Sears shareholders were dealt yet another blow this morning.

The retailer, run by hedge fund manager Eddie Lampert, said its fourth-quarter earnings will fall far short of expectations. It is likely to earn between $350 million and $470 million, or $2.59 to $3.48 per share, for the quarter ending February 2. Analysts had forecast it to earn $4.43 per share.

There was little to celebrate at the company's Sears and Kmart stores over the holidays. Same store sales at Sears dropped 2.8 percent for the nine-week holiday period, while Kmart stores sold 4.2 percent less than in the same period last year.

Sears blamed the weak economic environment caused by the housing slump and deteriorating consumer-credit conditions. It said it does not expect any near-term improvement to the retail outlook.

This is just the latest in a string of disappointments (read here for more on the fallout from the Sears-Kmart merger in this month's issue) for the company since Lampert, who bought Kmart in 2002, acquired Sears more than three years ago for $12 billion. It has slashed spending on advertising and closed more than 100 stores. It cut benefits for employees and froze its pension plan.

But the cost reductions haven't done enough for the bottom line. Its share price is half what it was last spring.

This morning's announcement prompted several downgrades by Wall Street analysts and sent shares down another 10 percent.