HOFFMAN ESTATES, IL-Sears Holdings Corp. chains Kmart and Sears posted a plunge in profits and sales during its fourth quarter. The company was embattled by “increasing competition and the impact of unfavorable economic conditions, including a deteriorating housing market, a decrease in consumers’ disposable income and the increased costs of consumer staples,” according to a company statement.

“In 2008, we need to reverse much of the profit erosion we experienced in 2007,”says Chairman Edward Lampert, in a letter to shareholders released with Q4 results. “It won’t be easy, especially if the economy stays soft.”

Company-wide same-store sales fell 4.5% year over year during the quarter, which ended Feb. 2. Kmart experienced a 5.2% plunge, while Sears stores fell 4.3%. Total revenues fell $1.1 billion, to $15.1 billion, while operating income came in at $794 million, down from $1.4 billion.

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