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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.

Last month Sears management announced that CEO Aylwin Lewis was leaving the company. Lewis’ interim replacement is W. Bruce Johnson, former executive vice president of supply chain and operations.

That move came a few days after the company announced it was changing its “internal management and organizational structure.” Part of that change includes focusing more on individual business units, including “operating businesses, support, brands, online and real estate,” according to a statement.

The company operates just under 1,400 Kmarts, and just over 2,400 Sears units in North America.

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