BY SANDRA GUY BUSINESS REPORTER

Sears, Roebuck and Co. on Tuesday reported a record negative quarterly operating cash flow, prompting one analyst to repeat his warning that the retailer is in trouble.

Sears' stock closed Tuesday at a 52-week low of $22.70.

The $842 million in negative cash flow, or $2.65 a share in the quarter just ended, is more than twice Sears' previous biggest negative cash flow of $1.27 a share recorded two years ago, said Michael Markowski, director of research at StockDiagnostics.com, an investment firm that looks for anomalies in companies' financial reports.

It is the third straight quarter this fiscal year Sears has had negative operating cash flow. Earlier this fiscal year, Sears had recorded a negative operating cash flow of $232 million in its second quarter and $43 million in the first quarter. For the first nine months of 2002, Sears recorded $1.117 billion in negative cash flow, compared with positive cash flow of $1.463 billion in the same period a year earlier, Markowski pointed out.

"This negative operating cash flow indicates Sears' business model is not generating cash," Markowski said Tuesday. "Credit-card receivables are growing faster than net income from credit cards. Until Sears starts generating positive operating cash flow, everyone is at risk."

The situation is particularly worrisome because it reflects Sears' mounting credit-card woes. Credit provides more than 60 percent of the Hoffman Estates-based retailer's operating profit.

Sears CEO Alan Lacy has said the trouble stems from a weak economy. He tried to reassure furious Wall Street analysts at an Oct. 17 meeting that Sears had resolved the situation by firing the former head of the company's credit division and boosting its allowance for future uncollectible debts by $222 million in the quarter ended Sept. 30.

However, increased delinquencies and skyrocketing bankruptcy filings by Sears credit-card holders are expected to continue through the end of the year and lead to higher charge-offs for uncollectible credit-card accounts, Sears warned in its quarterly financial statement filed Tuesday with the Securities and Exchange Commission.

For the first time, Sears made public the amount it wrote off due to bankruptcies of credit-card holders. "Bankruptcy filings, which had increased 1 percent during the first half of 2002 over comparable 2001 levels, increased by 20 percent during the third quarter," according to the document.

Sears wrote off $231 million in the third quarter due to bankruptcy filings, up from $193 million in the year-earlier period. For the nine months ended Sept. 28, Sears wrote off $654 million due to bankruptcy filings, compared with $610 million in the same period a year ago.

Markowski said Sears must turn around its negative cash flow situation by Christmas or face further credit rating downgrades. On Friday, credit rating agency Fitch downgraded Sears notes covering $808 million of securities backed by credit-card receivables.

Sears also revealed more details about lawsuits filed against it, including three alleging former and current Sears directors breached their fiduciary duties by mismanaging the credit-card business. Sears will fight the claims.