UPDATE 5-Sears tops estimates; some skeptical about turnaround

Thu Feb 28, 2013 2:03pm EST
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* "We know we still have a lot of work to do," CEO Lampert says

* Kmart same-store sales drop 3.7 percent

* Total costs fall more sharply than sales; net loss narrows

* Shares down 5.6 percent

By Dhanya Skariachan

Feb 28 (Reuters) - Retailer Sears Holdings Corp reported a higher-than-expected quarterly profit that stemmed mainly from cost cuts, doing little to boost Wall Street's faith in its turnaround and sending its shares down as much as 7 percent on Thursday.

The stakes were high this holiday season for the operator of Sears department stores and the Kmart discount chain. Many on Wall Street were looking at the quarter as a key gauge of progress of the turnaround at the company, which is controlled by hedge fund manager Edward Lampert.

Sears Holdings' sales have fallen every year since 2005, when Lampert merged the Kmart and Sears Roebuck and Co chains in an $11 billion deal.

However, the company has boosted results in recent quarters by closing stores and managing inventory. It has also sold real estate and other assets to pay down debt.   Continued...