[R]11:00AM New York - Sears Holdings Corp stock plunges 10% after company cut fourth quarter earnings guidance.[/R]

Sears Holdings Corp (SHLD: chart) warned fourth quarter earnings may fall, as much, as 51% after reporting sales fell sharply at two of its units late last year.

At Sears, same-store sales, or sales at stores open at least a year, slid 2.4% for the nine weeks to January 5, 2008.The drop reflected a reduction in home appliances sales, which Sears Holdings attributed to the slowing housing market and increased competition.

Kmart reported a decline of 4.2%. Total domestic comparable stores sales dropped 3.5% during the review period.

The company expects fourth quarter to February 2, 2008 net earnings in the range of $350 million and $470 million. This will translate into per share earnings of between $2.59 and $3.48.

Sears reported a profit of $820 million, or $5.33 per share in the year ago quarter.

Analysts polled by Thomson Financial predicted fourth-quarter earnings of $4.43 per share and a full-year profit of $6.64 per share.

Shares of Sears plunged 10.1% or $9.67 to $85.59 in pre-market trading Monday but recovered in the morning to $89.60.

In the past 52 weeks, the stock has traded in the range $90.80 to $195.18. Financial analysts surveyed by Thomson had one-year price target of $131.40 before the the earnings warning.

For the fiscal 2008, Sears estimated profit between $744 million and $864 million and earnings are estimated between $5.13 and $5.96 per share.

Domestic merchandise inventory is expected to fall below 2007 position of $9.2 billion despite a $160 million inventory increase at Kmart''s pharmacy operations.

Excluding Sears Canada, the company expects to close the year with positive cash flow of $1 billion or more.

Sales fell across the board, said the company, with higher declines in the Sears apparel and tools segments, and the Kmart seasonal units.

Sears said that the slow-down in sales was due to competition and added economic pressures on consumers as home prices fell include the housing market problems, falling employment rates and other consumer credit worries, Sears said.

Gross margin fell 200 basis points, as a result of holiday promotions, markdowns and higher sales from the home electronics unit that has a lower margin rate.

In the ten weeks to January 11, 2008 Sears spent $513 million buying back 4.9 million ordinary shares. The company is holding $223 million for additional share buybacks.

Sears joins a growing list of several firms that have warned of weaker profits as consumer spending slows on rising food and energy costs and worries related to housing market grows. Most apparel retailers and department store stocks have fallen nearly 40% or more in the last six months of trading.