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Sears Holdings Reports Fourth Quarter and Full Year 2009 Results

Sears Holdings Corporation ("Holdings," "we," "us," "our" or the "Company") (NASDAQ: SHLD) today reported its fourth quarter and full year 2009 results. Highlights for the quarter and full year include:

  --  Net income attributable to Holdings' shareholders for the quarter of
      $430 million ($3.74 per diluted share) in 2009 and $190 million ($1.55
      per diluted share) in 2008 and for the year of $235 million ($1.99 per
      diluted share) in 2009 and $53 million ($0.42 per diluted share) in
      2008;
  --  Adjusted earnings per diluted share for the fourth quarter of $3.69 in
      2009 and $2.94 in 2008 and for the full year of $3.19 in 2009 and
      $1.69 in 2008;
  --  Adjusted EBITDA of $1.034 billion for the fourth quarter of 2009 and
      $1.822 billion for fiscal 2009;
  --  Fourth quarter EPS of $3.99, relative to the range of $3.36-$4.06
      projected in the outlook of January 7, 2010;  The outlook expressly
      excluded any store closing costs and hedge gains or losses which
      amounted to $0.25 per share net;
  --  An increase in comparable store sales at Kmart of 1.7% in the fourth
      quarter 2009; and
  --  Cash balances at year end  increased to $1.7 billion from $1.3 billion
      last year, while total debt was reduced by $414 million


"We continued to make progress in improving our performance in the fourth quarter, as Kmart comparable store sales increased for the second straight quarter and domestic Adjusted EBITDA increased over last year. Our improved performance is especially encouraging given the challenging economic environment, particularly related to big-ticket items," said W. Bruce Johnson, Sears Holdings' interim chief executive officer and president. "Further, our results indicate the success we can have by making a concerted effort to meet our customers' needs each and every day."

Fourth Quarter and Full Year Revenues and Comparable Store Sales

Total revenues decreased $33 million to $13.2 billion for the quarter ended January 30, 2010. Full year fiscal 2009 total revenues decreased $2.8 billion to $44.0 billion. The decreases were primarily due to lower comparable store sales and 62 fewer Kmart and Sears full-line stores. The decrease in revenues for the fourth quarter and full year in 2009 includes an increase of $219 million and a decline of $142 million, respectively, due to foreign currency exchange rates.

For the quarter, domestic comparable store sales declined 2.5%, and included an increase at Kmart of 1.7%, offset by a decline at Sears Domestic of 6.1%. For the year, domestic comparable store sales declined 5.1%, and included a slight decline at Kmart of 0.8% and a decline at Sears Domestic of 8.7%. The Kmart quarterly increase in comparable store sales was primarily driven by increases in the toys and home categories, partially offset by a decline in the apparel category. The quarter and the year also benefited from the impact of assuming the operations of its footwear business from a third party effective January 2009. Declines in sales for the quarter and year at Sears Domestic include decreases in the home appliance, lawn and garden, and home electronics categories.

Operating Income

Operating income was $749 million for the quarter ended January 30, 2010 and $325 million for the quarter ended January 31, 2009. Operating income increased $424 million and was the result of the significant items noted below and an increase in gross margin dollars due to the increase in gross margin rate. Operating income for the fourth quarter of 2009 includes expenses of $85 million related to domestic pension plans, store closings and severance, and a $32 million gain recorded in connection with the settlement of Visa/MasterCard antitrust litigation. Operating income for the fourth quarter of 2008 included a charge of $336 million related to asset impairments and costs associated with store closings and severance.

Operating income was $713 million for fiscal 2009 and $302 million for fiscal 2008. Operating income increased $411 million and was the result of reductions in selling and administrative expenses, partially offset by lower gross margin dollars given lower overall sales. Operating income for fiscal 2009 includes expenses of $301 million related to domestic pension plans, store closings and severance, a $44 million gain recognized by Sears Canada on the sale of its former headquarters, and a $32 million gain recorded in connection with the settlement of Visa/MasterCard antitrust litigation. Operating income for fiscal 2008 included a charge of $437 million related to costs associated with asset impairments and store closings and severance, as well as the positive impact of the reversal of a $62 million reserve because of a favorable verdict in connection with a legal settlement. See the attached schedule, "Significant Item Impact," for a reconciliation from GAAP to as adjusted amounts, including adjusted earnings per diluted share.

Financial Position

We had cash balances of $1.7 billion at January 30, 2010 ($398 million domestic and $1.3 billion at Sears Canada) and $1.3 billion at January 31, 2009. Significant uses of our cash during fiscal 2009 include repayments of $452 million on total outstanding debt balances, $424 million for share repurchases, capital expenditures of $361 million, and contributions to our pension and post-retirement benefit plans of $209 million.

Total debt (consisting of short-term borrowings, long-term debt and capital lease obligations) was $2.5 billion at January 30, 2010 and $2.9 billion at January 31, 2009. Total short-term borrowings at January 30, 2010 of $325 million were $117 million lower than our level of borrowings at January 31, 2009. The decrease in outstanding debt includes a reduction in domestic long-term debt and capital lease obligations of $333 million. Long-term debt of the parent (which excludes the debt of our Sears Canada ($281 million) and Orchard Supply Hardware ($296 million) subsidiaries, which is non-recourse to the parent) is less than $1 billion, with no significant required repayments until 2011.

In addition to these debt repayments, we further reduced our financial commitments as the balance of our domestic letters of credit decreased by one-third to $646 million, from last year's balance of $968 million. The letters of credit are used primarily to provide collateral in support of our insurance programs.

Share Repurchase

During the 13- and 52- week periods ended January 30, 2010, we repurchased approximately 0.9 million and 7.1 million common shares at a total cost of $66 million and $424 million, respectively, under our share repurchase program. Our repurchases for the 13- and 52- week periods ended January 30, 2010 were made at average prices of $71.68 and $59.81 per share, respectively. As of January 30, 2010, we had remaining authorization to repurchase $581 million of common shares under the share repurchase program. The share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods. Timing will be dependent on prevailing market conditions, alternative uses of capital and other factors.

Other Matters

We made the decision to close 27 underperforming stores during the fourth quarter of 2009 and 62 stores during the fiscal year 2009. We made the decision to close 32 underperforming stores during the fourth quarter of 2008 and 46 underperforming stores during the fiscal year 2008. We expect to record an additional charge of approximately $7 million during the first half of 2010 as the stores we decided to close in the fourth quarter of 2009 complete operations. Similar to our previous store closings, we expect that these will be additive to earnings given that the closure of these stores eliminates negative cash flows incurred from their operations, and will generate cash from the liquidation of inventory and from other proceeds. The list of stores closed can be found at www.searsmedia.com. We continue to evaluate our business in an effort to improve the operating results of the Company.

As we noted in our first quarter 2009 earnings release, the Company has a legacy pension obligation for past service performed by Kmart and Sears, Roebuck and Co. associates. The annual pension expense included in our financial statements related to these legacy domestic pension plans was relatively minimal in recent years. However, due to the severe decline in the capital markets that occurred in the latter part of 2008 our domestic pension expense increased by approximately $170 million for the fiscal year 2009. As a result, we present pension expense as a significant item affecting earnings and as a separate line item in our Adjusted EBITDA reconciliation to promote operating performance comparability.

Adjusted EBITDA

For purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") measurement computed as operating income (loss) appearing on the statements of income excluding depreciation and amortization and gains/(losses) on sales of assets. In addition, it is adjusted to exclude certain significant gains/(losses). Adjusted EBITDA is used by management to evaluate the operating performance of our businesses for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance because:

  --  EBITDA excludes the effects of financing and investing activities by
      eliminating the effects of interest and depreciation costs;
  --  Management considers gains/(losses) on the sale of assets to result
      from investing decisions rather than ongoing operations; and
  --  Other significant items, while periodically affecting our results, may
      vary significantly from period to period and have a disproportionate
      effect in a given period, which affects the comparability of results.




  Adjusted EBITDA was determined as follows:

                             Quarters Ended         Fiscal Years Ended
                             --------------         ------------------
                         January 30, January 31,  January 30, January 31,
                            2010        2009         2010        2009
                           ------      ------       ------      ------
  Operating income per
   statement of income       $749        $325         $713        $302
  Plus depreciation and
   amortization               248         236          926         981
  Less gain on sales of
   assets                      (4)        (12)         (74)        (51)
                           ------      ------       ------      ------
  Before excluded items       993         549        1,565       1,232

  Closed store reserve
   and severance               31          52          119          77
  Domestic pension
   expense                     42          --          170          --
  Legal settlement             --          --           --         (62)
  Goodwill and asset
   impairments                 --         284           --         360
  Visa/MasterCard
   settlement                 (32)         --          (32)         --
                           ------      ------       ------      ------
  Adjusted EBITDA as
   defined                 $1,034        $885       $1,822      $1,607
                           ======      ======       ======      ======
  % to revenues               7.8%        6.7%         4.1%        3.4%



  Adjusted EBITDA for our segments are as follows:

                                          Quarters Ended
                                          --------------
                            Adjusted EBITDA             % To Revenues
                            ---------------             ------------- 
                       January 30,   January 31,   January 30,  January 31,
                          2010          2009          2010         2009
                         ------        ------        ------       ------
  Kmart                    $341          $321           6.9%         6.5%
  Sears Domestic            491           424           7.1%         6.0%
  Sears Canada (1)          202           140          14.1%        10.7%
                         ------        ------        ------       ------
  Total Adjusted EBITDA  $1,034          $885           7.8%         6.7%
                         ======        ======        ======       ======

  (1) Fourth quarter EBITDA in Canadian dollars was $213 million in 2009 and
      $172 million in 2008.  


                                        Fiscal Years Ended
                                        ------------------
                            Adjusted EBITDA              % To Revenues
                            ---------------              -------------
                        January 30,   January 31,   January 30,  January 31,
                            2010          2009          2010         2009
                           ------        ------        ------       ------
  Kmart                      $364          $349           2.3%         2.2%
  Sears Domestic            1,003           803           4.2%         3.2%
  Sears Canada (1)            455           455           9.8%         8.7%
                           ------        ------        ------       ------
  Total Adjusted EBITDA    $1,822        $1,607           4.1%         3.4%
                           ======        ======        ======       ======

  (1) Full year EBITDA in Canadian dollars was $510 million in 2009 and 
      $491 million in 2008.


  Annual Report on Form 10-K

We plan to file with the SEC our Annual Report on Form 10-K for the year ended January 30, 2010 on or before March 31, 2010.

Forward-Looking Statements

Results are preliminary and unaudited. This press release contains forward-looking statements about our expectations for fiscal year 2010. Forward-looking statements are subject to risks and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement initiatives to improve inventory management and other capabilities; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, the availability of consumer and commercial credit, changes in consumer confidence, tastes, preferences and spending, and changes in vendor relationships; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; our dependence on sources outside the United States for significant amounts of our merchandise; our extensive reliance on computer systems to process transactions, summarize results and manage our business; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; and the outcome of pending and/or future legal proceedings, including product liability claims, including proceedings with respect to which the parties have reached a preliminary settlement. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available.

About Sears Holdings Corporation

Sears Holdings Corporation is the nation's fourth largest broadline retailer with approximately 3,900 full-line and specialty retail stores in the United States and Canada. Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics and automotive repair and maintenance. Key proprietary brands include Kenmore, Craftsman and DieHard, and a broad apparel offering, including such well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as well as the Apostrophe and Covington brands. It also has the Country Living collection, which is offered by Sears and Kmart. We are the nation's largest provider of home services, with more than 12 million service calls made annually. Sears Holdings Corporation operates through its subsidiaries, including Sears, Roebuck and Co. and Kmart Corporation. For more information, visit Sears Holdings' website at www.searsholdings.com.

                         Sears Holdings Corporation                       
                    Consolidated Statements of Income                 
                                 (Unaudited)                              
                                                                          
    Amounts are Preliminary and Subject to Change                       
    
                             Quarters Ended          Fiscal Years Ended 
    millions, except         --------------          ------------------ 
     per share data      January 30,  January 31,  January 30, January 31, 
                            2010        2009         2010        2009 
                            ----        ----         ----        ---- 
  REVENUES                                                                
    Merchandise sales                                                     
     and services         $13,247     $13,280      $44,043     $46,770 
                          -------     -------      -------     ------- 
                                                                          
  COSTS AND EXPENSES                                                      
    Cost of sales, buying 
     and occupancy          9,467       9,627       31,824      34,118 
    Gross margin dollars    3,780       3,653       12,219      12,652 
    Gross margin rate        28.5%       27.5%        27.7%       27.1%
                                                                          
    Selling and                                                           
     administrative         2,787       2,820       10,654      11,060 
    Selling and                                                           
     administrative                                                       
     expense as a                                                         
     percentage of total                                                  
     revenues                21.0%       21.2%        24.2%       23.6%
                                                                          
    Depreciation and                                                      
     amortization             248         236          926         981 
    Impairment charges          -         284            -         360 
    Gain on sales of                                                      
     assets                    (4)        (12)         (74)        (51)
                              ---         ---          ---         --- 
        Total costs and                                                   
         expenses          12,498      12,955       43,330      46,468 
                           ------      ------       ------      ------ 
                                                                          
  Operating income            749         325          713         302 
  Interest expense            (71)        (70)        (265)       (272)
  Interest and                                                          
   investment income            9           6           33          46 
  Other income (loss)          (9)         30          (61)        108 
                              ---         ---          ---         --- 
                                                                          
  Income before income                                                    
   taxes                      678         291          420         184 
  Income tax expense         (217)       (130)        (123)        (85)
                             ----        ----         ----         --- 
                                                                          
  Net income                  461         161          297          99 
  (Income) loss                                                           
   attributable to                                                        
   noncontrolling                                                         
   interest                   (31)         29          (62)        (46)
                              ---         ---          ---         --- 
                                                                          
  NET INCOME ATTRIBUTABLE TO                                              
   HOLDINGS' SHAREHOLDERS    $430        $190         $235         $53 
                             ====        ====         ====         === 
                                                                          
  INCOME PER COMMON                                                       
   SHARE ATTRIBUTABLE TO 
   HOLDINGS' SHAREHOLDERS                                             
    Diluted income per                                                    
     share                  $3.74       $1.55        $1.99       $0.42 
                                                                          
    Diluted weighted                                                      
     average common                                                       
     shares outstanding     114.9       122.5        117.9       127.0 



                   Sears Holdings Corporation                
              Condensed Consolidated Balance Sheets          
                                                             
  Amounts are Preliminary and Subject to Change              

                                         (Unaudited)            
                                         -----------            
                                                             
  millions                               January 30, January 31,
                                            2010        2009
                                            ----        ----
  ASSETS                                                     
  Current assets                                             
     Cash and cash equivalents             $1,689      $1,173
     Restricted cash                           11         124
     Receivables                              652         839
     Merchandise inventories                8,705       8,795
     Prepaid expenses and other current                        
      assets                                  381         485
                                              ---         ---
     Total current assets                  11,438      11,416
                                                             
  Property and equipment, net               7,709       8,091
  Goodwill                                  1,392       1,392
  Trade names and other intangible assets   3,208       3,283
  Other assets                              1,061       1,160
                                            -----       -----
     TOTAL ASSETS                         $24,808     $25,342
                                          =======     =======
                                                             
  LIABILITIES                                                
  Current liabilities                                        
     Short-term borrowings                   $325        $442
     Current portion of long-term debt                         
      and capitalized lease obligations       482         345
     Merchandise payables                   3,335       3,006
     Unearned revenues                      1,012       1,069
     Accrued expenses and other current                        
      liabilities                           3,632       3,650
                                            -----       -----
     Total current liabilities              8,786       8,512
                                                             
  Long-term debt and capitalized                             
   lease obligations                        1,698       2,132
  Pension and post-retirement benefits      2,271       2,057
  Other long-term liabilities               2,618       2,942
                                            -----       -----
     Total Liabilities                     15,373      15,643
                                           ------      ------
                                                             
     Total Equity                           9,435       9,699
                                            -----       -----
                                                             
     TOTAL LIABILITIES AND EQUITY         $24,808     $25,342
                                          =======     =======
                                                             
                                                             
  Total common shares outstanding           114.8       122.0



                          Sears Holdings Corporation                        
                                Segment Results                             
                                  (Unaudited)                               
                                                                            
  Amounts are Preliminary and Subject to Change                             
                                                                            
                                           Quarter Ended January 30, 2010   
                                          --------------------------------  
  millions, except store data                          Sears                
                                                 ----------------       
                                                                    Sears   
                                         Kmart   Domestic  Canada  Holdings 
                                        -------  --------  ------  -------- 
  Merchandise sales and services         $4,918    $6,892  $1,437   $13,247 
                                         ------    ------  ------   ------- 
                                                                            
  Cost of sales, buying and occupancy     3,686     4,832     949     9,467 
  Gross margin dollars                    1,232     2,060     488     3,780 
  Gross margin rate                        25.1%     29.9%   34.0%     28.5%
                                                                            
  Selling and administrative                897     1,604     286     2,787 
  Selling and administrative expense                                        
   as a percentage of total revenues       18.2%     23.3%   19.9%     21.0%
  Depreciation and amortization              43       177      28       248 
  Gain on sales of assets                    (4)        -       -        (4)
                                            ---       ---     ---        -- 
  Total costs and expenses                4,622     6,613   1,263    12,498 
                                          -----     -----   -----    ------ 
  Operating income                         $296      $279    $174      $749 
                                           ====      ====    ====      ==== 
                                                                            
  Number of:                                                                
    Kmart Stores                          1,327         -       -     1,327 
    Full-Line Stores                          -       908     122     1,030 
    Specialty Stores                          -     1,284     280     1,564 
                                            ---     -----     ---     ----- 
    Total Stores                          1,327     2,192     402     3,921 
                                          =====     =====     ===     ===== 
                                                                            
                                                                            
                                           Quarter Ended January 31, 2009   
                                          --------------------------------  
  millions, except store data                          Sears                
                                                 ----------------        
                                                                    Sears   
                                         Kmart   Domestic  Canada  Holdings 
                                        -------  --------  ------  -------- 
  Merchandise sales and services         $4,949    $7,021  $1,310   $13,280 
                                         ------    ------  ------   ------- 
                                                                            
  Cost of sales, buying and occupancy     3,736     4,994     897     9,627 
  Gross margin dollars                    1,213     2,027     413     3,653 
  Gross margin rate                        24.5%     28.9%   31.5%     27.5%
                                                                            
  Selling and administrative                909     1,638     273     2,820 
  Selling and administrative expense                                        
   as a percentage of total revenues       18.4%     23.3%   20.8%     21.2%
  Depreciation and amortization              37       174      25       236 
  Impairment charges                          1       283       -       284 
  Gain on sales of assets                    (8)       (4)      -       (12)
                                            ---       ---     ---       --- 
  Total costs and expenses                4,675     7,085   1,195    12,955 
                                          -----     -----   -----    ------ 
  Operating income (loss)                  $274      $(64)   $115      $325 
                                           ====      ====    ====      ==== 
                                                                            
  Number of:                                                                
    Kmart Stores                          1,368         -       -     1,368 
    Full-Line Stores                          -       929     122     1,051 
    Specialty Stores                          -     1,233     266     1,499 
                                            ---     -----     ---     ----- 
    Total Stores                          1,368     2,162     388     3,918 
                                          =====     =====     ===     ===== 
                                                                            
                                                                            
                                                                    
                                         Fiscal Year Ended January 30, 2010 
                                        ------------------------------------
  millions, except store data                          Sears                
                                                 ----------------          
                                                                    Sears   
                                         Kmart   Domestic  Canada  Holdings 
                                        -------  --------  ------  -------- 
  Merchandise sales and services        $15,743   $23,672  $4,628   $44,043 
                                        -------   -------  ------   ------- 
                                                                            
  Cost of sales, buying and occupancy    12,038    16,653   3,133    31,824 
  Gross margin dollars                    3,705     7,019   1,495    12,219 
  Gross margin rate                        23.5%     29.7%   32.3%     27.7%
                                                                            
  Selling and administrative              3,386     6,220   1,048    10,654 
  Selling and administrative expense                                        
   as a percentage of total revenues       21.5%     26.3%   22.6%     24.2%
  Depreciation and amortization             152       672     102       926 
  Gain on sales of assets                   (23)       (6)    (45)      (74)
                                            ---       ---     ---       --- 
  Total costs and expenses               15,553    23,539   4,238    43,330 
                                         ------    ------   -----    ------ 
  Operating income                         $190      $133    $390      $713 
                                           ====      ====    ====      ==== 
                                                                            
  Number of:                                                                
    Kmart Stores                          1,327         -       -     1,327 
    Full-Line Stores                          -       908     122     1,030 
    Specialty Stores                          -     1,284     280     1,564 
                                            ---     -----     ---     ----- 
    Total Stores                          1,327     2,192     402     3,921 
                                          =====     =====     ===     ===== 
                                                                            
                                                                            
                                         Fiscal Year Ended January 31, 2009 
                                        ------------------------------------
  millions, except store data                          Sears                
                                                 ----------------           
                                                                    Sears   
                                         Kmart   Domestic  Canada  Holdings 
                                        -------  --------  ------  -------- 
  Merchandise sales and services        $16,219   $25,315  $5,236   $46,770 
                                        -------   -------  ------   ------- 
                                                                            
  Cost of sales, buying and occupancy    12,442    18,084   3,592    34,118 
  Gross margin dollars                    3,777     7,231   1,644    12,652 
  Gross margin rate                        23.3%     28.6%   31.4%     27.1%
                                                                            
  Selling and administrative              3,456     6,415   1,189    11,060 
  Selling and administrative expense                                        
   as a percentage of total revenues       21.3%     25.3%   22.7%     23.6%
  Depreciation and amortization             138       724     119       981 
  Impairment charges                         21       339       -       360 
  Gain on sales of assets                   (10)      (10)    (31)      (51)
                                            ---       ---     ---       --- 
  Total costs and expenses               16,047    25,552   4,869    46,468 
                                         ------    ------   -----    ------ 
  Operating income (loss)                  $172     $(237)   $367      $302 
                                           ====     =====    ====      ==== 
                                                                            
  Number of:                                                                
    Kmart Stores                          1,368         -       -     1,368 
    Full-Line Stores                          -       929     122     1,051 
    Specialty Stores                          -     1,233     266     1,499 
                                            ---     -----     ---     ----- 
    Total Stores                          1,368     2,162     388     3,918 
                                          =====     =====     ===     ===== 



                      Sears Holdings Corporation                    
                            Adjusted EBITDA                         
                                                                    
  Amounts are Preliminary and Subject to Change                     

                                            Quarters Ended          
                                            --------------          
  millions                                 January 30, 2010         
                                         --------------------       
                                          Sears    Sears    Sears   
                                  Kmart  Domestic  Canada  Holdings 
                                  -----  --------  ------  -------- 
                                                                    
  Operating income per                                       
   statement of operations         $296    $279    $174      $749 
  Plus depreciation and                                             
   amortization                      43     177      28       248 
  Less gain on sales of assets       (4)      -       -        (4)
                                    ---     ---     ---       --- 
  Before excluded items             335     456     202       993 
                                                                    
  Closed store reserve and                                          
   severance                         23       8       -        31 
  Domestic pension expense            -      42       -        42 
  Visa/MasterCard settlement        (17)    (15)              (32)
                                    ---     ---     ---       --- 
  Adjusted EBITDA as defined       $341    $491    $202    $1,034 
                                   ====    ====    ====    ====== 
  % to  revenues                    6.9%    7.1%   14.1%      7.8%
                                                                    
                                                                    
                                                                    
                                            Quarters Ended          
                                            --------------          
  millions                                 January 31, 2009         
                                         --------------------       
                                          Sears    Sears    Sears   
                                  Kmart  Domestic  Canada  Holdings 
                                  -----  --------  ------  -------- 
                                                                    
  Operating income (loss) per                                       
   statement of operations         $274    $(64)   $115      $325 
  Plus depreciation and                                             
   amortization                      37     174      25       236 
  Less gain on sales of assets       (8)     (4)      -       (12)
                                    ---     ---     ---       --- 
  Before excluded items             303     106     140       549 
                                                                    
  Closed store reserve and                                          
   severance                         17      35       -        52 
  Goodwill and asset impairment       1     283       -       284 
                                    ---     ---     ---       --- 
  Adjusted EBITDA as defined       $321    $424    $140      $885 
                                   ====    ====    ====      ==== 
  % to  revenues                    6.5%    6.0%   10.7%      6.7%
                                                                    
                                                                    
                                          Fiscal Years Ended        
                                          ------------------        
  millions                                 January 30, 2010         
                                           ----------------         
                                          Sears    Sears    Sears   
                                  Kmart  Domestic  Canada  Holdings 
                                  -----  --------  ------  -------- 
                                                                    
  Operating income per                                       
   statement of operations         $190    $133    $390      $713 
  Plus depreciation and                                             
   amortization                     152     672     102       926 
  Less gain on sales of assets      (23)     (6)    (45)      (74)
                                    ---     ---     ---       --- 
  Before excluded items             319     799     447     1,565 
                                                                    
  Closed store reserve and                                          
   severance                         62      49       8       119 
  Domestic pension expense            -     170       -       170 
  Visa/MasterCard settlement        (17)    (15)              (32)
                                    ---     ---     ---       --- 
  Adjusted EBITDA as defined       $364  $1,003    $455    $1,822 
                                   ====  ======    ====    ====== 
  % to  revenues                    2.3%    4.2%    9.8%      4.1%
                                                                    
                                                                    
                                                                    
                                          Fiscal Years Ended        
                                          ------------------        
  millions                                 January 31, 2009         
                                           ----------------         
                                          Sears    Sears    Sears   
                                  Kmart  Domestic  Canada  Holdings 
                                  -----  --------  ------  -------- 
                                                                    
  Operating income (loss) per                                       
   statement of operations         $172   $(237)   $367      $302 
  Plus depreciation and                                             
   amortization                     138     724     119       981 
  Less gain on sales of assets      (10)    (10)    (31)      (51)
                                    ---     ---     ---       --- 
  Before excluded items             300     477     455     1,232 
                                                                    
  Closed store reserve and                                          
   severance                         28      49       -        77 
  Legal settlement                    -     (62)      -       (62)
  Goodwill and asset impairments     21     339       -       360 
                                    ---     ---     ---       --- 
  Adjusted EBITDA as defined       $349    $803    $455    $1,607 
                                   ====    ====    ====    ====== 
  % to  revenues                    2.2%    3.2%    8.7%      3.4%



                         Sears Holdings Corporation                      
                          Significant Item Impact                        
                                                                         
                                                                         
  Amounts are Preliminary and Subject to Change                          
                                                                         
                                 Quarter ended January 30, 2010          
                                 ------------------------------          
                                      Domestic    Mark-to-   Closed Store 
  millions, except                     Pension     Market    Reserve and  
   per share data          GAAP        Expense      Gains     Severance  
                           ----       ---------   --------   ------------ 
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact      $9,467           $-        $-          $(16)
  Selling and                                                            
   administrative                                                        
   impact                 2,787          (42)        -           (15)
  Depreciation and                                                       
   amortization impact      248            -         -           (12)
  Operating income                                                       
   impact                   749           42         -            43 
  Other loss impact          (9)           -        (1)            - 
  Income tax expense                                                     
   impact                  (217)         (13)        -           (13)
  After tax and                                                          
   noncontrolling                                                        
   interest  impact         430           29        (1)           30 
  Diluted income per                                                     
   share impact           $3.74        $0.25    $(0.01) (1)    $0.26 (1) 
                                                                         
                                                                         
                                                                         
                          Quarter ended January 30, 2010                 
                          ------------------------------                 
                           Visa/                                         
  millions, except      MasterCard       Tax         As           
   per share data       Settlement     Matters    Adjusted        
                        -----------    -------    --------        
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact          $-           $-      $9,451               
  Selling and                                                            
   administrative                                                        
   impact                    32            -       2,762               
  Depreciation and                                                       
   amortization impact        -            -         236               
  Operating income                                                       
   impact                   (32)           -         802               
  Other loss impact           -            -         (10)              
  Income tax expense                                                     
   impact                    10          (41)       (274)              
  After tax and                                                          
   noncontrolling                                                        
   interest  impact         (22)         (41)        425               
  Diluted income per                                                     
   share impact          $(0.19)      $(0.36)      $3.69               
                                                                         
        
                                                                   
                                 Quarter ended January 31, 2009          
                                 ------------------------------    
                                                  Mark-to-   Closed Store 
  millions, except                                 Market    Reserve and  
   per share data          GAAP      Impairments    Gains     Severance  
                           ----      -----------  --------   ------------ 
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact      $9,627           $-        $-          $(26)
  Selling and                                                            
   administrative                                                        
   impact                 2,820            -         -           (26)
  Impairment charges                                                     
   impact                   284         (284)        -             - 
  Operating income                                                       
   impact                   325          284         -            52 
  Interest expense                                                       
   impact                   (70)           -         -             - 
  Other income impact        30            -        (9)            - 
  Income tax expense                                                     
   impact                  (130)         (77)        3           (20)
  Noncontrolling                                                         
   interest impact           29          (52)        2             - 
  After tax and                                                          
   noncontrolling                                                        
   interest  impact         190          155        (4)           32 
  Diluted income per                                                     
   share impact           $1.55        $1.27    $(0.03)        $0.26 
                                                                         
                                                                         
                                                                         
                          Quarter ended January 31, 2009                 
                          ------------------------------                 
                        Repurchase                                       
  millions, except       of Debt         Tax         As           
   per share data       Securities     Matters    Adjusted        
                        -----------    -------    --------        
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact          $-           $-      $9,601               
  Selling and                                                            
   administrative                                                        
   impact                     -            -       2,794               
  Impairment charges                                                     
   impact                     -            -           -               
  Operating income                                                       
   impact                     -            -         661               
  Interest expense                                                       
   impact                    (9)           -         (79)              
  Other income impact         -            -          21               
  Income tax expense                                                     
   impact                     4           (8)       (228)              
  Noncontrolling                                                         
   interest impact            -            -         (21)              
  After tax and                                                          
   noncontrolling                                                        
   interest  impact          (5)          (8)        360               
  Diluted income per                                                     
   share impact          $(0.04)      $(0.07)      $2.94               
                                                                         
                     
                                                      
                                  Year ended January 30, 2010            
                                  ---------------------------     
                                      Domestic    Mark-to-   Closed Store 
  millions, except                     Pension     Market    Reserve and  
   per share data          GAAP        Expense      Gains     Severance  
                           ----       ---------   --------   ------------ 
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact      $31,824           $-        $-          $(37)
  Selling and                                                            
   administrative                                                        
   impact                 10,654         (170)        -           (82)
  Depreciation and                                                       
   amortization impact       926            -         -           (12)
  Gain on sales of                                                       
   assets impact             (74)           -         -             - 
  Operating income                                                       
   impact                    713          170         -           131 
  Other loss impact          (61)           -        33             - 
  Income tax expense                                                     
   impact                   (123)         (50)       (8)          (38)
  Noncontrolling                                                         
   interest impact           (62)           -        (9)           (3)
  After tax and                                                          
   noncontrolling                                                        
   interest  impact          235          120        16            90 
  Diluted income per                                                     
   share impact            $1.99        $1.02     $0.14         $0.77 
                                                                         
                                                                         
                                                                         
                                  Year ended January 30, 2010            
                                  ---------------------------            
                       Gain on Sale                                      
                         of Sears        Visa/                            
  millions, except        Canada      MasterCard     Tax         As      
   per share data      Headquarters   Settlement   Matters    Adjusted   
                       ------------  -----------   -------    --------   
  Cost of sales, 
   buying and                                                            
   occupancy impact           $-           $-        $-       $31,787 
  Selling and                                                            
   administrative                                                        
   impact                      -           32         -        10,434 
  Depreciation and                                                       
   amortization impact         -            -         -           914 
  Gain on sales of                                                       
   assets impact              44            -         -           (30)
  Operating income                                                       
   impact                    (44)         (32)        -           938 
  Other loss impact            -            -         -           (28)
  Income tax expense                                                     
   impact                     10           10       (41)         (240)
  Noncontrolling                                                         
   interest impact            12            -         -           (62)
  After tax and                                                          
   noncontrolling                                                        
   interest  impact          (22)         (22)      (41)          376 
  Diluted income per                                                     
   share impact           $(0.19)      $(0.19)   $(0.35)        $3.19 
                                                                         
                                                                         
                                  Year ended January 31, 2009            
                                  ---------------------------            
                                                  Mark-to-   Closed Store 
  millions, except                                 Market    Reserve and  
   per share data          GAAP      Impairments    Gains     Severance  
                           ----      -----------  --------  - ----------- 
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact      $34,118           $-        $-          $(36)
  Selling and                                                            
   administrative                                                        
   impact                 11,060            -         -           (41)
  Impairment charges                                                     
   impact                    360         (360)        -             - 
  Gain on sales of                                                       
   assets impact             (51)           -         -             - 
  Operating income                                                       
   impact                    302          360         -            77 
  Interest expense                                                       
   impact                   (272)           -         -             - 
  Other income impact        108            -       (81)            - 
  Income tax expense                                                     
   impact                    (85)        (107)       26           (30)
  Noncontrolling                                                         
   interest impact           (46)         (52)       22             - 
  After tax and                                                          
   noncontrolling                                                        
   interest  impact           53          201       (33)           47 
  Diluted income per                                                     
   share impact            $0.42        $1.57    $(0.26)        $0.37 
                                                                         
                                                                         
                                                                         
                                  Year ended January 31, 2009            
                                  ---------------------------            
                                      Repurchase                         
  millions, except        Legal        of Debt       Tax         As      
   per share data       Settlement    Securities   Matters    Adjusted   
                        ----------   -----------   -------    --------   
  Cost of sales,                                                         
   buying and                                                            
   occupancy impact           $-           $-        $-       $34,082 
  Selling and                                                            
   administrative                                                        
   impact                     62            -         -        11,081 
  Impairment charges                                                     
   impact                      -            -         -             - 
  Gain on sales of                                                       
   assets impact               -            -         -           (51)
  Operating income                                                       
   impact                    (62)           -         -           677 
  Interest expense                                                       
   impact                      -          (13)        -          (285)
  Other income impact          -            -         -            27 
  Income tax expense                                                     
   impact                     25            5        (8)         (174)
  Noncontrolling                                                         
   interest impact             -            -         -           (76)
  After tax and                                                          
   noncontrolling                                                        
   interest  impact          (37)          (8)       (8)          215 
  Diluted income per                                                     
   share impact           $(0.29)      $(0.06)   $(0.06)        $1.69 

  (1) In our January 7, 2010 press release, we provided an expected range of
  net income attributable to Holdings' shareholders for the fourth quarter 
  ending January 30, 2010 to be between $385 million and $465 million, or 
  between $3.36 and $4.06 per diluted share.  Those net income and earnings
  per share ranges excluded the impact related to store closings and 
  impairment charges, restructuring activities including severance, and 
  mark-to-market gains and losses on hedge transactions executed by Sears 
  Canada as those amounts were not available at that time.  On a comparable
  basis with the outlook provided, our fourth quarter net income was $459 
  million, or $3.99 per diluted share determined as follows:


                                                  Net Income         
                                                 (in millions)   EPS
                                                 -------------  -----
  Results per Consolidated Statement of Income        $430      $3.74
  Closed store reserve and severance                    30       0.26
  Mark-to-market gains                                  (1)     (0.01)
                                                       ---      -----
  Results on comparable basis with outlook provided   $459      $3.99
                                                      ====      =====

First Call Analyst:
FCMN Contact: kfreely@searshc.com

SOURCE: Sears Holdings Corporation

CONTACT: Sears Holdings Public Relations, +1-847-286-8371

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