Sears Holdings Corp. said Monday that sales at stores open at least a year fell 3.5% in the holiday period and warned that fiscal fourth-quarter profit could be less than half that of a year earlier, sending its shares down 5%.
The retailer run by hedge fund manager Edward Lampert blamed the weak holiday sales on increased competition, the crumbling U.S. housing market and the credit crunch -- problems it had flagged in November.
The company's shares fell $4.79 to $91.38. They sank to as low as $86.04 during regular trading.
The stock, which was created by the merger of Kmart Holding Corp. and Sears, Roebuck & Co., has fallen 30% since it began trading as Sears Holdings in March 2005. It is down more than 50% from a high of $195.18 last April.
Wall Street analysts downgraded Sears Holdings' stock, citing its vulnerability to an economic downturn.
"We expect the retailer to experience accelerated share loss and profit pressures in an increasingly tough macro backdrop," Goldman Sachs analyst Adrianne Shapira said in a research note. She downgraded Sears to "sell" from "neutral."
In the nine weeks ended Jan. 5, so-called same-store sales fell 2.8% at U.S. Sears stores and 4.2% at Kmart stores. Such sales have fallen at both chains for the last seven quarters.
Weakness in apparel, tools and seasonal products offset a rise in home electronics sales, Sears said.
The company said it expected net income of $350 million and $470 million, or $2.59 to $3.48 a share, for its fourth quarter ending Feb. 2, down from $5.33 a share a year earlier. Analysts expected $4.37 a share, according to Reuters Estimates.
For the year, Sears forecast profit of $744 million to $864 million, or $5.13 to $5.96 a share.