a statement. “Nevertheless, the company continues to generate cash, and we continue to invest in our customer relationships, our multichannel experience, and our information technology systems. Importantly, we believe that our stores and Web sites are ready to serve our customers and provide them more reasons to shop with us.”

For more coverage, see Friday’s issue of WWD.