(11-29) 03:56 PST Hoffman Estates, Ill. (AP) —

Department store retailer Sears Holdings Corp., led by hedge-fund manager Chairman Eddie Lampert, said Thursday its third-quarter profit plunged due to a $223 million drop in gross margin, reflecting both lower sales and inventory-clearing markdowns.

The operator of Sears and Kmart stores, which earlier this week said it may buy out the rest of retro-themed retailer Restoration Hardware Inc., reported net income declined to $2 million, or a penny per share, from $196 million, or $1.27 per share, a year ago, which included investments gains of 42 cents per share.

Excluding these gains, earnings for the 2006 period totaled 85 cents per share.

Sales for the quarter ended Nov. 3 slipped 3 percent to $11.5 billion from $11.9 billion in the fiscal 2006 period.

The results widely missed the consensus estimate of analysts surveyed by Thomson Financial, who predicted profit of 50 cents per share. Two analysts had forecast revenue of $11.61 billion.

“We are very disappointed in our performance for the third quarter. We cannot blame our results entirely on the retail and macro-economic environments. We have much on which to improve and are working hard to do so,” said Aylwin Lewis, Sears Holdings’ chief executive and president.

The company said it had cash and cash equivalents of $1.5 billion at Nov. 3, down from $2.1 billion a year ago and $4 billion at Feb. 3, 2007. Gross margin declined 90 basis points to 27.4 percent, hurt by markdowns taken to clear seasonal merchandise and higher inventory levels due to lower sales.

Sears also warned it expects difficult economic conditions to persist in the near-term, with sales and gross margin likely continuing to be pressured through the rest of the year.

(02-09) 08:16 PST WASHINGTON (AP) —

Despite remarkably quick passage, the economic aid plan and its cash rebates may come too late to prevent a recession this year. For many experts, however, the $168 billion boost to the lagging economy may mean the difference between a short downturn and something much more serious.

The measure that President Bush plans to sign this coming week will send government payments to more than 130 million people. Checks that will start showing up in mailboxes in May range from $300 to $1,200; households with children get an additional $300 per child. Businesses benefit, too, through tax breaks to increase investment spending on plants and equipment.

The tax relief is intended to jump-start the economy. Politicians, worried about a recession in an election year, put aside their normal bickering to speed the proposal through Congress.

Nonetheless, there is debate over how effective it will be. Critics say debt-burdened consumers will use the money to pay bills rather than spending the checks and spurring growth.

An Associated Press-Ipsos poll found that only 19 percent of those surveyed said they planned to spend their rebate checks. Forty-five percent said they would pay off bills, while 32 percent said they planned to invest the money.

Supporters of the proposal said they have faith that people will spend the money when they get it.

“When you ask people what they will do with the money, they often say they will pay off their credit card bills,” said David Wyss, chief economist at Standard & Poor’s in New York. “People may mean it when they say it, but when you look at what they actually do, most of the money gets spent.”

Many economists expect anywhere from two-fifths to two-thirds of the rebate checks to be spent in the first six months, based on past experience.

If that happens, the aid plan will do its job of helping the economy rebound after a prolonged housing slump and a credit squeeze. Analysts increasingly believe the economy has slipped into a recession, the first since 2001.

Global Insight, a private forecasting firm in Lexington, Mass., changed its forecast this past week to project a mild recession in 2008. It predicted the gross domestic product would decline at an annual rate of 0.4 percent from January through March and then at a 0.5 percent rate over the next three months. By one rule of thumb, the economy is in a recession when the GDP declines for six months in a row.

Analysts have downgraded their forecasts based on a string of bad reports signaling that the economy clearly donwshifted at the end of last year. Unemployment took a big jump in December. January saw the first loss of payroll jobs in more than four years.

In addition, activity in the service sector, where most people work, fell sharply in January. Automakers and big retail stores struggled with lackluster sales last month.

“With housing activity and prices yet to hit bottom Д and still falling sharply Д the downturn is now spreading more broadly through the economy. The consumer has long been under stress and is now showing signs of cracking,” Global Insight said in announcing its new recession forecast.

Brian Bethune, a Global Insight economist, said the new forecast projects the economy will rebound in the summer and grow at a 3.4 percent rate as the rebate checks give a jolt to consumer spending. As that impact wears off, growth will slow to a still healthy 2.7 percent rate over the final three months of the year, he said.

Other economists see a similar pattern Д and benefit from the rebates.

“This is going to provide a very important and measurable boost to the economy in the second half of this year. It won’t forestall a recession, but it will ensure that the downturn is short and mild,” said Mark Zandi, chief economist at Moody’s Economy.com.

Zandi said he expected this downturn to be similar to the 2001 recession, which lasted eight months.

The unemployment rate rose by 2.5 percentage points back then. Zandi said it will rise by less than 2 percentage points during this period of weakness, going from a low last year of 4.4 percent to a peak of about 6 percent.

The expectation of a short and mild recession is also based on the view that the Federal Reserve will keep cutting interest rates in the month ahead. The Fed aggressively began lowering rates in January.

Economists are raising the possibility that the government may consider a second economic rescue plan this year. For example, Democratic senators had hoped the just-passed measure would have extended unemployment benefits; that idea failed, but they are pledging to keep pushing it.

Many economists believe the government will have to do more to address the mortgage crisis. Defaults are soaring as millions of borrowers with spotty credit histories who got loans find themselves unable to make monthly payments once the mortgages reset to higher interest rates.

Analysts said further quick action by the Fed at the first signs of trouble will be essential, given the problems that have already hit the financial industry and wiped out an estimated $120 billion in capital reserves. As a result, banks will lend less until they replenish those reserves.

Economists said they cannot rule out the chance of a double-dip recession, where the GDP rebounds briefly in response to the rescue plan, only to fall into negative territory again.

“We are not out of the woods yet and the risks remain very high because of the widespread problems in the financial sector,” Zandi said.

Wales followed their success at Twickenham with a victory over Scotland which was less emphatic than the scoreline suggested. The visitors, despite never threatening with the ball in hand, were only two points down with 14 minutes to go but two key substitutions made by the home head coach Warren Gatland, who again showed his ruthlessness by ordering off his two match-winners against England, turned the game.

The half-back James Hook and Mike Phillips, outstanding the week before, were struggling for answers as Scotland started asking questions. Hook’s early second-half try had put Wales 17-9 ahead, but the pair became indecisive and Wales started getting turned over. On came Dwayne Peel and Stephen Jones and the Scots found themselves heading home for a rethink.

Wales started as they had finished at Twickenham, surging forward in the opening minute after Scotland messed up and attacking line-out. The ball bounced off Ryan Jones, Martyn Williams hacked on and Scotland found themselves defending their own line. Ryan Jones, Mike Phillips (twice), Adam Jones and Lee Byrne were all held up on the line before Wales decided to move the ball only for Tom Shanklin to knock on.

The sequence came to sum up the opening period: the roof was open, allowing spring-like sun to soak the spectators on the east side of the ground but one unforced error followed another with only the occasional sprinkle of stardust. Scotland, as ever, were adept in the set-pieces, but they play behind with the hand-brake on. Only Chris Paterson, marginalised on the wing, showed any presence of mind.

Scotland survived the opening barrage to take the lead on 10 minutes when Paterson kicked a penalty after Nathan Hines had been taken out in the air at a line-out near Wales’s line. They had gained the territory after the wing Jamie Roberts, in his first touch in international rugby, had sprinted to the Scotland 25 only to pass to the visiting centre Andrew Henderson who kicked the ball deep into home territory.

Wales’s response was indignant. After Hugo Southwell chipped in his own 10-yard line rather than put his boot through the ball, Phillips caught the ball and started an attack which finished when Henson filled in at first receiver going left and fed Hook whose neat pass freed Byrne and gave Shane Williams the room to score his 36th international try which Hook converted.

It should have been the cue for Wales to establish an unassailable lead, all the more so when Hines was sent to the sin-bin after 20 minutes for lashing out at Byrne with the back of his hand, although the Wales full-back was guilty of some simulation. Wales forced a scrum five yards from the Scotland line but Mike Blair forced Ryan Jones to knock on and the Scots, using Henderson as a blind-side flanker to cancel their one man disadvantage.

Wales only extended their lead in the final moments of Hines’s banishment when Hook kicked a penalty after John Barclay, having stolen a Wales throw, was penalised for not releasing. Passes were being spilled regularly and Scotland pulled back to 10-6 just before the interval when Paterson kicked his second penalty after Wales had taken down a scrum.

Paterson pulled his side, who had lost their captain Jason White through injury just before the break, back to with a point three minutes after the restart with another penalty, but if Scotland were dealing in three-pointers, Wales had a cutting edge and within two minutes had extended their lead, almost despite themselves. Phillips passed behind Hook inside Scotland’s 25 but the prop Duncan Jones picked up and fed Hook who handed off Euan Murray before outpacing the other prop Allan Jacobsen.

Hook’s conversion made it 17-9, but Wales became too open and found their lead cut to two points before the end of the third quarter as Paterson landed two more penalties, both coming after Wales had been turned over. The game was balanced despite Wales’s manifest superiority and Gatland responded by bringing off Hook and Phillips and replacing them with the more experienced Peel and Stephen Jones.

Scotland found themselves frozen out as the Llanelli Scarlets’ duo, Lions in 2005, used their experience to take play through the phases on draw Scotland’s defenders. Jones gave his side a cushion with a 40-yard penalty on 66 minutes, but it took a moment of brilliance from Shane Williams to seal the victory with 12 minutes to go. The wing received the ball 40 yards out and swerved past or through three tacklers before contorting his body as Nikki Walker tackled him on the line to remain in play as he touched the ball down a split second before making contact with the corner flag.

Jones converted and later added a penalty as Scotland subsided. The visitors finished on the attack without ever looking threatening, Martyn Williams was by now ruling the breakdown, and in picking up their second defeat in a week, they are still looking for their first try. Wales again won despite playing only in patches. At times they displayed a lack of understanding and, in the modern parlance, their game understanding crackled with static, but they had the ability to create and finish, the stark difference between two sides moving in opposite directions.