By Dhanya Skariachan

NEW YORK (Reuters) - Retailer Sears Holdings Corp , which is controlled by billionaire investor Eddie Lampert, reported a wider-than-expected quarterly loss on Thursday as weak sales, bigger discounts and higher costs at its Canadian unit ate into margins.

The company blamed the lackluster sales numbers on weak demand for consumer electronics at both its Sears department stores and Kmart discount chains.

Sales at Sears Holdings have fallen every year since 2005, when Lampert formed the company by merging Kmart and Sears.

In the second quarter, sales fell 1.2 percent to $10.3 billion, while analysts expected $10.5 billion. Sales at U.S. stores open at least a year fell 0.7 percent, with those at the namesake stores down 1.2 percent and Kmart staying flat.

In addition to weaker sales, discounts and costs also squeezed margins.

The company took bigger discounts to boost sales of appliances, apparel and home goods. Selling and administrative expenses at Sears Canada rose $53 million from last year.

The company's net loss widened to $146 million, or $1.37 a share, from $39 million, or 35 cents a share, a year earlier. Excluding items, the loss was $1.13 a share. Analysts on average were expecting a loss of 64 cents, according to Thomson Reuters I/B/E/S.

Earlier this week, Sears Canada Inc reported a quarterly net loss , compared with a profit a year before, as sales at its established stores continued to drop amid heightened competition. Sears Holdings owns a 93 percent stake in Sears Canada, according to Thomson Reuters data.

(Reporting by Dhanya Skariachan; Additional reporting by S. John Tilak; Editing by Lisa Von Ahn)