Multi-channel retailer Sears Canada, which is embroiled in an ownership tug-of-war, reported an increased second-quarter profit thanks to improved margins and a better exchange rate.

Quarterly profit grew 68% to C$18.1m (US$15.96m) from $10.8m the same time last year. Sales, meanwhile, slipped 6.2% to C$1.43bn from C$1.52bn a year ago after the company sold off its credit and financial services operations.

Gross margins for the quarter increased by 150 basis points. Total expenses were reduced by 14.1%, approximately 60% of which are related to the sale of the Credit and Financial Services operations. Inventory levels were down 2.4%.

"The improvement in gross margins over the prior-year period reflects lower promotional discounts, a favourable shift in sales mix as a higher proportion of sales were realised in the higher margin categories and channels, reduced inventory shrinkage costs and the stronger Canadian dollar," the company said.

"In addition, the quarter's margin rate was positively affected by a product cost reduction retroactive to the beginning of the year which was realized in the quarter."

Parent company Sears Holdings is battling to privatise its Canadian business, but a group of minority shareholders has filed a complaint against the deal.