Sales Woes Continue at Sears

Sears Holdings(SHLD Quote - Cramer on SHLD - Stock Picks) projected first-quarter profits below Wall Street's expectation amid further same-store sales declines at its two chains.

The owner of the Kmart and Sears chains said late Thursday that it expects to report earnings of $1.30 to $1.53 a share for the first quarter, which ends Saturday. That forecast includes several items -- including a legal settlement, a dividend from its Sears Mexico investment and a change to Sears Canada benefit plans -- that are expected to result in a net gain of $42 million, or 27 cents a share.

That implies earnings of $1.03 to $1.26 a share before the gain. Analysts polled by Thomson Financial, whose forecasts typically exclude items, expect a profit of $1.46 a share.

Sears Holdings, which released its forecast ahead of its annual meeting Friday, said same-store sales at Kmart fell 4.7% in the period. The company blamed the decline on lower transaction volumes.

At Sears, same-store sales, or sales at stores open at least a year, slid 2.4%. The drop reflected a reduction in home appliances sales, which Sears Holdings attributed to the slowing housing market and increased competition.

Sears Holdings, run by hedge fund guru Ed Lampert, has had a long slide in its same-store sales as Lampert and his team focus on improving profits by slashing costs and reining in capital spending rather than increasing sales. Investors are now looking to see what the company will do with its cash pile, which Sears said should total $3 billion at the end of the quarter.

Investors also have been watching the company's total return swap investments, a risky derivative trading tactic that has given the company's bottom line a boost in recent quarters. Sears said its one-time gains in the first quarter will be partially offset by losses on these investments.

Shares of Sears were slipping $9.76, or 5.2%, to $178.56 in after-hours trading.