In this May 18, 2011 photo, a display of Wet/Dry vacuums is shown at a Sears store in Bethel Park, Pa. The company reported Thursday Aug. 16, 2012 that it lost $132 million, or $1.25 per share, for the period ended July 28. That compares with a loss of $146 million, or $1.37 per share, a year ago. (AP Photo/Gene J. Puskar)

HOFFMAN ESTATES, Ill. - Sears Holding Corp. (Nasdaq:SHLD) cut expenses and reduced inventory in its second quarter, helping the struggling North American retailer post a narrower loss than last year.

The company, which is majority shareholder in Sears Canada (TSX:SCC) and owns the Sears and Kmart chains in the United States, reported adjusted results that met Wall Street's expectations.

But Sears Holding's revenue fell short because of weaker sales at both Sears and Kmart stores.

Sears is trying to turn around its business and spruce up its image. Three days ago the Hoffman Estates, Ill. company said that it is moving forward with plans to spin off its Hometown and Outlet stores along with some hardware stores into a separate company. The transaction is targeted to close in the third quarter.

The retailer has looked at spinoffs and real estate sales to restore profitability and boost shareholder confidence. Aside from the separation of the Hometown, Outlet and some hardware stores, the company announced in May that it would spin off a stake in its Canada division so that it could focus on turning around its U.S. business. This spinoff is expected to close during the second half of the year.

Sears Canada, a publicly traded company that is 93 per cent owned by Sears Holdings, reported Wednesday that its net loss in the 13 weeks ended July 28 was $9.8 million or 10 cents per share. That compared with a net loss of $200,000 or less than a penny per share in the similar 2011 period. Its revenue fell to $1.05 billion from $1.15 billion.

For the period ended July 28, Sears Holdings lost $132 million, or $1.25 per share, for the period ended July 28. That compares with a loss of $146 million, or $1.37 per share, a year ago.

Excluding costs tied to store closings, a pension expense and other items, the company lost 86 cents per share.

Sears managed to trim its selling and administrative expenses in the quarter by reducing payroll and advertising costs.

Merchandise inventories fell to $8.7 billion from $9.3 billion. Domestic inventory was reduced thanks to store closings and improved productivity.

Sears, which has more than 3,900 stores in the U.S. and Canada, also reduced its total debt to $3.3 billion from $3.5 billion.

Revenue dropped seven per cent to $9.47 billion, missing Wall Street's $9.68 billion estimate.

Revenue from Sears stores in the U.S. open at least a year fell 2.9 per cent. The figure declined 4.7 per cent for Kmart locations. Sales of consumer electronics softened as the company dealt with competitive pricing. Lawn and garden sales also fell, with drought conditions across the country hindering purchases.

Fewer clearance items dragged down revenue, with tighter inventory levels limiting the amount of seasonal merchandise markdowns. Pharmacy sales fell as popular drugs such as cholesterol fighter Lipitor started coming out in cheaper generic versions.

News from © The Associated Press, 2012