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Sears Holdings Reports Fourth Quarter and Full Year 2010 Results
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Sears Public Relations And Communications
(847) 286-8371

Sears Holdings Reports Fourth Quarter and Full Year 2010 Results

    HOFFMAN ESTATES, Ill., Feb. 24, 2011 /PRNewswire/ -- Sears Holdings
Corporation ("Holdings," "we," "us," "our" or the "Company") (Nasdaq: SHLD)
today reported its fourth quarter and full year 2010 results. In summary,
we reported:



-- Net income attributable to Holdings' shareholders for the fourth quarter of $374 million ($3.43 per diluted share) in 2010 and $430 million ($3.74 per diluted share) in 2009 and for the year of $133 million ($1.19 per diluted share) in 2010 and $235 million ($1.99 per diluted share) in 2009; -- Adjusted earnings per diluted share for the fourth quarter of $3.67 in 2010 and $3.69 in 2009 and for the full year of $2.07 in 2010 and $3.19 in 2009; -- Adjusted EBITDA of $933 million for the fourth quarter of 2010 and $1.453 billion for fiscal 2010; -- These results were within our previously announced range (see calculation in the attached schedule "Adjusted Earnings per Share"); and -- An increase in comparable store sales at Kmart of 2.5% in the fourth quarter 2010 and 0.7% for fiscal 2010. Fourth Quarter and Full Year Revenues and Comparable Store Sales Revenues decreased $103 million to $13.1 billion for the quarter ended January 29, 2011. Full year revenues decreased $717 million to $43.3 billion. The decreases were primarily due to lower comparable store sales and fewer Kmart and Sears full-line stores. The fourth quarter and full year 2010 revenues included an increase of $69 million and $433 million, respectively, due to foreign currency exchange rates. For the quarter, domestic comparable store sales declined 1.2%, which comprises an increase at Kmart of 2.5% and a decline at Sears Domestic of 4.5%. For the year, domestic comparable store sales declined 1.6%, with an increase at Kmart of 0.7% and a decline at Sears Domestic of 3.6%. The Kmart increases in comparable store sales were driven by increases in most categories, with notable increases in the apparel, footwear, jewelry, sporting goods and toys categories, partially offset by declines in the food and consumables and pharmacy categories. Declines in sales at Sears Domestic were primarily driven by the hardlines categories, as well as apparel. Over half of the total decline in both periods occurred in consumer electronics. In contrast, Sears' footwear, jewelry, and automotive categories generated comparable store sales growth during the periods. Operating Income Operating income was $663 million for the quarter ended January 29, 2011 and $749 million for the quarter ended January 30, 2010. Operating income decreased $86 million primarily due to a decline in gross profit dollars due to lower overall sales and a decrease of 60 basis points in margin rate. Operating income for the fourth quarter of 2010 includes expenses of $55 million related to domestic pension plans, store closings and severance. Operating income for the fourth quarter of 2009 includes expenses of $85 million related to domestic pension plans, store closings and severance, as well as a $32 million gain recorded in connection with the settlement of Visa/MasterCard antitrust litigation. Operating income was $474 million in 2010 and $713 million in 2009. Operating income decreased $239 million primarily due to lower gross profit dollars given lower overall sales and a decline in margin rate, partially offset by reductions in selling and administrative expenses, which includes incremental expenses of $135 million related to our continued investment in our multi-channel capabilities and the continued promotion of our Shop Your Way Rewards program. Operating income for fiscal 2010 also includes expenses of $156 million related to domestic pension plans, store closings and severance and a gain on sale of assets of $35 million. 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. The impact these and other items had on our operating income and earnings is summarized in the attached schedule, "Adjusted Earnings per Share." Financial Position We had cash balances of $1.4 billion at January 29, 2011 ($960 million domestic and $430 million at Sears Canada) as compared to $1.7 billion at January 30, 2010. Commercial paper outstanding at January 29, 2011 was $360 million, as compared to $206 million at January 30, 2010. Uses of cash during fiscal 2010 included $603 million for the purchase of Sears Canada shares, repayments of long-term debt of $486 million, capital expenditures of $441 million, $394 million for share repurchases, and contributions to our pension and post-retirement benefit plans of $316 million. These uses of cash were funded in part from $1.25 billion of proceeds from our senior secured notes offering in October 2010. Merchandise inventories at January 29, 2011 were $9.1 billion, as compared to $8.7 billion at January 30, 2010. Domestic inventory increased approximately $270 million to $8.3 billion at January 29, 2011. The increase was primarily in the Kmart apparel, electronics, toys, footwear and sporting goods categories. Sears Canada's inventory levels increased approximately $150 million to $868 million at January 29, 2011 primarily due to the change in exchange rates, lower sales and the timing of merchandise receipts. There were no borrowings outstanding on our domestic revolver at the end of fiscal 2010, in contrast to fiscal 2009 when we had $119 million of borrowings outstanding. We had $235 million of letters of credit outstanding on the revolver at the end of the fiscal year, leaving remaining availability of $2.2 billion. We finished fiscal 2010 with total debt (consisting of short-term borrowings, long-term debt and capitalized lease obligations) of $3.5 billion, up from $2.5 billion at January 30, 2010, due primarily to the senior secured notes offering discussed above. Share Repurchase During the 13- and 52- week periods ended January 29, 2011, we repurchased approximately 1.2 million and 5.5 million common shares at a total cost of $77 million and $394 million, respectively, under our share repurchase program. Our repurchases for the 13- and 52- week periods ended January 29, 2011 were made at average prices of $66.35 and $71.76 per share, respectively. At January 29, 2011, we had remaining authorization to repurchase $187 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. Adjusted EBITDA For purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") measurement computed as net income attributable to Sears Holdings Corporation appearing on the statements of income excluding income attributable to noncontrolling interest, income tax expense, interest and investment income, other loss, interest expense, gains on sales of assets and depreciation and amortization. In addition, it further adjusts for certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our businesses, as well as executive compensation metrics. 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:

13 Weeks Ended -------------- January January 29, 30, 2011 2010 -------- -------- Net income attributable to Holdings' Shareholders $374 $430 Income attributable to noncontrolling interest 8 31 Income tax expense 187 217 Interest and investment income (8) (9) Other loss 5 9 Interest expense 97 71 Gain on sales of assets (14) (4) Depreciation and amortization 239 248 Before excluded items 888 993 Domestic pension expense 32 42 Closed store reserve and severance 13 31 Visa/MasterCard settlement - (32) Adjusted EBITDA as defined $933 $1,034 ==== ====== % to revenues 7.1% 7.8%

52 Weeks Ended -------------- January January 29, 30, 2011 2010 -------- -------- Net income attributable to Holdings' Shareholders $133 $235 Income attributable to noncontrolling interest 17 62 Income tax expense 36 123 Interest and investment income (36) (33) Other loss 14 61 Interest expense 310 265 Gain on sales of assets (67) (74) Depreciation and amortization 900 926 Before excluded items 1,307 1,565 Domestic pension expense 120 170 Closed store reserve and severance 26 119 Visa/MasterCard settlement - (32) Adjusted EBITDA as defined $1,453 $1,822 ====== ====== % to revenues 3.4% 4.1%

Adjusted EBITDA for our segments are as follows:

Quarters Ended -------------- Adjusted EBITDA --------------- January January 29, 2011 30, 2010 -------- -------- Kmart $375 $341 Sears Domestic 420 491 Sears Canada (1) 138 202 --- --- Total Adjusted EBITDA $933 $1,034 ==== ======

Quarters Ended -------------- % To Revenues ------------- January January 29, 2011 30, 2010 -------- -------- Kmart 7.5% 6.9% Sears Domestic 6.3% 7.1% Sears Canada (1) 9.5% 14.1% --- ---- Total Adjusted EBITDA 7.1% 7.8% === ===

(1) Fourth quarter EBITDA in Canadian dollars was $139 million in fiscal 2010 and $213 million in fiscal 2009.

Fiscal Years Ended ------------------ Adjusted EBITDA --------------- January January 29, 2011 30, 2010 -------- -------- Kmart $508 $364 Sears Domestic 626 1,003 Sears Canada (1) 319 455 --- --- Total Adjusted EBITDA $1,453 $1,822 ====== ======

Fiscal Years Ended ------------------ % To Revenues ------------- January January 29, 2011 30, 2010 -------- -------- Kmart 3.3% 2.3% Sears Domestic 2.7% 4.2% Sears Canada (1) 6.7% 9.8% --- --- Total Adjusted EBITDA 3.4% 4.1% === ===

(1)Full year EBITDA in Canadian dollars was $327 million in fiscal 2010 and $510 million in fiscal 2009. 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 29, 2011 on or before March 30, 2011. Forward-Looking Statements Results are preliminary and unaudited. This press release contains forward-looking statements about our expectations for fiscal year 2011. 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; the outcome of pending and/or future legal proceedings, including product liability claims and proceedings with respect to which the parties have reached a preliminary settlement; and the timing and amount of required pension plan funding. 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 over 4,000 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, consumer electronics and automotive repair and maintenance. Sears Holdings is the 2010 ENERGY STAR? Retail Partner of the Year. 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 11 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 http://www.searsholdings.com.

Sears Holdings Corporation Consolidated Statements of Income (Unaudited)

Amounts are Preliminary and Subject to Change 13 Weeks Ended -------------- January January millions, except per share data 29, 30, 2011 2010 ---- ---- REVENUES Merchandise sales and services $13,144 $13,247 ------- ------- COSTS AND EXPENSES Cost of sales, buying and occupancy 9,476 9,467 Gross profit dollars 3,668 3,780 Margin rate 27.9% 28.5% Selling and administrative 2,780 2,787 Selling and administrative expense as a percentage of total revenues 21.2% 21.0% Depreciation and amortization 239 248 Gain on sales of assets (14) (4) Total costs and expenses 12,481 12,498 ------ ------ Operating income 663 749 Interest expense (97) (71) Interest and investment income 8 9 Other loss (5) (9) --- --- Income before income taxes 569 678 Income tax expense (187) (217) ---- ---- Net income 382 461 Income attributable to noncontrolling interest (8) (31) --- --- NET INCOME ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS $374 $430 ==== ==== INCOME PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS Diluted income per share $3.43 $3.74 Diluted weighted average common shares outstanding 109.1 114.9

Amounts are Preliminary and Subject to Change 52 Weeks Ended -------------- January January millions, except per share data 29, 30, 2011 2010 ---- ---- REVENUES Merchandise sales and services $43,326 $44,043 ------- ------- COSTS AND EXPENSES Cost of sales, buying and occupancy 31,448 31,824 Gross profit dollars 11,878 12,219 Margin rate 27.4% 27.7% Selling and administrative 10,571 10,654 Selling and administrative expense as a percentage of total revenues 24.4% 24.2% Depreciation and amortization 900 926 Gain on sales of assets (67) (74) Total costs and expenses 42,852 43,330 ------ ------ Operating income 474 713 Interest expense (310) (265) Interest and investment income 36 33 Other loss (14) (61) --- --- Income before income taxes 186 420 Income tax expense (36) (123) --- ---- Net income 150 297 Income attributable to noncontrolling interest (17) (62) --- --- NET INCOME ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS $133 $235 ==== ==== INCOME PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS Diluted income per share $1.19 $1.99 Diluted weighted average common shares outstanding 111.7 117.9

Sears Holdings Corporation Condensed Consolidated Balance Sheets

Amounts are Preliminary and Subject to Change (Unaudited) ----------- January January millions 29, 30, 2011 2010 ---- ---- ASSETS Current assets Cash and cash equivalents $1,375 $1,689 Restricted cash 15 11 Receivables 683 652 Merchandise inventories 9,123 8,705 Prepaid expenses and other current assets 339 381 --- --- Total current assets 11,535 11,438 Property and equipment, net 7,365 7,709 Goodwill 1,392 1,392 Trade names and other intangible assets 3,139 3,208 Other assets 837 1,061 --- ----- TOTAL ASSETS $24,268 $24,808 ======= ======= LIABILITIES Current liabilities Short-term borrowings $360 $325 Current portion of long-term debt and capitalized lease obligations 509 482 Merchandise payables 3,101 3,335 Unearned revenues 976 1,012 Accrued expenses and other current liabilities 3,672 3,632 ----- ----- Total current liabilities 8,618 8,786 Long-term debt and capitalized lease obligations 2,663 1,698 Pension and post-retirement benefits 2,151 2,271 Other long-term liabilities 2,222 2,618 ----- ----- Total Liabilities 15,654 15,373 ------ ------ Total Equity 8,614 9,435 ----- ----- TOTAL LIABILITIES AND EQUITY $24,268 $24,808 ======= ======= Total common shares outstanding 108.9 114.8

Sears Holdings Corporation Segment Results (Unaudited) Amounts are Preliminary and Subject to Change

13 Weeks Ended January 29, 2011 ------------------------------- millions, except Sears Sears Sears store data Kmart Domestic Canada Holdings ----- --------- ------ --------- Merchandise sales and services $4,999 $6,686 $1,459 $13,144 ------ ------ ------ ------- Cost of sales, buying and occupancy 3,714 4,762 1,000 9,476 Gross profit dollars 1,285 1,924 459 3,668 Margin rate 25.7% 28.8% 31.5% 27.9% Selling and administrative 915 1,544 321 2,780 Selling and administrative expense as a percentage of total revenues 18.3% 23.1% 22.0% 21.2% Depreciation and amortization 40 172 27 239 Gain on sales of assets (1) 1 (14) (14) Total costs and expenses 4,668 6,479 1,334 12,481 ----- ----- ----- ------ Operating income (loss) $331 $207 $125 $663 ==== ==== ==== ==== Number of: Kmart Stores 1,307 - - 1,307 Full-Line Stores - 894 122 1,016 Specialty Stores - 1,354 361 1,715 Total Stores 1,307 2,248 483 4,038 ===== ===== === ===== 13 Weeks Ended January 30, 2010 ------------------------------- millions, except Sears Sears Sears store data 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 profit dollars 1,232 2,060 488 3,780 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 (loss) $296 $279 $174 $749 ==== ==== ==== ==== Number of: Kmart Stores 1,327 - - 1,327 Full-Line Stores - 908 122 1,030 Specialty Stores - 1,313 280 1,593 Total Stores 1,327 2,221 402 3,950 ===== ===== === =====

Sears Holdings Corporation Segment Results (Unaudited) Amounts are Preliminary and Subject to Change

52 Weeks Ended January 29, 2011 ------------------------------- millions, except Sears Sears Sears store data Kmart Domestic Canada Holdings ----- --------- ------ --------- Merchandise sales and services $15,593 $22,937 $4,796 $43,326 ------- ------- ------ ------- Cost of sales, buying and occupancy 11,757 16,358 3,333 31,448 Gross profit dollars 3,836 6,579 1,463 11,878 Margin rate 24.6% 28.7% 30.5% 27.4% Selling and administrative 3,341 6,086 1,144 10,571 Selling and administrative expense as a percentage of total revenues 21.4% 26.5% 23.9% 24.4% Depreciation and amortization 149 651 100 900 Gain on sales of assets (7) (46) (14) (67) Total costs and expenses 15,240 23,049 4,563 42,852 ------ ------ ----- ------ Operating income (loss) $353 $(112) $233 $474 ==== ===== ==== ==== Number of: Kmart Stores 1,307 - - 1,307 Full-Line Stores - 894 122 1,016 Specialty Stores - 1,354 361 1,715 Total Stores 1,307 2,248 483 4,038 ===== ===== === ===== 52 Weeks Ended January 30, 2010 ------------------------------- millions, except Sears Sears Sears store data 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 profit dollars 3,705 7,019 1,495 12,219 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 (loss) $190 $133 $390 $713 ==== ==== ==== ==== Number of: Kmart Stores 1,327 - - 1,327 Full-Line Stores - 908 122 1,030 Specialty Stores - 1,313 280 1,593 Total Stores 1,327 2,221 402 3,950 ===== ===== === =====

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

13 Weeks Ended -------------- millions January 29, 2011 ---------------- Sears Sears Sears Kmart Domestic Canada Holdings ----- --------- ------ --------- Operating income per statement of operations $331 $207 $125 $663 Depreciation and amortization 40 172 27 239 Gain on sales of assets (1) 1 (14) (14) --- --- --- --- Before excluded items 370 380 138 888 Closed store reserve and severance 5 8 - 13 Domestic pension expense - 32 - 32 Visa/MasterCard settlement - - - - Adjusted EBITDA as defined $375 $420 $138 $933 ==== ==== ==== ==== % to revenues 7.5% 6.3% 9.5% 7.1%

13 Weeks Ended -------------- millions January 30, 2010 ---------------- Sears Sears Sears Kmart Domestic Canada Holdings ----- --------- ------ --------- Operating income per statement of operations $296 $279 $174 $749 Depreciation and amortization 43 177 28 248 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%

52 Weeks Ended -------------- millions January 29, 2011 ---------------- Sears Sears Sears Kmart Domestic Canada Holdings ----- --------- ------ --------- Operating income per statement of operations $353 $(112) $233 $474 Depreciation and amortization 149 651 100 900 Gain on sales of assets (7) (46) (14) (67) --- --- --- --- Before excluded items 495 493 319 1,307 Closed store reserve and severance 13 13 - 26 Domestic pension expense - 120 - 120 Visa/MasterCard settlement - - - - Adjusted EBITDA as defined $508 $626 $319 $1,453 ==== ==== ==== ====== % to revenues 3.3% 2.7% 6.7% 3.4%

52 Weeks Ended -------------- millions January 30, 2010 ---------------- Sears Sears Sears Kmart Domestic Canada Holdings ----- --------- ------ --------- Operating income per statement of operations $190 $133 $390 $713 Depreciation and amortization 152 672 102 926 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%

Sears Holdings Corporation Adjusted Earnings per Share Amounts are Preliminary and Subject to Change

13 Weeks Ended January 29, 2011 ------------------------------- Closed January Store Mark- 11, Reserve to- 2011 millions, except and Market Outlook per share data GAAP Severance Losses Adjusted ---- --------- ------ -------- Cost of sales, buying and occupancy impact $9,476 $(7) $- $9,469 Selling and administrative impact 2,780 (6) - 2,774 Depreciation and amortization impact 239 (10) - 229 Operating income impact 663 23 - 686 Other loss impact (5) - 5 - Income tax expense impact (187) (8) (2) (197) After tax and noncontrolling interest impact 374 15 3 392 Diluted income per share impact $3.43 (1) $0.14 (1)/(2) $0.03 (1)/(2) $3.60

13 Weeks Ended January 29, 2011 ------------------------------- Domestic millions, except Pension Tax As per share data Expense Matters Adjusted --------- ------- -------- Cost of sales, buying and occupancy impact $- $- $9,469 Selling and administrative impact (32) - 2,742 Depreciation and amortization impact - 229 Operating income impact 32 - 718 Other loss impact - - - Income tax expense impact (11) (13) (221) After tax and noncontrolling interest impact 21 (13) 400 Diluted income per share impact $0.19 $(0.12) $3.67

13 Weeks Ended January 30, 2010 ------------------------------- Closed Store Mark- Reserve to- Domestic millions, except and Market Pension per share data GAAP Severance Gains Expense ---- ---------- ------ --------- Cost of sales, buying and occupancy impact $9,467 $(16) $- $- Selling and administrative impact 2,787 (15) - (42) Depreciation and amortization impact 248 (12) - - Operating income impact 749 43 - 42 Other loss impact (9) - (1) - Income tax expense impact (217) (13) - (13) After tax and noncontrolling interest impact 430 30 (1) 29 Diluted income per share impact $3.74 $0.26 $(0.01) $0.25

13 Weeks 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

52 Weeks Ended January 29, 2011 ------------------------------- Closed Store Mark- Reserve to- Domestic millions, except and Market Pension per share data GAAP Severance Losses Expense ---- --------- ------ -------- Cost of sales, buying and occupancy impact $31,448 $(12) $- $- Selling and administrative impact 10,571 (14) - (120) Depreciation and amortization impact 900 (10) - - Gain on sales of assets impact (67) - - - Operating income impact 474 36 - 120 Other loss impact (14) - 6 - Income tax expense impact (36) (6) (1) (24) Noncontrolling interest impact (17) - (1) - After tax and noncontrolling interest impact 133 30 4 96 Diluted income per share impact $1.19 (2) $0.27 $0.04 $0.86

52 Weeks Ended January 29, 2011 ------------------------------- Gain on Canadian Sales of Dividend millions, except Real Tax Tax As per share data Estate Impact Matters Adjusted -------- -------- ------- -------- Cost of sales, buying and occupancy impact $- $- $- $31,436 Selling and administrative impact - - - 10,437 Depreciation and amortization impact - - - 890 Gain on sales of assets impact 35 - - (32) Operating income impact (35) - - 595 Other loss impact - - - (8) Income tax expense impact 7 9 (13) (64) Noncontrolling interest impact - - - (18) After tax and noncontrolling interest impact (28) 9 (13) 231 Diluted income per share impact $(0.25) $0.08 $(0.12) $2.07

52 Weeks Ended January 30, 2010 ------------------------------- Closed Store Mark- Reserve to- Domestic millions, except and Market Pension per share data GAAP Severance Losses Expense ---- --------- ------ -------- Cost of sales, buying and occupancy impact $31,824 $(37) $- $- Selling and administrative impact 10,654 (82) - (170) Depreciation and amortization impact 926 (12) - - Gain on sales of assets impact (74) - - - Operating income impact 713 131 - 170 Other loss impact (61) - 33 - Income tax expense impact (123) (38) (8) (50) Noncontrolling interest impact (62) (3) (9) - After tax and noncontrolling interest impact 235 90 16 120 Diluted income per share impact $1.99 $0.77 $0.14 $1.02

52 Weeks 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

This schedule provides a reconciliation from GAAP results to our adjusted earnings amounts, including adjusted earnings per diluted share. (1) As compared to our January 11, 2011 outlook range of $3.39 to $4.12, fourth quarter EPS was $3.60. The outlook excluded any fourth quarter store closing costs and mark-to-market gains and losses on hedge transactions executed by Sears Canada which aggregated to $0.17 per share. (2) As compared to our January 11, 2011 outlook range of $1.16 to $1.88, full year EPS was $1.36. The outlook excluded any fourth quarter store closing costs and mark-to-market gains and losses on hedge transactions executed by Sears Canada which aggregated to $0.17 per share. SOURCE Sears Holdings Corporation



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