The bleak outlook from Sears came the same day that Home Depot forecast a deeper profit drop for 2007.
"Although we believe our business has suffered from many of the same factors that have led other retailers to announce disappointing results and lowered expectations, our recent performance underscores our ongoing need to become more relevant to consumers while improving our discipline around expense management," Sears Holdings Chief Executive Aylwin Lewis said in a statement.
Should the sales trends continue, Sears Holdings said it expected quarterly profit of $160 million to $200 million, or $1.06 to $1.32 a share, including special items.
Excluding an after-tax gain of about $12 million from bankruptcy-related settlements and total return swap investing activities, Sears expects to earn 98 cents to $1.24 per share.
On that basis, analysts' average forecast was $2.12 per share, according to Reuters Estimates.
In last year's second quarter, Sears earned $294 million, or $1.88 a share. Excluding a gain, it earned $272 million, or $1.74 per share, in that period.
Sears said it expected to end the second quarter with about $2.8 billion in cash and cash equivalents, excluding Sears Canada, down from $3.1 billion at the end of the first quarter.
Investors watch the cash closely because Sears has given Lampert authority to invest excess money as he sees fit.
The new $1 billion share repurchase authorization is in addition to the $121 million worth of shares still available for repurchase under an existing program. Sears said it had bought back about 13.8 million shares for $1.9 billion since the repurchase plan was approved in the third quarter of fiscal 2005. As of July 7, it had about 150.9 million common shares outstanding.
Shares of Sears were down 8.7% at $156.50 in midday Nasdaq trade.
The company reported results for the nine weeks ended on July 7. The second quarter ends on August 4. Sears said it did not plan to update its outlook before announcing second-quarter results on or about August 30.