Sears sales shrink, but losses double

Sears Holdings (NASDAQ: SHLD) on Thursday reported the smallest decline in quarterly same-store sales in more than three years, but its losses widened, as the embattled department store chain continues to trim its fleet of stores and aims to get back to profitability.

Sears, faced with mounting liabilities, continues to be in a race to sell off assets, cut costs and reduce debt, in a fight to keep the business afloat. Although same-store sales declines slowed during the latest period, they remain steep, as if to show the iconic retailer hasn't won shoppers back.

Heading into the holiday season, industry watchers say, Sears' options remain limited.

Sales at Sears and Kmart stores open for at least 12 months were down 3.9% during the second quarter, compared with a decline of 11.9% in the prior period. The 3.9% drop included a same-store sales decline of 3.7% at Kmart stores and a 4% decline at Sears’ stores. The company also said it saw positive comparable sales growth of 3% in July and 2.5% in August.

In a blog post, CEO Eddie Lampert reiterated Thursday he still believes Sears can accomplish its restructuring outside of bankruptcy, saying the alternative "could result in significant reductions in value." It's been more than a year since Sears warned it might not be able to continue "as a going concern."

Those shares, which are heavily shorted, were up as much as 27% in after-hours trading on the news. They opened Friday up seven cents, or 5.8%, to $1.28