Updated from 10:14 a.m. EDTSears ( S) is having a harder time than many on Wall Street believed, as overhanging inventory issues continue to plague sell-through, especially in apparel. The department store chain reported a greater-than-expected drop in second-quarter earnings and lowered its full-year earnings guidance to below consensus early Thursday. But shares of Sears regained some losses -- though still at a 52-week low in afternoon trading -- after the company asserted on a subsequent conference call that its sales and inventory management outlook is improved for the all-important holiday fourth quarter as it continues work on resetting several business units. Including charges, the company earned $53 million, or 24 cents a share, in the quarter ended July 3, down from $309 million, or $1.04 a share, in the year-ago period. Charges totaling 24 cents a share included severance costs from a restructuring of the company's home office and additional depreciation expense from assets sold to Computer Sciences Corp. ( CSC). Computer Sciences will be providing Sears with desktop and server computer systems and support for the retailer's Web site and voice and data networks. Excluding charges, the company would have earned 48 cents a share. On that basis, analysts had been calling for a profit of 71 cents a share. Shares were lately down $1.03, or 3%, to $33.90, after earlier dropping about 8%. "We lacked a sufficient amount of fashion-oriented spring merchandise in what has been a strong fashion-oriented spring season," said Chief Executive Alan J. Lacy on the call. Total sales dropped to $8.78 billion, from $10.2 billion a year ago. Domestic same-store sales decreased 2.9%. Home appliance sales were negatively impacted because cooler, wetter weather in much of the country led to decreased sales of air conditioners, negatively impacting overall home appliance same-store sales by 130 basis points.