updated 8/16/2004 9:33:08 AM ET 2004-08-16T13:33:08

Kmart Holding Corp. swung into a profit in the second quarter from a year-ago loss, but sales continued to fall, hurt by cooler weather and fewer sales events.

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The company said Monday that it earned $155 million, or $1.54 per share in the three months ended July 28. That compared with a loss of $5 million , or 6 cents, in the same quarter last year.

The earnings offered the first “apples-to-apples” comparison since Kmart emerged from bankruptcy as a restructured company in May of last year.

Total revenue, however, dropped 15.3 percent to $4.8 billion from $5.6 billion in the year-ago period.

Same-store sales, considered the best indicator of a retailer’s health, continued to decrease, falling 14.9 percent from a year ago. Same-store sales are sales at stores opened at least a year and take store closings out of the mix.

“We are pleased with our continued progress and ability to deliver consistent profit,” chief executive Julian Day said in a statement. “We have continued to focus on process changes that simplify the operations of our stores and distribution centers, including improving merchandise flow and lowering inventory levels which result in lower shrink expense, lower clearance and promotional markdowns and lower payroll expenses.”

Kmart, whose critics predicted it would be left for dead, has won the praise of investors for its quick financial turnaround, bidding shares up since this past March. Shares of Kmart closed at $64.90, on the Nasdaq, unchanged from the previous day.

Last week, Kmart said it was cutting some 200 jobs at its headquarters as part of ongoing streamlining efforts.

The company also lowered the maximum number of stores it plans to sell to The Home Depot Inc. from 24 to 19.

The planned real estate sale had been embraced enthusiastically by Wall Street. Under the revised agreement with Atlanta-based Home Depot, Kmart will sell no fewer than 13 stores for $173 million in cash and up to 19 stores for $288.5 million. Previously, it said it would sell up to 24 stores for a maximum of $365 million.

But skepticism remains about its viability as a retailer. The company continues to lose market share to powerhouses Wal-Mart Stores Inc. and Target Corp.

Kmart is hoping its redesigned clothing lines, launched this summer in time for the back-to-school season, will help distinguish it from its competitors.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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