Sears disappoints as consumers cut back

NEW YORK (Reuters) - Sears Holdings Corp reported a wider-than-expected quarterly loss on Thursday as consumers curbed spending in a weak U.S. economy, and the retailer's shares fell more than 3 percent.

The company, run by hedge fund manager Edward Lampert, blamed a lackluster performance by its Kmart discount chain on tepid food sales. Sears' namesake department stores suffered from weak demand for lawn and garden products, tools and consumer electronics.

Sales at U.S. stores open at least a year fell 2.2 percent, with declines of 1.4 percent at Kmart and 2.8 percent at Sears Domestic.

The results underscored the shaky U.S. consumer sentiment that has also hurt other retailers, including industry leader Wal-Mart and warehouse club operator BJ's Wholesale .

"This is probably as good as it gets for Sears, and this isn't great," International Strategy & Investment Group analyst Greg Melich said.

He pointed out that rising apparel costs would probably weigh on gross margins next year, and same-store sales would suffer because of fewer government stimulus programs for energy-efficient appliances.

By contrast, many bargain-hunting consumers visited Dollar Tree stores, helping the discount chain post a stronger-than-expected quarterly profit on Thursday. It sells most of its goods for $1.

Sears Holdings' net loss narrowed to $39 million, or 35 cents a share, in the second quarter ended July 31 from $94 million, or 79 cents a share, a year earlier.

Excluding certain items, the loss was 36 cents a share, twice as wide as the analysts' average estimate of 18 cents, according to Thomson Reuters I/B/E/S.

Sales fell $93 million to $10.5 billion. That missed the analysts' average estimate of $10.6 billion, according to Thomson Reuters I/B/E/S.

Earlier this week, the retailer's Canadian unit, Sears Canada , posted a 35 percent drop in quarterly profit.

Sears shares fell 3.5 percent to $64.87 in early trading.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)