• by Sarah Mahoney  @mahoney_sarah, February 26, 2009

While Sears Holding Co. posted sharply lower results, it did fare a little better than some had predicted, and says its layaway programs--brought back first at its K mart chain and then at flagship Sears--boosted holiday sales.

Net income for the Hoffman Estates, Ill.-based holding company fell to $190 million for the fourth quarter of its fiscal year--a nosedive from the $426 million it recorded a year ago. And for its full fiscal year, net income shriveled to $53 million, compared with $826 million in the prior fiscal year, in part due to $437 million in charges related to severence, store closures and goodwill and asset impairment.

Sales in the quarter fell to $13.3 billion, compared to $15.1 billion in the year-ago period, while full-year sales dropped to $46.8 billion from $50.7 billion in fiscal 2007. The flagship Sears brand was the worst performer, with U.S. comparable-store sales tumbling 11%, while K mart held up relatively well, with a comparable-store decline of just 5%.

At both chains, categories tied to housing fared the worst: Home and household goods, appliances, and lawn and garden. Margins declined, as the company cut prices to remain competitive, which were partially offset by lower expenses, including $94 million whacked from its advertising and display expenses in the fiscal year.

"Fiscal 2008 was a very difficult year for the U.S. economy, and its effect on consumer confidence reflects the turmoil that has enveloped the retail industry and our business," company executives say in a release. "We maintained our focus on providing great product and service value to our customers, many of whom feel the impact of lower incomes and tighter credit."

The company, struggling with its reputation of a shabby store with limited merchandise, maintains that it is well-positioned to succeed in a recession. "The success of our layaway program during the holidays demonstrates our understanding of our customers' needs in this challenging financing environment," writes chairman Edward S. Lampert in his letter to shareholders.

"After observing the early success of this program at Kmart this fall, we scaled and launched it quickly at Sears as well, making us one of the only retailers to offer this payment option to customers for the 2008 holiday season. Not only did this program contribute additional sales, but more important, we were able to deepen our relationships with our customers by providing unique services and solutions to address the financial challenges they are currently facing." The company is also experimenting with new channels. Earlier this month, it announced the beta launch of ServiceLive.com, an online services marketplace where homeowners can name their price for home improvements and repairs. And last month, the Chicago Tribune reported that Sears would begin testing a drive-through ordering service this summer in Joliet, Ill. A new twist on the in-store pickup concept, the "MyGofer" system would allow shoppers to order online, and then pick up their merchandise in a drive-through.