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Sears-Kmart in skid, margins pressed  

Hoffman Estates, Ill. – Downward pressure on margins drove second-quarter net income down 40.1% to $176 million at Sears Holdings, which the big retailer said reflected “sales declines and increased promotional activity.” The company had net income of $294 million for the same quarter last year.

 The gross margin rate at the 3,800-store retailer fell to 27.7% from 28.4% a year ago, while SG&A costs as a percentage of sales jumped to 22.9% from 22.1%. 

Aylwin Lewis, Sears Holdings president and ceo, noted the company’s disappointment at missing targets. “In response, we are enhancing our marketing message to more clearly articulate the advantages of our products and service offerings, including our recently announced Ultimate Appliance Promise.”

 The decline stemmed from “lower operating results at both Sears Domestic and Kmart, partially offset by improved operating results at Sears Canada,” the company said. In merchandise categories, only footwear, women’s apparel, and consumer electronics were singled out as having increased sales.

 Total sales of $12.2 billion were down 4.7% from $12.8 billion one year ago.

 Comp-store sales dropped by 4.3% at Sears, and fell 3.8% at Kmart.

 The biggest hurt seemed to be at the U.S. Sears division, where quarterly sales of $6.70 billion were down 4.9% from $7.05 billion, and the gross margin rate of 29.4% was down 130 basis points from 30.7% last year.

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