10-K

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended February 2, 2013

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 000-51217

SEARS HOLDINGS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-1920798
(State of Incorporation)	(I.R.S. Employer Identification No.)
3333 Beverly Road, Hoffman Estates, Illinois	60179
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (847) 286-2500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of Each Exchange on Which Registered
Common Shares, par value $0.01 per share	The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  x  No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ¨  No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   x  Accelerated filer    ¨   Non-accelerated filer    ¨   Smaller reporting company    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On March 2, 2013, the registrant had 106,386,171 common shares outstanding. The aggregate market value (based on the closing price of the Registrant's common shares for stocks quoted on the NASDAQ Global Select Market) of the Registrant's common shares owned by non-affiliates (which are assumed, solely for the purpose of this calculation, to be stockholders other than (i) directors and executive officers of the Registrant and (ii) any person known by the Registrant to beneficially own five percent or more of the Registrant's common shares), as of the last business day of the Registrant's most recently completed second fiscal quarter, was approximately $1.1 billion.

Documents Incorporated By Reference

Part III of this Form 10-K incorporates by reference certain information from the Registrant’s definitive proxy statement relating to our Annual Meeting of Stockholders to be held on May 1, 2013 (the “2013 Proxy Statement”), which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Form 10-K relates.

PART I

Item  1. Business

General

Sears Holdings Corporation (“Holdings”) is the parent company of Kmart Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings (together with its subsidiaries, “we,” “us,” “our,” or the “Company”) was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”) on March 24, 2005. We are an integrated retailer with significant physical and intangible assets, as well as virtual capabilities enabled through technology. We currently operate a national network of stores with 2,019 full-line and 54 specialty retail stores in the United States operating through Kmart and Sears and 475 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 51%-owned subsidiary. Further, we operate a number of websites under the sears.com and kmart.com banners which offer more than 60 million products and provide the capability for our customers to engage in cross-channel transactions such as buy online/pick-up in store; buy in store/ship to home; and buy online, return in store. We are also the home of SHOP YOUR WAY™, a social shopping experience where Members have the ability to earn points, receive additional benefits and interact/shop with each other through shopyourway.com. The Company is the leading home appliance retailer as well as a leader in tools, lawn and garden, fitness equipment and automotive repair and maintenance. Key proprietary brands include Kenmore^®, Craftsman^® and DieHard^®. We also maintain a broad apparel offering including such well-known labels as Lands' End^®, the Kardashian Kollection, Jaclyn Smith, Joe Boxer, Sandra Lee and Levi's, as well as Sofia by Sofia Vergara and the Country Living Home Collection. We are the nation's largest provider of home services, with more than 14 million service calls made annually.

The retail industry is changing rapidly. The progression of the Internet, mobile technology, social networking and social media is fundamentally reshaping the way we interact with our core customers and members. As a result, we are transitioning to a Membership company. Our focus continues to be on our core customers, our Members, and finding ways to provide them value and convenience through Integrated Retail and our SHOP YOUR WAY Membership platform. We have invested significantly in our online ecommerce platforms, our Membership rewards program and the technology needed to support these initiatives.

Business Segments

During 2012, we operated three reportable segments: Kmart, Sears Domestic and Sears Canada. Financial information, including revenues, operating income (loss), total assets and capital expenditures for each of these business segments is contained in Note 17 of Notes to Consolidated Financial Statements. Information regarding the components of revenue for Holdings is included in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” as well as Note 17.

Kmart

At February 2, 2013, the Company operated a total of 1,221 Kmart stores across 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands. This store count consists of 1,196 discount stores, averaging 94,000 square feet, and 25 Super Centers, averaging 168,000 square feet. Most Kmart stores are one-floor, free-standing units that carry a wide array of products across many merchandise categories, including consumer electronics, seasonal merchandise, outdoor living, toys, lawn and garden equipment, food and consumables and apparel, including products sold under such well-known labels as Jaclyn Smith and Joe Boxer, and certain proprietary Sears brand products (such as Kenmore, Craftsman, and DieHard) and services. We also offer an assortment of major appliances, including Kenmore-branded products, in virtually all of our locations. There are 896 Kmart stores that also operate in-store pharmacies. The Super Centers generally operate 24 hours a day and combine a full-service grocery along with the merchandise selection of a discount store. There are also 21 Sears Auto Centers operating in Kmart stores. Sears Auto Centers offer a variety of professional automotive repair and maintenance services, as well as a full assortment of automotive accessories. Kmart continues to offer its layaway program, which allows customers to cost-effectively finance their purchases both in-store and online. In addition, we have expanded the ways our customers can receive their purchases, allowing our customers to buy online and pick up in store. This service, powered by MyGofer, is now available in over 956 Kmart stores via either mygofer.com or kmart.com. Kmart also sells its products through

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its kmart.com website and provides customers the option of buying through a mobile app or online and picking up their merchandise in one of our Kmart stores.

Sears Domestic

At February 2, 2013, Sears Domestic operations consisted of the following:

• Full-line Stores—798 stores, of which 788 are Full-line stores located across all 50 states and Puerto Rico. These stores are primarily mall-based locations averaging 136,000 square feet. Full-line stores offer a wide array of products and service offerings across many merchandise categories, including appliances, consumer electronics, tools, sporting goods, outdoor living, lawn and garden equipment, certain automotive services and products, such as tires and batteries, home fashion products, as well as apparel, footwear, jewelry and accessories for the whole family. Our product offerings include our proprietary Kenmore, Craftsman, DieHard, Lands' End, Covington, Apostrophe, and Canyon River Blues brand merchandise. In addition, at February 2, 2013, we operated 10 Sears Essentials/Grand stores located in 10 states. In 2012, we converted eight Sears Essentials/Grand stores to Kmart stores. These stores are primarily free-standing units averaging 157,000 square feet, offering health and beauty products, pantry goods, household products and toys in addition to the offerings of the typical mall-based store. We also have 714 Sears Auto Centers operating in association with Full-line stores and eight Sears Auto Centers operating out of Sears Essentials/Grand stores. In addition, there are 36 free standing Sears Auto Centers that operate independently of Full-line stores. Sears also extends the availability of its product selection through the use of its sears.com website, which offers an assortment of home, apparel and accessory merchandise and provides customers the option of buying through a mobile app or online and picking up their merchandise in one of our Full-line stores.

• Specialty Stores—54 specialty stores (primarily consisting of the 36 free standing Sears Auto Centers noted above and 14 Lands' End retail stores noted below) located in free-standing, off-mall locations or high-traffic neighborhood shopping centers.

• Lands' End—Lands' End, Inc. (“Lands' End”) is a leading direct merchant of traditionally styled casual clothing, accessories and footwear for men, women and children, as well as home products and soft luggage. These products are offered through multiple selling channels including landsend.com, one of the leading apparel websites, as well as catalog mailings, and international businesses. Lands' End has 14 retail stores, averaging 8,600 square feet, which offer Lands' End merchandise primarily from catalog and Internet channel overstocks. In addition, Lands' End has 280 “store within a store” departments primarily inside Sears Domestic Full-line locations.

• Commercial Sales—We sell Sears merchandise, parts, and services to commercial customers through our business-to-business Sears Commercial Sales and Appliance Builder/Distributor businesses.

• Sears Commercial Sales provides appliances and services to commercial customers in the single-family residential construction/remodel, property management, multi-family new construction, and government/military sectors.

• Our Appliance Builder/Distributor business offers premium appliance and plumbing fixtures to architects, designers, and new construction or remodeling customers, and is currently operating in nine markets with 17 facilities.

• Home Services—Product Repair Services, the nation's largest product repair service provider, is a key element in our active relationship with more than 43 million households. With almost 8,000 service technicians making over 14 million service and installation calls annually, this business delivers a broad range of retail-related residential and commercial services across all 50 states, Puerto Rico, Guam and the Virgin Islands under either the Sears Parts & Repair Services or A&E Factory Service brand names. Commercial and residential customers can obtain parts and repair services for all major brands of products within the appliances, lawn and garden equipment, consumer electronics, floor care products, and heating and cooling systems categories. We also provide repair parts with supporting instructions for “do-it-yourself” customers through our searspartsdirect.com website. This business also offers protection agreements, product installation services and Kenmore and Carrier brand residential heating

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and cooling systems. Home Services also includes home improvement services (primarily siding, windows, cabinet refacing, kitchen remodeling, roofing, carpet and upholstery cleaning, air duct cleaning, and garage door installation and repair) provided through Sears Home Improvement Services and Sears Home & Business Franchises.

Sears Canada

Sears Canada, a consolidated, 51%-owned subsidiary of Sears, conducts retail operations in Canada similar to those conducted by Sears Domestic, with a greater emphasis on apparel and other softlines than in the U.S. stores.

At February 2, 2013, Sears Canada operated a total of 118 full-line stores, 357 specialty stores (including 48 furniture and appliance stores, 261 dealer stores operated under independent local ownership, four appliance and mattress stores, 33 Corbeil stores, and 11 outlet stores), nine home services showrooms, 1,512 catalog pick-up locations and 101 travel offices. Sears Canada also sells its products through its sears.ca website.

Separation of Sears Hometown and Outlet Businesses

On October 11, 2012, we completed the separation of our Sears Hometown and Outlet businesses through a rights offering transaction. Holdings received gross proceeds of $446.5 million with respect to the transaction, consisting of $346.5 million for the sale of Sears Hometown and Outlet Stores, Inc. ("SHO") common shares and $100 million through a dividend from SHO prior to the separation. Prior to the separation, SHO entered into an asset-based senior secured revolving credit facility with a group of financial institutions to provide (subject to availability under a borrowing base) for aggregate maximum borrowings of $250 million. Borrowings of $100 million from this revolving credit facility were used to fund the dividend paid to Holdings. We accounted for this separation in accordance with accounting standards applicable to common control transactions as ESL Investments, Inc. (together with its affiliated funds, "ESL") is a majority shareholder of Holdings and became a majority shareholder of SHO as a result of exercising subscription rights pursuant to the rights offering. Accordingly, we classified the difference between the proceeds received and the carrying value of net assets contributed to SHO as a reduction of capital in excess of par value in the Consolidated Statement of Equity for the period ended February 2, 2013.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with SHO under the terms described in Note 15. Because of the various agreements with SHO, the Company has determined that it has significant continuing cash flows with SHO. Accordingly, the operating results for SHO through the date of the separation are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Consolidated Financial Statements. See Note 15 of Notes to Consolidated Financial Statements for further information related to the agreements with SHO.

Partial Spin-Off of Interest in Sears Canada

On November 13, 2012, we completed a partial spin-off (the “spin-off”) of our interest in Sears Canada. Prior to the spin-off, Holdings beneficially owned approximately 96% of the issued and outstanding common shares of Sears Canada. In connection with the spin-off, we distributed approximately 45 million common shares of Sears Canada held by Holdings on a pro rata basis to holders of Holdings' common stock. Following the spin-off, Holdings was the beneficial holder of approximately 51% of the issued and outstanding common shares of Sears Canada, and as such, Holdings has maintained control of Sears Canada and will continue to consolidate the results of Sears Canada. We accounted for the spin-off as an equity transaction in accordance with accounting standards applicable to noncontrolling interests. Accordingly, we reclassified a portion of our ownership interest in Sears Canada and accumulated other comprehensive loss to noncontrolling interest in the Consolidated Statement of Equity at February 2, 2013.

At February 2, 2013, January 28, 2012 and January 29, 2011, Holdings was the beneficial holder of approximately 52 million, or 51%, 97 million, or 95%, and 97 million, or 92%, respectively, of the common shares of Sears Canada.

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Acquisition of Noncontrolling Interest

During the first quarter of 2010, we acquired approximately 19 million additional common shares of Sears Canada. We paid a total of $560 million for the additional shares and accounted for the acquisition of additional interest in Sears Canada as an equity transaction in accordance with accounting standards applicable to noncontrolling interests. Accordingly, we reclassified an accumulated other comprehensive loss from noncontrolling interest to controlling interest in the Consolidated Statement of Equity for the period ended January 29, 2011.

Spin-Off of Orchard Supply Hardware Stores Corporation

On December 30, 2011, we completed the spin-off to our shareholders of all the capital stock of Orchard Supply Hardware Stores Corporation (“Orchard”) that was owned by Holdings immediately prior to the spin-off, consisting of common stock that represented approximately 80% of the voting power of Orchard's outstanding capital stock and preferred stock that represented 100% of Orchard's outstanding nonvoting capital stock. In connection with the spin-off, Holdings and certain of its subsidiaries entered into various agreements with Orchard, including a distribution agreement, a transition services agreement, an appliance sale and consignment agreement and brand license agreements. In addition, certain tax matters between Holdings and Orchard are governed by a tax sharing agreement entered into in 2005.

Real Estate Transactions

In the normal course of business, we consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash. In addition, we review leases that will expire in the short term in order to determine the appropriate action to take with respect to them.

Further information concerning our real estate transactions is contained in Note 11 of Notes to Consolidated Financial Statements.

Trademarks and Trade Names

The KMART^® and SEARS^® trade names, service marks and trademarks, used by us both in the United States and internationally, are material to our retail and other related businesses.

We sell proprietary branded merchandise under a number of brand names that are important to our operations. Our KENMORE^®, CRAFTSMAN^®, DIEHARD^® and LANDS' END^® brands are among the most recognized proprietary brands in retailing. These marks are the subject of numerous United States and foreign trademark registrations. Other well recognized Company trademarks and service marks include CANYON RIVER BLUES^®, COVINGTON^®, SHOP YOUR WAY™, SMART SENSE^®, STRUCTURE^®, THOM MCAN^® and TOUGHSKINS^®, which also are registered or are the subject of pending registration applications in the United States. Generally, our rights in our trade names and marks continue so long as we use them.

Seasonality

The retail business is seasonal in nature, and we generate a high proportion of our revenues, operating income and operating cash flows during the fourth quarter of our year, which includes the holiday season. As a result, our overall profitability is heavily impacted by our fourth quarter operating results. Additionally, in preparation for the fourth quarter holiday season, we significantly increase our merchandise inventory levels, which are financed from operating cash flows, credit terms received from vendors and borrowings under our domestic credit agreement (described in the “Uses and Sources of Liquidity” section below). Fourth quarter reported revenues accounted for 30% of total reported revenues in each of the years 2012, 2011 and 2010. See Note 19 to our Consolidated Financial Statements for further information on revenues earned by quarter in 2012 and 2011.

Competition

Our business is subject to highly competitive conditions. We compete with a wide variety of retailers, including other department stores, discounters, home improvement stores, consumer electronics dealers, auto service providers, specialty retailers, wholesale clubs, as well as many other retailers operating on a national, regional or

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local level in the U.S. and Canada. Online and catalog businesses, which handle similar lines of merchandise, also compete with us. Walmart, Target, Kohl's, J.C. Penney, Macy's, The Home Depot, Lowe's, Best Buy and Amazon are some of the national retailers and businesses with which we compete. The Home Depot and Lowe's are major competitors in relation to our home appliance business, which accounted for approximately 15% of our 2012 and 16% of our 2011 and 2010 reported revenues. Sears Canada competes in Canada with Hudson's Bay Company, other Canadian-based store and online retailers, as well as certain U.S.-based competitors, including some of those mentioned above, that are expanding into Canada. Success in these competitive marketplaces is based on factors such as price, product assortment and quality, service and convenience, including availability of retail-related services such as access to credit, product delivery, repair and installation. Additionally, we are influenced by a number of factors including, but not limited to, the cost of goods, consumer debt availability and buying patterns, economic conditions, customer preferences, inflation, currency exchange fluctuations, weather patterns, and catastrophic events. Item 1A in this report on Form 10-K contains further information regarding risks to our business.

Employees

At February 2, 2013, subsidiaries of Holdings had approximately 246,000 employees in the United States and U.S. territories, and approximately 28,000 employees in Canada through Sears Canada. These employee counts include part-time employees.

Our Website; Availability of SEC Reports and Other Information

Our corporate website is located at searsholdings.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports are available, free of charge, through the “SEC Filings” portion of the Investor Information section of our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

The Corporate Governance Guidelines of our Board of Directors, the charters of the Audit, Compensation, Finance and Nominating and Corporate Governance Committees of the Board of Directors, our Code of Conduct and the Board of Directors Code of Conduct are available in the Corporate Governance section of searsholdings.com. References to our website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

Item  1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, results of operations and financial condition.

If we fail to offer merchandise and services that our customers want, our sales may be limited, which would reduce our revenues and profits.

In order for our business to be successful, we must identify, obtain supplies of, and offer to our customers, attractive, innovative and high-quality merchandise on a continuous basis. Our products and services must satisfy the desires of our customers, whose preferences may change in the future. If we misjudge either the demand for products and services we sell or our customers' purchasing habits and tastes, we may be faced with excess inventories of some products and missed opportunities for products and services we chose not to offer. In addition, our sales may decline or we may be required to sell the merchandise we have obtained at lower prices. This would have a negative effect on our business and results of operations.

Our integrated retail strategy is based on a number of initiatives, including our SHOP YOUR WAY program, that depend on our ability to respond quickly to ongoing technology developments and implement new ways to understand and rely on the data to interact with our members and customers in order to achieve expected benefits.

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If we do not successfully manage our inventory levels, our operating results will be adversely affected.

We must maintain sufficient inventory levels to operate our business successfully. However, we also must guard against accumulating excess inventory as we seek to minimize out-of-stock levels across all product categories and to maintain in-stock levels. In addition, we have plans to reduce peak domestic inventory in fiscal year 2013 by $500 million from $8.6 billion at the end of the third quarter of fiscal year 2012. We obtain a significant portion of our inventory from vendors located outside the United States. Some of these vendors often require lengthy advance notice of our requirements in order to be able to supply products in the quantities we request. This usually requires us to order merchandise, and enter into purchase order contracts for the purchase and manufacture of such merchandise, well in advance of the time these products will be offered for sale. As a result, we may experience difficulty in responding to a changing retail environment, which makes us vulnerable to changes in price. If we do not accurately anticipate the future demand for a particular product or the time it will take to obtain new inventory, our inventory levels will not be appropriate and our results of operations may be negatively impacted.

If we are unable to compete effectively in the highly competitive retail industry, our business and results of operations could be materially adversely affected.

The retail industry is highly competitive with few barriers to entry. We compete with a wide variety of retailers, including other department stores, discounters, home improvement stores, appliances and consumer electronics retailers, auto service providers, specialty retailers, wholesale clubs and many other competitors operating on a national, regional or local level in the U.S. and Canada. Some of our competitors are actively engaged in new store expansion. Online and catalog businesses, which handle similar lines of merchandise, and some of which are not required to collect sales taxes on purchases made by their customers, also compete with us. In this competitive marketplace, success is based on factors such as price, product assortment and quality, service and convenience.

Our success depends on our ability to differentiate ourselves from our competitors with respect to shopping convenience, a quality assortment of available merchandise and superior customer service. We must also successfully respond to our customers' changing tastes. The performance of our competitors, as well as changes in their pricing policies, marketing activities, new store openings and other business strategies, could have a material adverse effect on our business, financial condition and results of operations.

Our business has been and will continue to be affected by worldwide economic conditions; a failure of the economy to sustain its recovery, a renewed decline in consumer-spending levels and other conditions, including inflation and changing prices of energy, could lead to reduced revenues and gross margins, and negatively impact our liquidity.

Many economic and other factors are outside of our control, including consumer and commercial credit availability, consumer confidence and spending levels, including the impact of payroll tax increases on U.S. consumers, inflation, employment levels, housing sales and remodels, consumer debt levels, fuel costs and other challenges currently affecting the global economy, the full impact of which on our business, results of operations and financial condition cannot be predicted with certainty. These economic conditions adversely affect the disposable income levels of, and the credit available to, our customers, which could lead to reduced demand for our merchandise. Changing fuel and energy costs may have a significant impact on our operations. We require significant quantities of fuel for the vehicles used by technicians in our home services business and we are exposed to the risk associated with variations in the market price for petroleum products. We could experience a disruption in energy supplies, including our supply of gasoline, as a result of factors that are beyond our control, which could have an adverse effect on our business. Certain of our vendors also could experience increases in the cost of various raw materials, such as cotton, oil-related materials, steel and rubber, which could result in increases in the prices that we pay for merchandise, particularly apparel, appliances and tires. The domestic and international political situation also affects consumer confidence. The threat, outbreak or escalation of terrorism, military conflicts or other hostilities could lead to a decrease in consumer spending. Any of these events and factors could cause us to increase inventory markdowns and promotional expenses, thereby reducing our gross margins and operating results.

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The lack of willingness of our vendors to provide acceptable payment terms could negatively impact our liquidity and/or reduce the availability of products or services we seek to procure.

We depend on our vendors to provide us with financing on our purchases of inventory and services. Our vendors could seek to limit the availability of vendor credit to us or other terms under which they sell to us, or both, which could negatively impact our liquidity. In addition, the inability of vendors to access liquidity, or the insolvency of vendors, could lead to their failure to deliver inventory or other services. Certain of our vendors finance their operations and/or reduce the risk associated with collecting accounts receivable from us by selling or “factoring” the receivables or by purchasing credit insurance or other forms of protection from loss associated with our credit risks. The ability of our vendors to do so is subject to the perceived credit quality of the Company. Such vendors could be limited in their ability to factor receivables or obtain credit protection in the future because of our perceived financial position and creditworthiness, which could reduce the availability of products or services we seek to procure.

Certain factors, including changes in market conditions and our credit ratings, may limit our access to capital markets and other financing sources and materially increase our borrowing costs.

In addition to credit terms from vendors, our liquidity needs are funded by our operating cash flows and, to the extent necessary, borrowings under our credit agreements and commercial paper program and access to capital markets. The availability of financing depends on numerous factors, including economic and market conditions, our operating performance, our credit ratings, and lenders' assessments of our prospects and the prospects of the retail industry in general. Changes in these factors may affect our cost of financing, liquidity and our ability to access financing sources, including the accordion feature of our domestic revolving credit facility and possible second lien indebtedness that is permitted under the domestic revolving credit facility. Rating agencies revise their ratings for the companies that they follow from time to time and our ratings may be revised or withdrawn in their entirety at any time.

While the Company's domestic revolving credit facility currently provides for up to $3.275 billion of lender commitments, our ability to borrow funds under this facility is limited by a borrowing base determined relative to the value, from time to time, of eligible inventory, accounts receivable and certain other assets. If, through asset sales or other means, the value of these eligible assets is not sufficient to support borrowings of up to the full amount of the commitments under this facility, we will not have full access to the facility, but rather could have access to a lesser amount determined by the borrowing base.

The lenders under our credit facilities may not be able to meet their commitments if they experience shortages of capital and liquidity and there can be no assurance that our ability to otherwise access the credit markets will not be adversely affected by changes in the financial markets and the global economy.

We cannot predict whether our plans to generate liquidity, reduce inventory and reduce fixed costs will be successful.

We have plans to generate at least $500 million of additional liquidity over the next 12 months, reduce peak domestic inventory in fiscal year 2013 by $500 million from $8.6 billion at the end of the third quarter of fiscal year 2012 and reduce our fixed cost base by $200 million during fiscal year 2013. The achievement of these objectives is subject to risks and uncertainties with respect to market conditions and other factors that may cause our actual results, performance or achievements to be materially different from our plans, and there can be no assurance that transactions to monetize assets or other actions to generate liquidity will become available on acceptable terms. Our ability to reduce fixed costs, which include occupancy costs and certain payroll costs, may be limited by our contractual obligations and other factors.

Due to the seasonality of our business, our annual operating results would be adversely affected if our business performs poorly in the fourth quarter.

Our business is seasonal, with a high proportion of revenues, operating income and operating cash flows being generated during the fourth quarter of our year, which includes the holiday season. As a result, our fourth quarter operating results significantly impact our annual operating results. Our fourth quarter operating results may fluctuate significantly, based on many factors, including holiday spending patterns and weather conditions.

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Our sales may fluctuate for a variety of reasons, which could adversely affect our results of operations.

Our business is sensitive to customers' spending patterns, which in turn are subject to prevailing economic conditions. Our sales and results of operations have fluctuated in the past, and we expect them to continue to fluctuate in the future. A variety of other factors affect our sales and financial performance, including:

• actions by our competitors, including opening of new stores in our existing markets or changes to the way these competitors go to market online,

• seasonal fluctuations due to weather conditions,

• changes in our merchandise strategy and mix,

• changes in population and other demographics, and

• timing of our promotional events.

Accordingly, our results for any one quarter are not necessarily indicative of the results to be expected for any other quarter, and comparable store sales for any particular future period may increase or decrease. For more information on our results of operations, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this report on Form 10-K.

We rely on foreign sources for significant amounts of our merchandise, and our business may therefore be negatively affected by the risks associated with international trade.

We depend on a large number of products produced in foreign markets. We face risks, including reputational risks, associated with the delivery of merchandise originating outside the United States, including:

• potential economic and political instability in countries where our suppliers are located,

• increases in shipping costs,

• manufacturing and transportation delays and interruptions,

• supplier compliance with applicable laws, including labor and environmental laws, and with our global compliance program for suppliers and factories,

• adverse fluctuations in currency exchange rates, and

• changes in U.S. and foreign laws affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws.

We rely extensively on computer systems to implement our integrated retail strategy, process transactions, summarize results and otherwise manage our business. Disruptions in these systems could harm our ability to run our business.

Given the significance of our online and mobile capabilities and the number of individual transactions we have each year, it is critical that we maintain uninterrupted operation of our computer and communications hardware and software systems, some of which are based on end-of-life or legacy technology, operate with minimal or no vendor support and are otherwise difficult to maintain. Our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events such as fires, tornadoes and hurricanes, and usage errors by our employees. Operating legacy systems subject us to inherent costs and risks associated with maintaining, upgrading and replacing these systems and retaining sufficiently skilled personnel to maintain and operate the systems, demands on management time, and other risks and costs. Cyber-security risks such as malicious software and attempts to gain unauthorized access to data are rapidly evolving and could lead to disruptions in our systems, unauthorized release of confidential or otherwise protected information or corruption of data. If individuals are successful in infiltrating, breaking into, disrupting, damaging or otherwise stealing from the computer systems of the Company or its third-party providers, or if our systems are otherwise damaged or cease to function properly, we may have to make a significant investment to fix or replace them, we may suffer interruptions in our operations in the interim, we may face costly litigation, and our reputation with our members and customers may be harmed. Any material interruption in our computer operations may have a material adverse effect on our business or results of operations. In addition, we are pursuing initiatives to transform our

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information technology processes and systems. These initiatives are highly complex and include replacing legacy systems, upgrading existing systems, and acquiring new systems and hardware with updated functionality. The risk of disruption is increased in periods when such complex and significant systems changes are undertaken.

If we do not maintain the security of our member and customer, associate or company information, we could damage our reputation, incur substantial additional costs and become subject to litigation.

Any significant security compromise or breach of member and customer, associate or company data, either held or maintained by the Company or our third-party providers, could significantly damage our reputation and brands and result in additional costs, lost sales, fines and/or lawsuits. The regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs. There is no guarantee that the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches. A data security breach could negatively impact our business and our results of operations.

We rely on third parties to provide us with services in connection with the administration of certain aspects of our business.

We have entered into agreements with third-party service providers (both domestic and overseas) to provide processing and administrative functions over a broad range of areas, and we may continue to do so in the future. These areas include finance and accounting, information technology, including IT development, call center, human resources and procurement functions. Services provided by third parties as a part of outsourcing initiatives could be interrupted as a result of many factors, such as acts of God or contract disputes, and any failure by third parties to provide us with these services on a timely basis or within our service level expectations and performance standards could result in a disruption of our business. In addition, to the extent we are unable to maintain our outsourcing arrangements; we would incur substantial costs, including costs associated with hiring new employees, in order to return these services in-house. These outsourcing arrangements also carry the risk that the Company will fail to adequately retain the significant internal historical knowledge of our business and systems that is transferred to the service providers as the employment of the Company's personnel who possess such knowledge ends.

We could incur charges due to impairment of goodwill, intangible and long-lived assets.

At February 2, 2013, we had goodwill and intangible asset balances of $3.3 billion, which are subject to periodic testing for impairment. Our long-lived assets, primarily stores, also are subject to periodic testing for impairment. A significant amount of judgment is involved in the periodic testing. Failure to achieve sufficient levels of cash flow within each of our reporting units, or sales of our branded products or cash flow generated from operations at individual store locations could result in impairment charges for goodwill and intangible assets or fixed asset impairment for long-lived assets, which could have a material adverse effect on our reported results of operations. Impairment charges, if any, resulting from the periodic testing are non-cash. A significant and sustained decline in our stock price could result in goodwill impairment charges. During times of financial market volatility, significant judgment is used to determine the underlying cause of the decline and whether stock price declines are short-term in nature or indicative of an event or change in circumstances. See Notes 12 and 13 of Notes to Consolidated Financial Statements for further information.

The loss of key personnel may disrupt our business and adversely affect our financial results.

We depend on the contributions of key personnel, including Edward S. Lampert, our Chairman and Chief Executive Officer, and other key employees, for our future success. Although certain executives have employment agreements with us, changes in our senior management and any future departures of key employees may disrupt our business and materially adversely affect our results of operations.

10

Affiliates of our Chairman and Chief Executive Officer, whose interests may be different than your interests, exert substantial influence over our Company.

Affiliates of Edward S. Lampert, our Chairman and Chief Executive Officer, beneficially own approximately 55% of the outstanding shares of our common stock. These affiliates are controlled, directly or indirectly, by Mr. Lampert. Accordingly, these affiliates, and thus Mr. Lampert, have substantial influence over many, if not all, actions to be taken or approved by our stockholders, including the election of directors and any transactions involving a change of control.

The interests of these affiliates, which have investments in other companies, including our former subsidiary, Sears Hometown and Outlet Stores, Inc., may from time to time diverge from the interests of our other stockholders, particularly with regard to new investment opportunities. This substantial influence may have the effect of discouraging offers to acquire our Company because the consummation of any such acquisition would likely require the consent of these affiliates.

We may be unable to protect or preserve the image of our brands and our intellectual property rights, which could have a negative impact on our business.

We regard our copyrights, service marks, trademarks, trade dress, trade secrets, patents and similar intellectual property as critical to our success, particularly those that relate to our private branded merchandise. As such, we rely on trademark and copyright law, patent law, trade secret protection and confidentiality agreements with our associates, consultants, vendors, and others to protect our proprietary rights. Nevertheless, the steps we take to protect our proprietary rights may be inadequate. If we are unable to protect or preserve the value of our trademarks, copyrights, trade secrets, patents or other proprietary rights for any reason, or if we fail to maintain the image of our brands due to merchandise and service quality issues, actual or perceived, adverse publicity, governmental investigations or litigation, or other reasons, our brands and reputation could be damaged and we could lose customers.

We may be subject to product liability claims if people or properties are harmed by the products we sell or the services we offer.

Some of the products we sell may expose us to product liability claims relating to personal injury, death, or property damage caused by such products, and may require us to take actions such as product recalls. We also provide various services, which could also give rise to such claims. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

We may be subject to periodic litigation and other regulatory proceedings. These proceedings may be affected by changes in laws and government regulations or changes in the enforcement thereof.

From time to time, we may be involved in lawsuits and regulatory actions relating to our business, certain of which may be in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. Our pharmacy, home services and grocery businesses, in particular, are subject to numerous federal, state and local regulations. We are impacted by trends in litigation, including class-action allegations brought under various consumer protection and employment laws, including wage and hour laws, and investigations and actions that are based on allegations of untimely compliance or noncompliance with applicable regulations or statutes. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our business, financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, these proceedings could result in substantial costs and may require that we devote substantial resources to defend our Company. Further, changes in governmental regulations both in the United States and in the other countries where we operate could have adverse effects on our business and subject us to additional regulatory actions. For a description of current legal proceedings, see Item 3, “Legal Proceedings,” as well as Note 18 of Notes to Consolidated Financial Statements in this report on Form 10-K.

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Our pension and postretirement benefit plan obligations are currently underfunded, and we may have to make significant cash payments to some or all of these plans, which would reduce the cash available for our businesses.

We have unfunded obligations under our domestic and foreign pension and postretirement benefit plans. The funded status of our pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations. Unfavorable returns on the plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding, which would reduce the cash available for our businesses. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funding status of our pension plans and future contributions, as well as the periodic pension cost in subsequent years. Moreover, unfavorable regulatory action could materially change the timing and amount of required plan funding and negatively impact our business operations and impair our business strategy.

Item 1B. Unresolved Staff Comments

Not applicable.

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Item  2. Properties

The following table summarizes the locations of our Kmart and Sears Domestic stores at February 2, 2013:

	Kmart		Sears Domestic
State/Territory	Discount Stores	Super Centers	Full-line Mall Stores	Sears Essentials/ Grand Stores	Specialty Stores
Alabama	24	—	10	—	—
Alaska	—	—	3	—	—
Arizona	16	—	14	—	—
Arkansas	5	—	7	—	1
California	102	—	79	1	5
Colorado	13	—	11	1	1
Connecticut	8	—	8	—	—
Delaware	6	—	4	—	—
District of Columbia	—	—	—	—	—
Florida	69	—	51	—	1
Georgia	28	—	19	—	—
Hawaii	7	—	6	—	—
Idaho	8	—	5	—	—
Illinois	46	4	35	1	9
Indiana	31	3	18	—	1
Iowa	21	—	9	—	2
Kansas	11	—	8	—	1
Kentucky	27	—	9	—	—
Louisiana	11	—	13	—	1
Maine	6	—	5	—	—
Maryland	21	—	19	—	—
Massachusetts	19	—	21	—	—
Michigan	69	6	24	—	—
Minnesota	21	—	12	—	4
Mississippi	7	—	5	—	—
Missouri	27	—	10	1	—
Montana	9	—	3	—	—
Nebraska	8	—	4	—	—
Nevada	10	—	4	1	1
New Hampshire	6	—	6	—	—
New Jersey	35	—	20	—	5
New Mexico	15	—	7	—	—
New York	52	1	45	—	6
North Carolina	43	—	21	—	—
North Dakota	7	—	4	—	—
Ohio	52	7	38	1	1
Oklahoma	9	—	10	—	—
Oregon	13	—	8	—	1
Pennsylvania	95	2	42	1	2
Rhode Island	1	—	2	—	—
South Carolina	25	—	12	—	—
South Dakota	9	—	2	—	—
Tennessee	32	—	18	—	—
Texas	20	—	58	1	1
Utah	15	—	4	1	1
Vermont	3	—	2	—	—
Virginia	39	1	20	1	1
Washington	15	—	20	—	2
West Virginia	15	1	7	—	—
Wisconsin	28	—	15	—	6
Wyoming	9	—	2	—	—
Puerto Rico	23	—	9	—	1
U.S. Virgin Islands	4	—	—	—	—
Guam	1	—	—	—	—
Totals	1,196	25	788	10	54

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	Kmart		Sears Domestic			Sears Canada		Total
	Discount Stores	Super Centers	Full-line Mall Stores	Sears Essentials/ Grand Stores	Specialty Stores	Full-line Stores	Specialty Stores
Owned	184	19	497	8	26	14	2	750
Leased	1,012	6	291	2	28	104	77	1,520
Independently-owned and operated stores	—	—	—	—	—	—	278	278
Stores at February 2, 2013	1,196	25	788	10	54	118	357	2,548

In addition, at February 2, 2013, we had 38 domestic supply chain distribution centers, of which 12 were owned and 26 were leased for terms ranging from three to five years. Of the total, 10 primarily support Kmart stores, 24 primarily support Sears stores and four support both Sears and Kmart stores. We also had 465 domestic store warehouses, customer call centers and service facilities (including 17 facilities related to our appliance builder/distributor business), most of which are leased for terms ranging generally from three to five years or are part of other facilities included in the above table. Many of our facilities are also used to support our online channels.

Our principal executive offices are located on a 200-acre site owned by us at the Prairie Stone office park in Hoffman Estates, Illinois. The complex consists of six interconnected office buildings totaling approximately two million gross square feet of office space. In addition, we have a campus in Dodgeville, Wisconsin supporting the corporate headquarters, distribution center and customer sales/service operations for Lands' End. We also own an 86,000 square foot office building in Troy, Michigan. We operate numerous buying offices throughout the world that procure product internationally, as well as an information technology center in Pune, India.

At February 2, 2013, Sears Canada operated a total of 118 full-line stores, 357 specialty stores (including 48 furniture and appliance stores, 261 hometown dealer stores operated under independent local ownership, four appliance and mattress stores, 33 Corbeil stores, and 11 outlet stores), nine home services showrooms, 1,512 catalog pick-up locations and 101 travel offices.

A description of our leasing arrangements and commitments appears in Note 14 of Notes to Consolidated Financial Statements.

Item 3. Legal Proceedings

Item 103 of SEC Regulation S-K requires that we disclose legal proceedings to which the Company and a governmental authority is a party and that arise under laws dealing with the discharge of materials into the environment or the protection of the environment, if the proceeding reasonably involves potential monetary sanctions of $100,000 or more. Disclosure also is required as to any such proceedings known by us to be contemplated by governmental authorities. In that connection, we note that Sears was a party to administrative actions brought by the California Air Resources Board (“CARB”) that alleged that Sears offered for sale certain mini bikes and stand-up scooters that were not certified by CARB. The parties have entered into a settlement agreement that provides for the payment by Sears of a $285,200 penalty. The vendor of this merchandise has agreed to reimburse Sears for the full amount of the penalty pursuant to its indemnification obligations to Sears.

See Part II, Item 8, “Financial Statements—Notes to Consolidated Financial Statements,” Note 18—“Legal Proceedings,” for additional information regarding legal proceedings, which information is incorporated herein by this reference.

Item 4. Mine Safety Disclosures

Not applicable.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following table and information sets forth the names of our executive officers, their current positions and offices with the Company, the date they first became executive officers of the Company, their current ages, and their principal employment during the past five years.

Name	Position	Date First Became an Executive Officer	Age
Edward S. Lampert	Chairman of the Board and Chief Executive Officer	2013	50
Ronald D. Boire	Executive Vice President, Chief Merchandising Officer and President, Sears Full Line Stores and Kmart Formats	2012	51
Imran Jooma	Executive Vice President and President, Online, Marketing, Pricing & Financial Services	2012	40
Robert A. Schriesheim	Executive Vice President and Chief Financial Officer	2011	52
Dane A. Drobny	Senior Vice President, General Counsel and Corporate Secretary	2010	45
William K. Phelan	Senior Vice President, Finance	2005	50
Robert A. Riecker	Vice President, Controller and Chief Accounting Officer	2012	48

__________________

Mr. Lampert has served as Chairman of the Company's Board of Directors since 2004 and as our Chief Executive Officer since February 2013. He also is the Chairman and Chief Executive Officer of ESL Investments, Inc., which he founded in April 1988.

Mr. Boire joined the Company as Executive Vice President, Chief Merchandising Officer and President, Sears Full Line Stores and Kmart Formats in January 2012. He served from October 2009 until January 2012 as President and Chief Executive Officer of Brookstone, a consumer products company. He served as President, U.S. Toys, North America, for Toys “R” Us, a specialty retailer of toys and juvenile products, from July 2006 until September 2009. He previously served as Executive Vice President, Global Merchandise Manager of Best Buy Co., Inc., a retailer of consumer electronics and related products from May 2003 to June 2006. Prior to joining Best Buy Co., Inc., Mr. Boire served for 17 years in a variety of increasingly senior roles at Sony Electronics Inc., a marketer of electronic products and services.

Mr. Jooma joined the Company in June 2007 as Vice President, e-Commerce, and has served in his current position since November 2011. He was elected Executive Vice President in November 2012. From May 2010 until November 2011, he served as the Company's Senior Vice President and President, e-Commerce. From August 2009 until May 2010, he served as Senior Vice President, e-Commerce, of the Company. Prior to joining the Company, he served as Vice President of eCommerce at Circuit City Stores, Inc. and prior thereto as the Divisional Vice President of eCommerce at OfficeMax Incorporated.

Mr. Schriesheim joined the Company as Executive Vice President in August 2011 and became Executive Vice President and Chief Financial Officer that same month. Prior to joining the Company, he served as the Chief Financial Officer of Hewitt Associates, Inc., a global human resources consulting and outsourcing company, from January 2010 to October 2010. From October 2006 to January 2010, he served as Executive Vice President and Chief Financial Officer of Lawson Software, Inc., an ERP software provider. From August 2002 to October 2006, he was affiliated with ARCH Development Partners, LLC, a seed stage venture capital fund. Before joining ARCH, Mr. Schriesheim held executive positions at Global TeleSystems, SBC Equity Partners, Ameritech, AC Nielsen and Brooke Group Ltd. Mr. Schriesheim has served as a director of Skyworks Solutions, Inc. since May 2006 and is chairman of its audit committee. He also served as a director of Dobson Communications Corp. from 2004 to 2007, a director of Lawson Software from 2006 to 2011, a director and Co-Chairman of MSC.Software Corporation from 2007 to 2009 and a director of Georgia Gulf Corporation from 2009 to 2010.

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Mr. Drobny joined us as Senior Vice President, General Counsel and Corporate Secretary in May 2010. Prior to joining the Company, he practiced law with the law firm of Winston & Strawn LLP, most recently as Capital Partner, from September 1993 until May 2010.

Mr. Phelan was elected Senior Vice President, Finance of the Company in January 2012. From September 2007 until January 2012, he served as Senior Vice President and Controller of the Company. From May 2011 until August 2011, Mr. Phelan served as our acting Chief Financial Officer, while from May 2009 until May 2011 and from August 2011 until January 2012, he also served as our Chief Accounting Officer. From December 2007 until December 2008, Mr. Phelan also served as the Company's Treasurer. From the consummation of the Merger until September 2007, Mr. Phelan served as Vice President and Controller. Prior to the consummation of the Merger, he served as Assistant Controller of Sears.

Mr. Riecker was elected Vice President, Controller and Chief Accounting Officer in January 2012. He joined the Company as Assistant Controller in October 2005 and served as Vice President and Assistant Controller from May 2007 to October 2011. From October 2011 until his election as Vice President, Controller and Chief Accounting Officer, he served as the Company's Vice President, Internal Audit.

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PART II

Item  5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Holdings' common stock is quoted on The NASDAQ Stock Market under the ticker symbol SHLD. There were 14,217 shareholders of record at March 2, 2013. The quarterly high and low sales prices for Holdings' common stock are set forth below.

	Fiscal Year 2012
	Sears Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Common stock price
High	$	85.90	$	65.70	$	67.20	$	68.77
Low	$	41.14	$	46.28	$	47.01	$	38.40
	Fiscal Year 2011
	Sears Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Common stock price
High	$	94.79	$	86.72	$	83.25	$	80.37
Low	$	73.59	$	66.15	$	51.14	$	28.89

Holdings has not paid and does not expect to pay cash dividends in the foreseeable future.

Equity Compensation Plan Information

The following table reflects information about securities authorized for issuance under our equity compensation plans at February 2, 2013.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights	(c) Number of securities remaining available for future issuance under equity compensation plans*
Equity compensation plans approved by security holders	—	—	261,774
Equity compensation plans not approved by security holders	—	—	—
Total	—	—	261,774

__________________

* Represents shares of common stock that may be issued pursuant to our 2006 Stock Plan. Excludes shares covered by an outstanding plan award that, subsequent to February 2, 2013, ultimately are not delivered on an unrestricted basis (for example, because the award is forfeited, canceled, settled in cash or used to satisfy tax withholding obligations). Awards under the 2006 Stock Plan may be restricted stock awards, a grant of shares of our common stock in connection with an award made under a long-term incentive plan, or certain other awards.

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Stock Performance Graph

Comparison of Five-Year Cumulative Stockholder Return

The following graph compares the cumulative total return to stockholders on Holdings' common stock from February 1, 2008 through February 1, 2013, the last trading day before the end of our 2012 year, with the return on the S&P 500 Stock Index, the S&P 500 Retailing Index and the S&P 500 Department Stores Index for the same period. The graph assumes an initial investment of $100 on February 1, 2008 in each of our common stock, the S&P 500 Stock Index, the S&P Retailing Index and the S&P 500 Department Stores Index.

The S&P 500 Retailing Index consists of companies included in the S&P 500 Stock Index in the broadly defined retail sector, which includes competing retailers of softlines (apparel and domestics) and hardlines (appliances, electronics and home improvement products), as well as food and drug retailers. The S&P 500 Department Stores Index consists primarily of department stores that compete with our full-line stores.

	Feb. 1, 2008		Jan. 30, 2009		Jan. 29, 2010		Jan. 28, 2011		Jan. 27, 2012		Feb. 1, 2013
Sears Holdings	$	100.00	$	37.78	$	86.12	$	70.24	$	41.55	$	49.89
S&P 500 Stock Index	$	100.00	$	60.64	$	80.72	$	97.89	$	103.10	$	121.25
S&P 500 Retailing Index	$	100.00	$	62.28	$	96.85	$	123.37	$	140.16	$	178.46
S&P 500 Department Stores Index	$	100.00	$	47.25	$	78.97	$	90.57	$	102.24	$	105.40

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Purchase of Equity Securities

The following table provides information about shares of common stock we acquired during the fourth quarter of 2012. During the quarter ended February 2, 2013, we did not repurchase any shares of our common stock under our common share repurchase program. At February 2, 2013, we had approximately $504 million of remaining authorization under the program.

	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of  Publicly Announced Program(2)	Average Price Paid per  Share for Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
October 28, 2012 to November 24, 2012	706	$	64.54	—	$	—
November 25, 2012 to December 29, 2012	1,824	42.01		—	—
December 30, 2012 to February 2, 2013	18,919	43.99		—	—
Total	21,449	$	44.50	—	$	—	$	504,000,000

__________________

⁽¹⁾  Consists entirely of 21,449 shares acquired from associates to meet withholding tax requirements from the vesting of restricted stock.

⁽²⁾  Our common share repurchase program was initially announced on September 14, 2005 and has a total authorization since inception of the program of $6.5 billion, including the authorizations to purchase up to an additional $500 million of common stock on each of December 17, 2009 and May 2, 2011. The program has no stated expiration date.

The domestic credit agreement (described in the “Uses and Sources of Liquidity” section below) limits our ability to make restricted payments, including dividends and share repurchases, under certain circumstances, including if availability under the credit facility, as defined, is less than 15%. It also imposes various other requirements which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.

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Item 6. Selected Financial Data

The table below summarizes our recent financial information. The data set forth below should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our Consolidated Financial Statements and notes thereto in Item 8.

	Fiscal
dollars in millions, except per share and store data	2012			2011			2010			2009			2008
Summary of Operations
Revenues(1)	$	39,854		$	41,567		$	42,664		$	43,360		$	46,007
Domestic comparable store sales %	(2.5		)%	(2.2		)%	(1.3		)%	(4.7		)%	(7.7		)%
Net income (loss) from continuing operations attributable to Holdings' shareholders(2)	(930		)	(3,113		)	122			218			295
Per Common Share
Basic:
Net income (loss) from continuing operations attributable to Holdings' shareholders	$	(8.78	)	$	(29.15	)	$	1.09		$	1.85		$	2.32
Diluted:
Net income (loss) from continuing operations attributable to Holdings' shareholders	$	(8.78	)	$	(29.15	)	$	1.09		$	1.85		$	2.32
Holdings' book value per common share	$	25.89		$	40.26		$	78.19		$	79.21		$	76.91
Financial Data
Total assets	$	19,340		$	21,381		$	24,360		$	24,901		$	25,444
Long-term debt	1,579			1,693			1,872			949			1,220
Long-term capital lease obligations	364			395			472			510			552
Capital expenditures	378			432			426			350			486
Adjusted EBITDA	626			277			1,385			1,744			1,524
Number of stores	2,548			4,010			3,949			3,862			3,862

__________________

⁽¹⁾  We follow a retail-based financial reporting calendar. Accordingly, the fiscal year ended February 2, 2013 contained 53 weeks, while all other years presented contained 52 weeks.

⁽²⁾  The periods presented were impacted by certain significant items, which affected the comparability of amounts reflected in the above selected financial data. For 2012, 2011 and 2010, these significant items are discussed within Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” 2009 results include the impact of domestic pension expense of $170 million, a $131 million charge related to store closings and severance, a gain on the sale of Sears Canada Headquarters of $44 million, a gain of $32 million recorded in connection with the settlement of Visa/MasterCard antitrust litigation, mark-to-market losses of $33 million on Sears Canada hedge transactions and a tax benefit of $41 million related to the resolution of certain income tax matters. 2008 results include the impact of a $98 million charge related to asset impairments, a $77 million charge related to store closings and severance, mark-to-market gains of $81 million on Sears Canada hedge transactions, the reversal of a $62 million reserve because of the overturning of an adverse jury verdict relating to the redemption of certain Sears, Roebuck and Co. bonds in 2004, a tax benefit of $8 million related to the resolution of certain income tax matters and gains of $13 million on negotiated repurchases of debt securities prior to maturity.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

We have divided our “Management's Discussion and Analysis of Financial Condition and Results of Operations” into the following six sections:

• Overview of Holdings

• Results of Operations:

Fiscal Year

Holdings' Consolidated Results

Business Segment Results

• Analysis of Consolidated Financial Condition

• Contractual Obligations and Off-Balance Sheet Arrangements

• Application of Critical Accounting Policies and Estimates

• Cautionary Statement Regarding Forward-Looking Information

The discussion that follows should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8.

OVERVIEW OF HOLDINGS

Holdings, the parent company of Kmart and Sears, was formed in connection with the March 24, 2005 Merger of these two companies. We are an integrated retailer with significant physical and intangible assets, as well as virtual capabilities enabled through technology. We currently operate a national network of stores with 2,019 full-line and 54 specialty retail stores in the United States, operating through Kmart and Sears, and 475 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 51%-owned subsidiary. Further, we operate a number of websites under the Sears.com and Kmart.com banners which offer more than 60 million products and provide the capability for our customers to engage in cross-channel transactions such as buy online/pick-up in store; buy in store/ship to home; and buy online, return in store. We are also the home of SHOP YOUR WAY™, a social shopping experience where members have the ability to earn points, receive additional benefits and interact/shop with each other through shopyourway.com. The Company is the leading home appliance retailer as well as a leader in tools, lawn and garden, fitness equipment and automotive repair and maintenance. Key proprietary brands include Kenmore^®, Craftsman^®and DieHard^®. We also maintain a broad apparel offering including such well-known labels as Lands' End^®, the Kardashian Kollection, Jaclyn Smith, Joe Boxer, Sandra Lee and Levi's, as well as Sofia by Sofia Vergara and the Country Living Home Collection. We are the nation's largest provider of home services, with more than 14 million service calls made annually.

We currently conduct our operations in three business segments: Kmart, Sears Domestic and Sears Canada. The nature of operations conducted within each of these segments is discussed within the “Business Segments” section of Item 1 in this report on Form 10-K. Our business segments have been determined in accordance with accounting standards regarding the determination, and reporting, of business segments.

Our focus continues to be on our core customers, our Members, and finding ways to provide them value and convenience through Integrated Retail and our SHOP YOUR WAY Membership platform. We have invested significantly in our online ecommerce platforms, our Membership rewards program and the technology needed to support these initiatives. Our actions in 2012 were guided by the following strategic priorities:

Innovation Around Our Customers and Members

We continue to focus on building and growing a deeply engaging membership program, called SHOP YOUR WAY. SHOP YOUR WAY is more than just a typical loyalty program. It is a comprehensive platform that transforms customer transactions into relationships and allows us to know our Members better and to serve them better as well. It includes the rewards program, our shopyourway.com social shopping platform, our SHOP YOUR WAY Max free

21

shipping platform and a variety of other applications and components. Collectively, these elements change the way we do business both inside and outside the Company.

We are also focused on providing integrated retail solutions for our Members and customers. We rolled out tablets and mobile devices to Sears Domestic stores across the country. The tablets are equipped to help our store associates provide a better overall shopping experience. Our associates can use tablets to look at product specifications, compare products side-by-side and search for inventory if it is not readily available at the store. More information about products, inventory, pricing and reviews is now available at their fingertips, which means Members can have more confidence in their product selection.

We have designed other experiences that provide seamless and convenient integrated experiences for our Members. Building on our Buy Online Pick Up In Store and Ready in 5 promise, we developed a Return/Exchange in 5 capability that allows Members to fill out the product return information online. Members simply drop off or exchange the item they want to return at our Merchandise Pick Up area within five minutes or less.

Core Retail Excellence

We are also focused on providing great merchandise value to our customers and Members. In 2012, we launched several innovative brand offerings such as Outdoor Life, Alphaline electronics accessories, and RoadHandler tires. In January 2013, we announced that we would be developing two new apparel lines in a collaborative effort between SHOP YOUR WAY and our Kmart format. We have a long heritage of building celebrity brands, both at Sears and Kmart. We chose to partner with Nicki Minaj and Adam Levine for this collaboration because of their creativity, their global appeal and their strong interest in developing their clothing brands in a unique and innovative manner.

We are focused on providing flexibility and convenience for our Members through such things as buy online/pick-up in store, buy in store/ship to home, digital receipts and returns and exchanges in five minutes or less. We enhanced our layaway program and added the capability for our Members to make layaway payments online and have the items from their layaway shipped directly to their homes when their contract has been completed. We also provide our customers with easy access to a broad and diverse range of products and categories through marketplace on sears.com.

Financial and Operational Discipline

In 2012, we also demonstrated our financial flexibility by positively impacting our liquidity by $1.8 billion, while unlocking the value in our asset portfolio, as part of our on-going asset re-configuration where we are re-deploying our capital in support of our member-centric, integrated retail strategy. Actions taken included:

• the separation of our Sears Hometown and Outlet businesses through a rights offering transaction, which generated gross proceeds of approximately $447 million;

• the partial spin-off of 45% of Sears Canada;

• the execution of various real estate transactions which generated cash proceeds of approximately $440 million;

• Reducing inventory by nearly $1.0 billion below last year's level and adjusting our promotional cadence to be more targeted;

• Reducing our fixed cost structure by over $500 million; and

• Capitalizing on an opportunity to reduce risk related to our legacy pension obligation by making a voluntary offer to former employees to pay a lump sum.

We are an asset-rich enterprise with substantial liquidity, unencumbered real estate and well-established stand-alone businesses, including Lands' End and Sears Canada. We expect to generate at least $500 million of additional liquidity through monetization of assets over the next 12 months. In addition to our asset monetizations, we currently expect to reduce 2013 peak domestic inventory by $500 million from the 2012 level of $8.6 billion at the end of the third quarter as a result of stores already or expected to be closed, initiatives underway to reduce slow-moving inventory and modest productivity improvement. This action is expected to generate $300 million of cash after consideration of related payables. We also expect to further reduce our fixed cost base by another $200 million in 2013.

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RESULTS OF OPERATIONS

Fiscal Year

Our fiscal year end is the Saturday closest to January 31 each year. Fiscal year 2012 consisted of 53 weeks while fiscal years 2011 and 2010 consisted of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The following fiscal periods are presented in this report.

Fiscal year	Ended	Weeks
2012	February 2, 2013	53
2011	January 28, 2012	52
2010	January 29, 2011	52

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Holdings' Consolidated Results

Holdings' consolidated results of operations for 2012, 2011 and 2010 are summarized as follows:

millions, except per share data	2012			2011			2010
REVENUES
Merchandise sales and services	$	39,854		$	41,567		$	42,664
COSTS AND EXPENSES
Cost of sales, buying and occupancy	29,340			30,966			31,000
Gross margin dollars	10,514			10,601			11,664
Gross margin rate	26.4		%	25.5		%	27.3		%
Selling and administrative	10,660			10,664			10,425
Selling and administrative expense as a percentage of revenues	26.7		%	25.7		%	24.4		%
Depreciation and amortization	830			853			869
Impairment charges	330			649			—
Gain on sales of assets	(468		)	(64		)	(67		)
Total costs and expenses	40,692			43,068			42,227
Operating income (loss)	(838		)	(1,501		)	437
Interest expense	(267		)	(289		)	(293		)
Interest and investment income	94			41			36
Other income (loss)	1			(2		)	(14		)
Income (loss) from continuing operations before income taxes	(1,010		)	(1,751		)	166
Income tax expense	(44		)	(1,369		)	(27		)
Income (loss) from continuing operations	(1,054		)	(3,120		)	139
Income (loss) from discontinued operations, net of tax	—			(27		)	11
Net income (loss)	(1,054		)	(3,147		)	150
(Income) loss attributable to noncontrolling interests	124			7			(17		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(930	)	$	(3,140	)	$	133
Amounts attributable to Holdings’ shareholders:
Income (loss) from continuing operations, net of tax	$	(930	)	$	(3,113	)	$	122
Income (loss) from discontinued operations, net of tax	—			(27		)	11
Net income (loss)	$	(930	)	$	(3,140	)	$	133
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Diluted income (loss) per share from continuing operations	$	(8.78	)	$	(29.15	)	$	1.09
Diluted income (loss) per share from discontinued operations	—			(0.25		)	0.10
	$	(8.78	)	$	(29.40	)	$	1.19
Diluted weighted average common shares outstanding	105.9			106.8			111.7

References to comparable store sales amounts within the following discussion include sales for all stores operating for a period of at least 12 full months, including remodeled and expanded stores, but excluding store relocations and stores that have undergone format changes. In addition, comparable store sales amounts include sales from sears.com and kmart.com shipped directly to customers and have been adjusted for the change in the unshipped sales reserves recorded at the end of each reporting period. Comparable store sales results for 2012 were calculated based on the 52-week period ended January 26, 2013 as compared to the comparable 52-week period in the prior year.

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2012 Compared to 2011

Net Loss from Continuing Operations Attributable to Holdings' Shareholders

We recorded a net loss from continuing operations attributable to Holdings' shareholders of $930 million ($8.78 loss per diluted share from continuing operations) and $3.1 billion ($29.15 loss per diluted share from continuing operations) for 2012 and 2011, respectively. Our results for 2012 and 2011 were affected by a number of significant items, including non-cash charges related to pension settlements and the impairment of goodwill balances and a $1.8 billion non-cash charge to establish a valuation allowance against our domestic deferred tax assets in 2011. Our net loss from continuing operations as adjusted for these significant items was $215 million ($2.03 loss per diluted share from continuing operations) for 2012 and $482 million ($4.52 loss per diluted share from continuing operations) for 2011. The improvement in net loss for the year reflected an improvement in gross margin rate of 90 basis points and a decrease in selling and administrative expenses, which were partially offset by a decline in gross margin dollars, given lower sales.

In addition to our net income (loss) from continuing operations determined in accordance with GAAP, for purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") measurement as well as Adjusted Earnings per Share (“Adjusted EPS”).

Adjusted EBITDA is computed as net income (loss) attributable to Sears Holdings Corporation appearing on the Statements of Operations excluding income (loss) attributable to noncontrolling interest, income tax expense, interest expense, interest and investment income, other income (loss), depreciation and amortization and gain on sales of assets. In addition, it is adjusted to exclude 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, 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 financings 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 comparability of results.

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Adjusted EBITDA was determined as follows:

millions	2012			2011			2010
Net income (loss) attributable to SHC per statement of operations	$	(930	)	$	(3,140	)	$	133
Income (loss) attributable to noncontrolling interest	(124		)	(7		)	17
(Income) loss from discontinued operations, net of tax	—			27			(11		)
Income tax expense	44			1,369			27
Interest expense	267			289			293
Interest and investment income	(94		)	(41		)	(36		)
Other income (loss)	(1		)	2			14
Operating income (loss)	(838		)	(1,501		)	437
Depreciation and amortization	830			853			869
Gain on sales of assets	(468		)	(64		)	(67		)
Before excluded items	(476		)	(712		)	1,239
Impairment charges	330			649			—
Pension settlements	455			—			—
Closed store reserve and severance	140			254			26
Domestic pension expense	165			74			120
Transaction costs	12			—			—
Hurricane losses	—			12			—
Adjusted EBITDA as defined	$	626		$	277		$	1,385
% to revenues	1.6		%	0.7		%	3.2		%

Adjusted EBITDA for our segments was as follows:

	2012												2011												2010
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating income (loss) per statement of operations	$	5		$	(656	)	$	(187	)	$	(838	)	$	(34	)	$	(1,447	)	$	(20	)	$	(1,501	)	$	353		$	(149	)	$	233		$	437
Depreciation and amortization	147			578			105			830			149			601			103			853			149			620			100			869
Gain on sales of assets	(37		)	(261		)	(170		)	(468		)	(34		)	(30		)	—			(64		)	(7		)	(46		)	(14		)	(67		)
Before excluded items	115			(339		)	(252		)	(476		)	81			(876		)	83			(712		)	495			425			319			1,239
Closed store reserve and severance	76			44			20			140			76			160			18			254			13			13			—			26
Impairment charges	10			25			295			330			15			634			—			649			—			—			—			—
Pension settlements	—			452			3			455			—			—			—			—			—			—			—			—
Domestic pension expense	—			165			—			165			—			74			—			74			—			120			—			120
Transaction costs	—			9			3			12			—			—			—			—			—			—			—			—
Hurricane losses	—			—			—			—			—			12			—			12			$	—		$	—		$	—		$	—
Adjusted EBITDA as defined	$	201		$	356		$	69		$	626		$	172		$	4		$	101		$	277		$	508		$	558		$	319		$	1,385
% to revenues	1.4		%	1.7		%	1.6		%	1.6		%	1.1		%	—%			2.2		%	0.7		%	3.3		%	2.5		%	6.7		%	3.2		%

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We also believe that use of Adjusted EPS improves the comparability of year-to-year results and is representative of our underlying performance. We have chosen to provide this supplemental information to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the reconciliations below, and to provide an additional measure of performance.

The following tables set forth results of operations on a GAAP and “As Adjusted” basis, as well as the impact each significant item used in calculating Adjusted EBITDA had on specific income and expense amounts reported in our Consolidated Statements of Operations during the years 2012, 2011 and 2010.

	Year Ended February 2, 2013
millions, except per share data	GAAP			Closed Store Reserve, Store Impairments and Severance			Gain on Sales of Assets			Transaction Costs			Goodwill Impairment			Pension Settlements			Domestic Pension Expense			Gain on Sale of Canadian Joint Venture			Tax Matters		As Adjusted
Cost of sales, buying and occupancy impact	$	29,340		$	(35	)	$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	29,305
Selling and administrative impact	10,660			(105		)	—			(12		)	—			(455		)	(165		)	—			—		9,923
Depreciation and amortization impact	830			(22		)	—			—			—			—			—			—			—		808
Impairment charges impact	330			(35		)	—			—			(295		)	—			—			—			—		—
Gain on sales of assets impact	(468		)	—			419			—			—			—			—			—			—		(49		)
Operating loss impact	(838		)	197			(419		)	12			295			455			165			—			—		(133		)
Interest and investment income impact	94			—			—			—			—			—			—			(25		)	—		69
Income tax expense impact	(44		)	(74		)	157			(5		)	—			—			(62		)	9			143		124
Loss attributable to noncontrolling interest impact	124			(7		)	8			—			(145		)	(1		)	—			12			—		(9		)
After tax and noncontrolling interest impact	(930		)	116			(254		)	7			150			454			103			(4		)	143		(215		)
Diluted loss per share impact	$	(8.78	)	$	1.09		$	(2.40	)	$	0.07		$	1.42		$	4.29		$	0.97		$	(0.04	)	$	1.35	$	(2.03	)

	Year Ended January 28, 2012
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve, Store Impairments and Severance			Mark-to-Market Losses			Gain on Sales of Assets			Hurricane Losses			Goodwill Impairment			Tax Matters		Discontinued Operations		As Adjusted
Cost of sales, buying and occupancy impact	$	30,966		$	—		$	(130	)	$	—		$	—		$	—		$	—		$	—	$	—	$	30,836
Selling and administrative impact	10,664			(74		)	(124		)	—			—			(12		)	—			—		—		10,454
Depreciation and amortization impact	853			—			(8		)	—			—			—			—			—		—		845
Impairment charges impact	649			—			(98		)	—			—			—			(551		)	—		—		—
Gain on sales of assets impact	(64		)	—			—			—			33			—			—			—		—		(31		)
Operating loss impact	(1,501		)	74			360			—			(33		)	12			551			—		—		(537		)
Other loss impact	(2		)	—			—			6			—			—			—			—		—		4
Income tax expense impact	(1,369		)	(28		)	(134		)	(2		)	13			(5		)	—			1,819		—		294
Loss from discontinued operations, net of tax impact	(27		)	—			—			—			—			—			—			—		27		—
Loss attributable to noncontrolling interest impact	7			—			(1		)	(1		)	—			—			—			—		—		5
After tax and noncontrolling interest impact	(3,140		)	46			225			3			(20		)	7			551			1,819		27		(482		)
Diluted loss per share impact	$	(29.40	)	$	0.43		$	2.10		$	0.03		$	(0.19	)	$	0.07		$	5.16		$	17.03	$	0.25	$	(4.52	)

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	Year Ended January 29, 2011
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve and Severance			Mark-to-Market Losses			Gain on Sales of Real Estate			Canadian Dividend Tax Impact		Tax Matters			Discontinued Operations			As Adjusted
Cost of sales, buying and occupancy impact	$	31,000		$	—		$	(12	)	$	—		$	—		$	—	$	—		$	—		$	30,988
Selling and administrative impact	10,425			(120		)	(14		)	—			—			—		—			—			10,291
Depreciation and amortization impact	869			—			(10		)	—			—			—		—			—			859
Gain on sales of assets impact	(67		)	—			—			—			35			—		—			—			(32		)
Operating income impact	437			120			36			—			(35		)	—		—			—			558
Other loss impact	(14		)	—			—			6			—			—		—			—			(8		)
Income tax expense impact	(27		)	(24		)	(6		)	(1		)	7			9		(13		)	—			(55		)
Income from discontinued operations, net of tax, impact	11			—			—			—			—			—		—			(11		)	—
Income attributable to noncontrolling interest impact	(17		)	—			—			(1		)	—			—		—			—			(18		)
After tax and noncontrolling interest impact	133			96			30			4			(28		)	9		(13		)	(11		)	220
Diluted income per share impact	$	1.19		$	0.86		$	0.27		$	0.04		$	(0.25	)	$	0.08	$	(0.12	)	$	(0.10	)	$	1.97

During 2012, we recorded a $455 million non-cash charge related to pension settlements as a result of the requirement to expense the unrealized actuarial losses. The charge had no effect on equity because the unrealized actuarial losses were already recognized in accumulated other comprehensive income/(loss). Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.

During 2011, we recorded a $1.8 billion non-cash charge to establish a valuation allowance against our domestic deferred tax assets. Accounting rules generally require that a valuation reserve be established when income has not been generated over a three-year cumulative period to support the deferred tax asset. While an accounting loss was recorded, we believe no economic loss has occurred as these net operating losses and tax benefits remain available to reduce future taxes as income is generated in subsequent periods.

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, we have a legacy pension obligation for past service performed by Kmart and Sears associates. The annual pension expense included in our financial statements related to these legacy domestic pension plans was relatively minimal in years prior to 2009. However, due to the severe decline in the capital markets that occurred in the latter part of 2008, our domestic pension expense was $165 million in 2012, $74 million in 2011 and $120 million in 2010.

During 2010, Sears Canada paid $754 million in dividends of which Holdings received $639 million. As Sears Canada is a consolidated subsidiary of Holdings, no income was recognized on the receipt of the dividend. However, Holdings did record $9 million of income tax expense related to the dividend.

Revenues and Comparable Store Sales

Revenues decreased $1.7 billion, or 4.1%, to $39.9 billion, as compared to revenues of $41.6 billion in 2011. The decline in revenue was primarily the result of having fewer Kmart and Sears Full-line stores in operation, a decrease in domestic comparable store sales of 2.5% and the separation of the Sears Hometown and Outlet businesses, partially offset by the inclusion of an additional week of revenues in 2012. The Company recorded approximately $500 million of revenues during the 53rd week of 2012. The separation of the Sears Hometown and Outlet businesses resulted in a net decrease in revenues of approximately $100 million. Additionally, Sears Canada had a 5.6% decline in comparable stores sales and revenues for the year included a decrease of $37 million due to changes in foreign currency exchange rates.

Domestic comparable store sales declined 2.5% with declines of 1.4% at Sears Domestic and 3.7% at Kmart. Excluding the consumer electronics category, total domestic comparable store sales decreased 1.4% with Sears Domestic decreasing only 0.1% and Kmart decreasing 2.8%.

The decline in comparable store sales of 1.4% at Sears Domestic was driven by decreases in consumer electronics, lawn and garden and home appliances as well as at Sears Auto Centers. These decreases were partially offset by increases in apparel and home. The Kmart decline in comparable store sales of 3.7% reflects decreases in a

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majority of its categories, most notably the consumer electronics, pharmacy, grocery and household and drug store categories.

Gross Margin

Gross margin declined $87 million to $10.5 billion in 2012 from $10.6 billion in 2011 and included charges of $35 million and $130 million related to store closures for 2012 and 2011, respectively. Excluding these items, gross margin declined $182 million as the above noted decline in revenues was only partially offset by an improvement in gross margin rate. In addition, Sears Canada's gross margin included a decrease of $11 million related to the impact of foreign currency exchange rates.

Sears Domestic's gross margin rate improved 120 basis points in 2012 primarily due to improved margins in the apparel, home appliance and footwear categories, which were partially offset by declines in the consumer electronics category and the Lands' End customer direct business. Kmart’s gross margin rate improved 70 basis points in 2012 due to the improvement in the apparel, pharmacy and toys categories which were partially offset by a decline in the consumer electronics category. Sears Canada’s gross margin rate decreased 10 basis points in 2012 due to declines in the fitness and recreation, children's wear, jewelry, accessories and luggage and footwear categories.

Selling and Administrative Expenses

Selling and administrative expenses for 2012 were flat with the prior year and included expenses related to pension plans, store closings and severance of $725 million in 2012 and $198 million in 2011. The current year also included $12 million of transaction costs associated with strategic initiatives while 2011 included expense of $12 million related to hurricane losses in 2011. Excluding these items, selling and administrative expenses declined $531 million due to reductions in advertising, supplies and payroll expenses. Selling and administrative expenses at Sears Canada for 2012 included a decrease of $10 million related to the impact of foreign currency exchange rates.

Selling and administrative expenses as a percentage of revenues ("selling and administrative expense rate") were 26.7% and 25.7% for 2012 and 2011, respectively, and increased primarily as a result of the above noted charges.

Depreciation and Amortization

Depreciation and amortization expense decreased by $23 million during 2012 to $830 million and included charges of $22 million and $8 million in 2012 and 2011, respectively, taken in connection with store closings. The decrease is primarily due to having fewer assets available for depreciation.

Impairment Charges

During 2012, we recorded impairment charges of $295 million and $35 million related to the impairment of goodwill and long-lived assets, respectively. We also recorded impairment charges during 2011 of $551 million and $98 million related to the impairment of goodwill and long-lived assets, respectively. Impairment charges recorded in both years are described further in Notes 12 and 13 in Notes to Consolidated Financial Statements.

Gain on Sales of Assets

We recorded total gains on sales of assets of $468 million in 2012 and $64 million in 2011, which were primarily attributable to several real estate transactions. The gain on sale of assets in 2012 included a gain of $223 million recognized on the sale of eleven (six owned and five leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds, and a gain of $163 million recognized on the surrender and early termination of the leases on three properties operated by Sears Canada, under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds. In connection with these transactions, we surrendered substantially all of our rights and obligations under our preexisting lease agreements and agreed to surrender each of the premises in periods ranging from six to 23 months from the date of closing. Gain on sales of assets recorded in 2012 also included a gain of $33 million related to the sale of a store operated under The Great Indoors format, one Sears Full-line store and one Kmart store. During 2011,

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the gain on sales of assets included a gain of $21 million recognized on the sale of two stores operated under The Great Indoors format and $12 million recognized on the sale of a store operated under the Kmart format.

Operating Loss

We recorded an operating loss of $838 million and $1.5 billion in 2012 and 2011, respectively. Operating loss for 2012 included non-cash charges related to pension settlements and the impairment of Sears Canada goodwill balances, expenses related to domestic pension plans, store closings and store impairments and severance and transaction costs, as well as the gains on sales of assets which aggregated to $705 million. Operating loss for 2011 included a non-cash charge of $551 million related to goodwill balances of certain reporting units, expenses related to domestic pension plans, store closings, severance and hurricane losses and a net gain on the sales of assets which aggregated to $964 million. Excluding these items, operating loss improved $404 million primarily due to the improvement in gross margin rate and a decrease in selling and administrative expenses, which were partially offset by a decline in gross margin dollars, given lower sales.

Interest Expense

We incurred $267 million and $289 million in interest expense during 2012 and 2011, respectively. The decrease is due to lower average outstanding borrowings.

Income Taxes

Our income tax effective rate was 4.4% in 2012 and 78.2% in 2011. The 2012 tax rate continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits will be realized. The prior year tax rate is the result of significant tax matters in 2011 which included a non-cash charge of $1.8 billion to establish a valuation allowance against certain deferred income tax assets.

2011 Compared to 2010

Net Income (Loss) from Continuing Operations Attributable to Holdings' Shareholders

We recorded a net loss from continuing operations attributable to Holdings' shareholders of $3.1 billion ($29.15 loss per diluted share from continuing operations) for 2011, as compared to net income from continuing operations of $122 million ($1.09 per diluted share from continuing operations) in 2010. Our results for 2011 and 2010 were affected by a number of significant items, including a $1.8 billion non-cash charge to establish a valuation allowance against our domestic deferred tax assets in 2011. Our net loss from continuing operations as adjusted for these significant items was $482 million ($4.52 loss per diluted share from continuing operations) for 2011 and our net income from continuing operations adjusted for these similar significant items was $220 million ($1.97 per diluted share from continuing operations) for 2010. The decrease in net income for the year reflected a decrease in operating income of $1.9 billion, including the impact of non-cash impairment charges and charges related to store closures. Excluding these items, operating income declined $1.1 billion, primarily related to a decline in our gross margin dollars, given lower sales, and a decline in gross margin rate of 180 basis points, and an increase in selling and administrative expenses.

Revenues and Comparable Store Sales

Revenues decreased $1.1 billion, or 2.6%, to $41.6 billion in 2011, as compared to revenues of $42.7 billion in 2010. The decline in revenues was primarily a result of a 2.2% decrease in domestic comparable stores sales and the effect of having fewer Kmart and Sears Full-line stores in operation. Additionally, Sears Canada had a 7.7% decline in comparable store sales, which was partially offset by an increase of $171 million due to changes in the Canadian foreign exchange rate.

For the year, domestic comparable store sales declined 2.2%, with declines of 3.0% at Sears Domestic and 1.4% at Kmart. Decreases in sales at Sears Domestic were driven by appliances and consumer electronics, and were partially offset by increases in the home category. The Kmart declines in comparable store sales included decreases

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in the consumer electronics, pharmacy, home, apparel and jewelry categories, partially offset by an increase in the grocery and household category.

Gross Margin

We generated gross margin of $10.6 billion in 2011 and $11.7 billion in 2010. The total decline in gross margin dollars of $1.1 billion was primarily driven by decreases in the gross margin rate across all of our segments, and included charges of $130 million and $12 million in 2011 and 2010, respectively, related to store closures and an increase of $51 million related to the impact of foreign currency exchange rates on gross margin at Sears Canada.

Kmart's gross margin rate declined 190 basis points in 2011 mainly due to higher commodity costs and markdowns in apparel and home, markdowns in consumer electronics, as well as declines in most other categories. Sears Domestic's gross margin rate declined 180 basis points in 2011 primarily due to reduced margins in the home appliance, consumer electronics, and Lands' End categories and declines in home services. Sears Canada's gross margin rate declined 170 basis points in 2011 as a result of clearing inventory, due to an enhanced focus on improving inventory productivity.

Selling and Administrative Expenses

Our selling and administrative expenses increased $239 million in 2011 to $10.7 billion. Domestic selling and administrative expenses increased $132 million from last year predominately due to increases in insurance and store closing expenses. Selling and administrative expenses at Sears Canada for 2011 increased $107 million from last year, and included an increase of $42 million related to the impact of foreign currency exchange rates. On a Canadian dollar basis, selling and administrative expenses increased by $65 million primarily due to increased investment in strategic projects and severance expense.

Selling and administrative expenses for 2011 included domestic pension plan expense of $74 million, store closing costs and severance of $124 million and $12 million of hurricane losses. Selling and administrative expenses for 2010 included domestic pension plan expense of $120 million and store closing costs and severance of $14 million.

Selling and administrative expenses as a percentage of revenues (“selling and administrative expense rate”) were 25.7% for 2011 and 24.4% for 2010, and increased as a result of the above noted increase in selling and administrative expenses, as well as the decline in revenues.

Depreciation and Amortization

Depreciation and amortization expense decreased by $16 million during 2011 to $853 million and included charges of $8 million and $10 million in 2011 and 2010, respectively, taken in connection with store closings. The decrease is primarily attributable to having fewer assets available for depreciation.

Impairment Charges

We recorded impairment charges of $551 million and $98 million during 2011 related to impairment of goodwill and long-lived assets, respectively. We did not record any such impairments in 2010. Impairment charges recorded during 2011 are further described in Notes 12 and 13 in Notes to Consolidated Financial Statements.

Gain on Sales of Assets

We recorded a gain on the sales of assets of $64 million during 2011 and $67 million in 2010. Gain on sales of assets for 2011 included a gain of $21 million recognized on the sale of two stores operated under The Great Indoors format and $12 million recognized on the sale of a store operated under the Kmart format. Gain on sales of assets for 2010 was impacted by the recognition of previously deferred gains on sales of assets. We sold a Sears Auto Center in October 2006, at which time we leased back the property for a period of time. Given the terms of the contract, for accounting purposes, the excess of proceeds received over the carrying value of the associated property was deferred. We closed our operations at this location during the first quarter of 2010 and, as a result, recognized a gain of $35 million on this sale at that time.

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Operating Income (Loss)

We recorded an operating loss of $1.5 billion in 2011, as compared to operating income of $437 million in 2010. Operating loss for 2011 included a $551 million non-cash impairment charge related to goodwill balances of certain reporting units, expenses related to domestic pension plans, store closings, severance and hurricane losses, and a net gain on sales of assets, which aggregated to $964 million. Operating income for 2010 included expenses related to domestic pension plans, store closings and severance and a gain on sale of assets, which aggregated to $121 million. The decline in operating income of $1.9 billion was primarily the result of a decline in our gross margin dollars, given lower overall sales, and a decline in our gross margin rate of 180 basis points and an increase in the above noted charges.

Other Loss

Other loss is primarily comprised of mark-to-market and settlement gains and losses on Sears Canada hedge transactions. Total net mark-to-market and settlement losses of $1 million and $15 million were recorded on these transactions in 2011 and 2010, respectively. See Notes 4 and 5 to the Consolidated Financial Statements for further information regarding these transactions.

Income Taxes

Our income tax expense effective tax rate for the year was 78.2% in 2011 and 16.3% in 2010. The increase in our tax rate was primarily due to several significant tax matters, which included a non-cash charge of $1.8 billion to establish a valuation allowance against certain deferred income tax assets and the nondeductible nature of our goodwill impairment.

Business Segment Results

Kmart

Kmart results and key statistics were as follows:

millions, except number of stores	2012			2011			2010
Merchandise sales and services	$	14,567		$	15,285		$	15,593
Comparable store sales %	(3.7		)%	(1.4		)%	0.8		%
Cost of sales, buying and occupancy	11,158			11,818			11,757
Gross margin dollars	3,409			3,467			3,836
Gross margin rate	23.4		%	22.7		%	24.6		%
Selling and administrative	3,284			3,371			3,341
Selling and administrative expense as a percentage of revenues	22.5		%	22.1		%	21.4		%
Depreciation and amortization	147			149			149
Impairment charges	10			15			—
Gain on sales of assets	(37		)	(34		)	(7		)
Total costs and expenses	14,562			15,319			15,240
Operating income (loss)	$	5		$	(34	)	$	353
Adjusted EBITDA	$	201		$	172		$	508
Total Kmart stores	1,221			1,305			1,307

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2012 Compared to 2011

Revenues and Comparable Store Sales

Kmart’s revenues decreased by $718 million to $14.6 billion as comparable store sales decreased 3.7% in 2012. The decrease in revenue was also due to the impact of Kmart having fewer stores in operation during 2012. These declines were partially offset by the inclusion of approximately $190 million of revenues recorded in the 53rd week of 2012.

The decrease in comparable store sales of 3.7% reflects decreases in a majority of its categories, most notably in the consumer electronics, pharmacy, grocery and household, and drug store categories. Excluding the consumer electronics category, Kmart comparable store sales decreased 2.8%. The decrease in consumer electronics sales continue to be negatively impacted by price compression as well as market shifts such as moves to smartphone technology and away from digital cameras, GPS devices, MP3 players and camcorders in addition to transitions to online gaming and applications while the decrease in pharmacy sales was driven by the conversion of brand name drugs to equivalent generic drugs. The decrease in the grocery and household category was primarily attributable to competitive pressures in this category.

Gross Margin

Kmart generated $3.4 billion in gross margin in 2012 and $3.5 billion in 2011. The decrease in Kmart’s gross margin is due to the above noted decrease in sales which was partially offset an improvement in gross margin rate and included $21 million and $46 million for markdowns recorded in connection with store closings during 2012 and 2011, respectively.

Kmart’s gross margin rate increased 70 basis points to 23.4% in 2012 from 22.7% in 2011 mainly due to improvements in the apparel, pharmacy and toys categories which were partially offset by a decline in the consumer electronics category.

Selling and Administrative Expenses

Kmart’s selling and administrative expenses decreased $87 million in 2012. The decrease primarily reflects decreases in payroll and advertising expenses. Selling and administrative expenses for 2012 and 2011 were impacted by expenses of $55 million and $30 million, respectively, related to store closings and severance.

Kmart’s selling and administrative expense rate was 22.5% in 2012 and 22.1% in 2011 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Depreciation and Amortization

Depreciation and amortization expense decreased $2 million in 2012 to $147 million and included $9 million of charges taken in connection with store closings. The decrease is primarily due to having fewer assets to depreciate.

Impairment charges

We recorded impairment charges of $10 million and $15 million in 2012 and 2011, respectively, related to impairment of long-lived assets. Impairment charges recorded during 2012 and 2011 are further described in Note 13 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

Kmart recorded a total net gain on sales of assets of $37 million and $34 million in 2012 and 2011, respectively. The gains on sales of assets in 2012 included a gain of $11 million recognized on the sale of one store while 2011 included a gain of $12 million recognized on the sale of one store.

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Operating Income (Loss)

Kmart recorded operating income of $5 million in 2012 as compared to an operating loss of $34 million in 2011. This improvement was primarily driven by the improvement in gross margin rate and a decrease in selling and administrative expenses which more than offset the above noted decrease in revenues. Operating income in 2012 included expenses related to store closing and severance costs of $85 million and store impairments of $10 million as well as a gain of $11 million related to the sale of one store. Kmart's operating loss for 2011 included expenses related to store impairments of $15 million, store closing and severance costs of $76 million as well as a gain of $12 million related to the sale of one store.

2011 Compared to 2010

Revenues and Comparable Store Sales

Kmart's total sales decreased by $308 million, as comparable store sales decreased 1.4% in 2011. The declines in revenue were primarily due to lower comparable store sales and the effect of having fewer Kmart stores in operation. The Kmart declines in comparable store sales included decreases in the consumer electronics, pharmacy, home, apparel and jewelry categories, partially offset by an increase in the grocery and household category.

Gross Margin

Kmart generated $3.5 billion in gross margin in 2011 and $3.8 billion in 2010. The decrease in gross margin dollars of $369 million was mainly driven by a decline in the gross margin rate and included charges of $46 million and $6 million for markdowns recorded in connection with store closings announced during 2011 and 2010, respectively.

Kmart's gross margin rate was 22.7% in 2011 and 24.6% in 2010. The decline of 190 basis points was mainly due to higher commodity costs and markdowns in apparel and home, as well as markdowns in consumer electronics.

Selling and Administrative Expenses

Kmart's selling and administrative expenses increased $30 million in 2011. The increase was mainly due to an increase in store closing expenses. Selling and administrative expenses were impacted by store closing costs and severance of $30 million and $7 million, in 2011 and 2010, respectively.

Kmart's selling and administrative expense rate was 22.1% in 2011 and 21.4% in 2010, and increased primarily as a result of Kmart's decline in revenues.

Impairment Charges

We recorded impairment charges of $15 million during 2011 related to impairment of long-lived assets. We did not record any such impairments in 2010. Impairment charges recorded during 2011 are further described in Note 13 in Notes to Consolidated Financial Statements.

Gain on Sales of Assets

Kmart recorded a total net gain on sales of assets of $34 million in 2011 and $7 million in 2010. The gains on sales of assets in 2011 included a gain of $12 million recognized on the sale of one store.

Operating Income (Loss)

Kmart recorded an operating loss of $34 million in 2011, as compared to operating income of $353 million in 2010. The decrease in Kmart's operating results was primarily the result of a decline in gross margin dollars, driven by the declines in the gross margin rate and revenues, and an increase in selling and administrative expenses. Kmart's operating loss for 2011 included expenses related to impairments of $15 million, store closing and severance costs of $76 million as well as a gain of $12 million related to the sale of one store. Operating income in 2010 included store closing and severance costs of $13 million.

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Sears Domestic

Sears Domestic results and key statistics were as follows:

millions, except number of stores	2012			2011			2010
Merchandise sales and services	$	20,977		$	21,649		$	22,275
Comparable store sales %	(1.4		)%	(3.0		)%	(3.1		)%
Cost of sales, buying and occupancy	15,107			15,849			15,910
Gross margin dollars	5,870			5,800			6,365
Gross margin rate	28.0		%	26.8		%	28.6		%
Selling and administrative	6,184			6,042			5,940
Selling and administrative expense as a percentage of revenues	29.5		%	27.9		%	26.7		%
Depreciation and amortization	578			601			620
Impairment charges	25			634			—
Gain on sales of assets	(261		)	(30		)	(46		)
Total costs and expenses	21,633			23,096			22,424
Operating loss	$	(656	)	$	(1,447	)	$	(149	)
Adjusted EBITDA	$	356		$	4		$	558
Number of:
Full-line stores(1)	798			867			894
Specialty stores(2)	54			1,338			1,265
Total Domestic Sears Stores	852			2,205			2,159

__________________

⁽¹⁾  2012 included 788 Full-line stores and 10 Sears Essentials/Grand stores; 2011 included 834 Full-line stores and 33 Sears Essentials/Grand stores; 2010 included 842 Full-line stores and 52 Sears Essentials/Grand stores    

⁽²⁾  2011 and 2010 included 1,273 and 1,205 stores, respectively, of Sears Hometown and Outlet Stores, Inc.

2012 Compared to 2011

Revenues and Comparable Store Sales

Sears Domestic’s revenues decreased by $672 million as comparable store sales decreased 1.4%. The decline in revenue is mainly due to the impact of having fewer Sears Full-line stores in operation, the decline in comparable store sales and the separation of the Sears Hometown and Outlet businesses, partially offset by the inclusion of approximately $275 million of revenues recorded in the 53rd week of 2012. The separation of the Sears Hometown and Outlet businesses resulted in a net decrease in revenues of approximately $100 million.

The decrease of 1.4% in comparable store sales was driven by decreases in the consumer electronics, lawn and garden and home appliances categories, as well as at Sears Auto Centers. These decreases were partially offset by increases in apparel and home. Consumer electronics continues to be negatively impacted by price compression, as well as market shifts such as moves to smartphone technology and away from digital cameras, GPS devices, MP3 Players and camcorders in addition to transitions to online gaming and applications. Excluding the consumer electronics category, Sears Domestic comparable stores sales decreased only 0.1%.

Gross Margin

Sears Domestic generated gross margin dollars of $5.9 billion in 2012 and $5.8 billion in 2011 as the decline in revenues in 2012 noted above was offset by an improvement in gross margin rate. Gross margin for 2012 and 2011 included charges of $14 million and $84 million, respectively, for markdowns recorded in connection with store closings.

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Sears Domestic’s gross margin rate was 28.0% in 2012 and 26.8% in 2011. The increase of 120 basis points was mainly due to improvements in the apparel, home appliance and footwear categories, which were partially offset by declines in the consumer electronics category and our Lands' End customer direct business.

Selling and Administrative Expenses

Sears Domestic’s selling and administrative expenses increased $142 million in 2012 as compared to 2011. Selling and administrative expenses for 2012 were impacted by expenses of $617 million related to pension plans and $30 million related to store closings and severance, while 2011 was impacted by expenses of $74 million related to pension plans and $76 million related to store closings and severance. Selling and administrative expenses for 2012 also included $9 million of transaction costs associated with strategic initiatives while 2011 included expense of $12 million related to hurricane losses. Excluding these items, selling and administrative expenses decreased $352 million due to declines in advertising and payroll expenses.

Sears Domestic’s selling and administrative expense rate was 29.5% in 2012 and 27.9% in 2011 and increased as a result of the above noted expenses.

Depreciation and Amortization

Depreciation and amortization expense decreased $23 million to $578 million during 2012 and included charges of $13 million and $8 million in 2012 and 2011, respectively, taken in connection with store closings. The decrease is primarily attributable to having fewer assets available for depreciation.

Impairment Charges

During 2012, we recorded impairment charges of $25 million related to the impairment of long-lived assets. We also recorded impairment charges during 2011 of $551 million and $98 million related to the impairment of goodwill and long-lived assets, respectively. Impairment charges recorded in both years are described further in Notes 12 and 13 in Notes to Consolidated Financial Statements.

Gain on Sales of Assets

We recorded total gains on sales of assets of $261 million in 2012 and $30 million in 2011 which were primarily attributable to several real estate transactions. The gain on sale of assets in 2012 included a gain of $223 million recognized on the sale of eleven (six owned and five leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds. In connection with this transaction, we surrendered substantially all of our rights and obligations under our preexisting lease agreements and agreed to surrender each of the premises in periods ranging from six to 23 months from the date of closing. Gain on sales of assets recorded in 2012 also included a gain of $22 million related to the sale of a store operated under The Great Indoors format and one Sears Full-line store. The gain on sales of assets in 2011 included a gain of $21 million recognized on the sale of two stores operated under the Great Indoors format.

Operating Loss

Sears Domestic reported an operating loss of $656 million in 2012 compared to $1.4 billion in 2011. Sears Domestic’s operating loss improved as the increase in selling and administrative expenses noted above was more than offset by lower impairment charges, an increase in the gains on sales of assets and an increase in gross margin dollars. Sears Domestic’s operating loss included expenses related to domestic pension plans and store closings and severance of $674 million and $242 million in 2012 and 2011, respectively, impairments of $25 million and $634 million in 2012 and 2011 respectively, $9 million of transaction costs associated with strategic initiatives in 2012 and hurricane losses of $12 million in 2011, as well as a gains of $245 million and $21 million in 2012 and 2011, respectively, related to the sale of real estate assets.

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2011 Compared to 2010

Revenues and Comparable Store Sales

Sears Domestic's total sales decreased by $626 million to $21.6 billion in 2011, as comparable store sales decreased 3.0%. The decline in revenue was mainly due to the decrease in comparable store sales, as well as the impact of having fewer Sears Full-line stores in operation. The decrease in comparable store sales was primarily driven by declines in the appliances and consumer electronics categories, and were partially offset by an increase in the home category.

Gross Margin

Sears Domestic generated gross margin dollars of $5.8 billion in 2011 and $6.4 billion in 2010. The decrease of $565 million was mainly a result of a decline in Sears Domestic's gross margin rate during 2011 and included charges of $84 million and $6 million for markdowns recorded in connection with store closings announced during 2011 and 2010, respectively.

Sears Domestic's gross margin rate was 26.8% in 2011 and 28.6% in 2010. The decline of 180 basis points was primarily due to reduced margins in the home appliance, consumer electronics, and Lands' End categories and declines in home services.

Selling and Administrative Expenses

Sears Domestic's selling and administrative expenses increased $102 million to $6.0 billion in 2011. The increase was mainly due to increases in insurance and store closing expenses. Selling and administrative expenses included domestic pension plan expense of $74 million in 2011 and $120 million in 2010, store closing costs and severance of $76 in 2011 and $7 million in 2010, and hurricane losses of $12 million in 2011.

Our selling and administrative expense rate was 27.9% for 2011 and 26.7% for 2010, and increased due to the above noted increase in expense and decline in sales.

Depreciation and Amortization

Depreciation and amortization expense decreased by $19 million to $601 million during 2011, and included charges of $8 million and $10 million in 2011 and 2010, respectively, taken in connection with store closings. The decrease is primarily attributable to having fewer assets available for depreciation.

Gain on Sales of Assets

Sears Domestic recorded a total net gain on sales of assets of $30 million in 2011 and $46 million in 2010. The gains on sales of assets in 2011 included a gain of $21 million recognized on the sale of two stores operated under The Great Indoors format. The gain on sales of assets in 2010 was due to the recognition of a previously deferred gain from the October 2006 sale of one of our Sears Auto Centers. At the time of the sale, we leased back the property for a period of time. Given the terms of the contract, for accounting purposes, the excess of proceeds received over the carrying value of the associated property was deferred. We closed our operations at this location during the first quarter of 2010 and, as a result, recognized a gain of $35 million on this sale at that time.

Impairment Charges

We recorded impairment charges of $551 million and $83 million during 2011 related to impairment of goodwill and long-lived assets, respectively. We did not record any such impairments in 2010. Impairment charges recorded during 2011 are further described in Notes 12 and 13 in Notes to Consolidated Financial Statements.

Operating Loss

Sears Domestic reported an operating loss of $1.4 billion in 2011 and $149 million in 2010. The increase in Sears Domestic's operating loss was primarily the result of lower gross margin dollars, driven by declines in the gross margin rate and revenues, and the impairment charges noted above. Sears Domestic's operating loss included

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expenses related to impairments of $634 million in 2011, domestic pension plans and store closing costs and severance of $242 million in 2011 and $143 million in 2010, hurricane losses of $12 million in 2011, as well as gains of $21 million and $35 million in 2011 and 2010, respectively, related to the sale of real estate.

Sears Canada

Sears Canada, a consolidated, 51%-owned subsidiary of Sears, conducts similar retail operations as Sears Domestic. Sears Canada results and key statistics were as follows:

millions, except number of stores	2012			2011			2010
Merchandise sales and services	$	4,310		$	4,633		$	4,796
Comparable store sales %	(5.6		)%	(7.7		)%	(4.0		)%
Cost of sales, buying and occupancy	3,075			3,299			3,333
Gross margin dollars	1,235			1,334			1,463
Gross margin rate	28.7		%	28.8		%	30.5		%
Selling and administrative	1,192			1,251			1,144
Selling and administrative expense as a percentage of revenues	27.7		%	27.0		%	23.9		%
Depreciation and amortization	105			103			100
Impairment charges	295			—			—
Gain on sales of assets	(170		)	—			(14		)
Total costs and expenses	4,497			4,653			4,563
Operating income (loss)	$	(187	)	$	(20	)	$	233
Adjusted EBITDA	$	69		$	101		$	319
Number of:
Full-line stores	118			122			122
Specialty stores	357			378			361
Total Sears Canada Stores	475			500			483

2012 Compared to 2011

Revenues and Comparable Store Sales

Sears Canada’s revenues decreased $323 million for 2012 as compared to the same period last year and included a $37 million decrease due to the impact of exchange rates during the year. On a Canadian dollar basis, revenues decreased by $286 million predominately due to a 5.6% decrease in comparable store sales primarily due to sales decreases in the tools, lawn and garden, electronics, bed and bath, women's apparel and menswear categories, partially offset by an increase in major appliances. These declines were partially offset by the inclusion of approximately $35 million of revenues recorded in the 53rd week of 2012.

Gross Margin

Gross margin dollars decreased $99 million in 2012 to $1.2 billion and included an $11 million decrease due to the impact of exchange rates. Gross margin decreased $88 million on a Canadian dollar basis. Sears Canada’s gross margin rate decreased 10 basis points to 28.7%, in 2012 from 28.8% in 2011, due to decreases in the fitness and recreation, children's wear, jewelry, accessories and luggage, and footwear categories.

Selling and Administrative Expenses

For 2012, Sears Canada’s selling and administrative expenses decreased $59 million, and included a decrease of $10 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses

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decreased by $49 million primarily due to decreases in advertising. Selling and administrative expenses for 2012 included expenses of $20 million related to store closings and severance, $3 million related to pension settlements and $3 million of transaction costs associated with strategic initiatives. Selling and administrative expenses for 2011 included severance expenses of $18 million.

Sears Canada’s selling and administrative expense rate was 27.7% in 2012 and 27.0% in 2011 and increased primarily due to the above noted decline in revenues.

Impairment Charges

We recorded impairment charges of $295 million in 2012 related to goodwill. We did not record any such impairments in 2011. Impairment charges recorded are further described in Note12 of Notes to Consolidated Financial Statements.

Gain on Sales of Assets

We recorded a total gain on sales of assets of $170 million in 2012 which included a gain of $163 million recognized on the surrender and early termination of the leases on three properties under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds. In connection with this transaction, we surrendered substantially all of our rights and obligations under our preexisting lease agreements and agreed to surrender each of the premises in six months from the date of closing.

Operating Loss

Sears Canada recorded an operating loss of $187 million and $20 million in 2012 and 2011, respectively. Operating loss in 2012 included expenses of $20 million related to store closings and severance, $3 million related to pension settlements and $3 million of transaction costs associated with strategic initiatives, as well as an impairment charge of $295 million and a gain on sales of assets of $163 million in 2012. Operating loss in 2011 included expenses related to store closings and severance of $18 million. The increase in operating loss was primarily due to the decline in sales, partially offset by the gain on sales of assets noted above as well as the decrease in selling and administrative expenses.

2011 Compared to 2010

Revenues and Comparable Store Sales

Sears Canada's revenues decreased by $163 million in 2011 to $4.6 billion and included a $171 million increase due to the impact of exchange rates. On a Canadian dollar basis, revenues decreased by $334 million, due to a 7.7% decline in comparable store sales primarily attributable to sales declines in the hardlines and home categories, with industry-wide price compression and aggressive competition affecting sales in major appliances, electronics and home décor products. Revenue in the apparel and accessories categories also experienced declines primarily in women's wear and men's wear.

Gross Margin

Total gross margin dollars decreased $129 million to $1.3 billion for 2011 and included a $51 million increase due to the impact of exchange rates. Gross margin decreased $180 million on a Canadian dollar basis primarily as a result of a decline in gross margin rate. Sears Canada's margin rate decreased 170 basis points to 28.8% in 2011, from 30.5% in 2010, as a result of clearing inventory, due to an enhanced focus on improving inventory productivity.

Selling and Administrative Expenses

Sears Canada's selling and administrative expenses increased $107 million to $1.3 billion in 2011, and included an increase of $42 million due to the impact of exchange rates and severance expenses of $18 million recorded during 2011. On a Canadian dollar basis, selling and administrative expenses increased by $65 million primarily due to increased investment in strategic projects and the above noted severance expense.

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Sears Canada's selling and administrative expense rate was 27.0% in 2011 and 23.9% in 2010, and increased primarily due to the above noted increase in expenses and decrease in sales.

Operating Income (Loss)

Sears Canada recorded an operating loss of $20 million in 2011 and operating income of $233 million in 2010. The $253 million decrease in operating results primarily reflects the above noted declines, on a Canadian dollar basis, in sales and gross margin, and the increase in selling and administrative expenses.

ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION

Cash Balances

Our cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. Our cash balances as of February 2, 2013 and January 28, 2012 are detailed in the following table.

millions	February 2, 2013		January 28, 2012
Domestic
Cash and equivalents	$	227	$	182
Cash posted as collateral	20		20
Credit card deposits in transit	133		155
Total domestic cash and cash equivalents	380		357
Sears Canada	229		390
Total cash and cash equivalents	609		747
Restricted cash	9		7
Total cash balances	$	618	$	754

We had total cash balances of $618 million at February 2, 2013 and $754 million at January 28, 2012. The decrease in cash during 2012 was primarily due to uses of cash for contributions to our pension and postretirement benefit plans of $593 million, capital expenditures of $378 million and repayments of long-term debt of $335 million, partially offset by cash generated from the sale of properties of $532 million and from the separation of Sears Hometown and Outlet Stores, Inc. of $447 million, as well as reductions in working capital needs.

At various times, we have posted cash collateral for certain outstanding letters of credit and self-insurance programs. Such cash collateral is classified within cash and cash equivalents given we have the ability to substitute letters of credit at any time for this cash collateral and it is therefore readily available to us.

Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. Cash amounts held in these short-term investments are readily available to us.

Credit card deposits in transit include deposits in transit from banks for payments related to third-party credit card and debit card transactions.

Restricted cash consists of cash related to Sears Canada’s balances, which have been pledged as collateral for letters of credit obligations issued under its offshore merchandise purchasing program and with counterparties related to outstanding derivative contracts, as well as funds held in trust in accordance with regulatory requirements governing advance ticket sales related to Sears Canada’s travel business.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash balances when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit were $114 million and $68 million as of February 2, 2013 and January 28, 2012, respectively.

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Investment of Available Capital

Since the Merger, we have continued to invest in our businesses to transform the customer experience as the retail industry evolves and provide the opportunity for attractive returns. Further, through February 2, 2013, we have repurchased approximately $6.0 billion of our common shares since the Merger and may continue to repurchase shares subject to market conditions and board authorization. In addition, we may pursue investments in the form of acquisitions, joint ventures, and partnerships where we believe appropriate returns can be obtained.

Our Board of Directors has delegated authority to direct investment of our surplus cash to our Chairman and Chief Executive Officer, Edward S. Lampert, subject to various limitations that have been or may be from time to time adopted by the Board of Directors and/or Finance Committee of the Board of Directors.

Operating Activities and Cash Flows

The Company used $303 million of cash in its continuing operations during 2012 and $307 million during 2011 as the decrease in our net loss in 2012 compared to the prior year was offset by increases in contributions to our pension and postretirement benefit plans. Our primary source of operating cash flows is the sale of goods and services to customers, while the primary use of cash in operations is the purchase of merchandise inventories.

The Company used $307 million in cash flows in its continuing operations during 2011 and generated $77 million of cash in its continuing operations in 2010. We used more cash in 2011 compared to 2010 mainly as a result of our net loss in 2011 and an increase in contributions to our pension and postretirement benefit plans, partially offset by a decrease in other working capital needs.

Merchandise inventories were $7.6 billion at February 2, 2013 and $8.4 billion at January 28, 2012. Merchandise payables were $2.8 billion at February 2, 2013 and $2.9 billion at January 28, 2012. Our Domestic inventory balances decreased approximately $895 million from $7.7 billion at January 28, 2012 to $6.8 billion at February 2, 2013. Excluding the inventory related to the Sears Hometown and Outlet store businesses, domestic inventory decreased $501 million from the prior year due to both improved productivity and store closures. Sears Domestic inventory decreased in virtually all categories, with the most notable decreases in the consumer electronics, home appliances, home and tools and paint categories. Kmart inventory also decreased in virtually all categories with the most notable decreases in the consumer electronics, pharmacy and drug and grocery and household categories. Sears Canada’s inventory levels increased approximately $46 million from $745 million at January 28, 2012 to $791 million at February 2, 2013, primarily due to the timing of merchandise receipts and a reduction in reserves due to improved inventory quality.

Investing Activities and Cash Flows

We generated net cash flows from investing activities from continuing operations of $191 million in 2012, compared to net cash flows used in investing activities from continuing operations of $352 million and $391 million in 2011 and 2010, respectively.

For 2012, net cash flows generated from investing activities included cash proceeds from the sales of properties of $532 million and $37 million from changes in investments and restricted cash, which were partially offset by cash used for capital expenditures of $378 million. Net cash flows used in investing activities from continuing operations in 2011and 2010 was primarily used for purchases of property and equipment.

We spent $378 million, $432 million, and $ 426 million during 2012, 2011 and 2010, respectively. Capital expenditures during 2012 included investments in online and mobile shopping capabilities, enhancements to the SHOP YOUR WAY Membership platform, information technology infrastructure, and store maintenance. Capital expenditures in 2011 included investments in online initiatives, information technology infrastructure, in-home consultative sales technology, and maintenance for stores and distribution centers. Capital expenditures during 2010 included investments in online initiatives, information technology and infrastructure for stores and distribution centers.

We anticipate 2013 capital expenditure levels to be similar to 2012 levels. It should be noted that in the normal course of business, we consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash and cause our capital expenditure levels to vary from period

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to period. In addition, we review leases that will expire in the short term in order to determine the appropriate action to take with respect to them. During 2012, we purchased one previously leased operating property for $6 million while in 2011, we purchased five previously leased operating properties for $17 million. We did not make any such purchases 2010.

Financing Activities and Cash Flows

Net cash used in financing activities from continuing operations was $27 million in 2012 and $64 million in 2010, while, in 2011, the Company generated net cash from financing activities of $47 million. Financing activities for 2012 included gross cash proceeds of $446.5 million as a result of the separation of SHO, which consisted of $346.5 million in cash proceeds received for the sale of SHO common shares and $100 million received through a dividend from SHO prior to the separation. The proceeds received were used to fund repayments on our domestic revolving credit facility. The financing activities in 2011 reflect an increase in debt to fund operations, and common share repurchase activity while the financing activities in 2010 reflect purchases of Sears Canada shares, debt repayments and common share repurchase activity, which were funded in part from $1.25 billion of proceeds from our senior secured notes offering in October 2010.

Repayments of long-term debt were $335 million, $611 million and $358 million in 2012, 2011 and 2010, respectively. These repayments were offset by gross cash proceeds of $446.5 million as a result of the separation of SHO in 2012, an increase of $815 million in total short-term borrowings and proceeds of $104 million from Sears Canada's credit facility in 2011, and $1.4 billion in proceeds from debt issuance in 2010.

In 2010, we took various financing actions to extend our capital structure. These actions included Holdings issuing $1.25 billion of 6 5/8% senior secured notes due 2018 which are secured by domestic inventory and credit card accounts receivable and Sears Canada entering into a five-year $800 million Canadian credit facility which is secured by a first lien on Sears Canada's inventory and receivable balances.

During 2010, we acquired approximately 19 million additional Sears Canada common shares. We paid a total of $560 million for the additional shares. In addition, Sears Canada purchased and cancelled approximately 2.2 million common shares during 2010 under its Normal Course Issuer Bid, at a cost of $43 million. Sears Canada declared and paid cash dividends of $7.00 Canadian per common share, or approximately $754 million Canadian ($708 million U.S.). Accordingly, Sears Canada paid $69 million to minority shareholders in connection with these dividends. For further information, see Note 2 of Notes to Consolidated Financial Statements.

During 2012, we did not repurchase any of our common shares under our share repurchase program. We did repurchase $183 million and $394 million of our common stock pursuant to our common share repurchase program in 2011 and 2010, respectively. The common share repurchase program was initially announced in 2005 and had a total authorization since inception of the program of $6.5 billion. At February 2, 2013, we had approximately $504 million of remaining authorization under the program. The common share repurchase program has no stated expiration date and 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.

Uses and Source of Liquidity

Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes, including debt repayment, pension plan contributions and common share repurchases. We consider ourselves to be an asset-rich enterprise with substantial liquidity and financial flexibility benefiting from multiple funding resources such as our $3.275 billion domestic revolving credit facility through April 2016, an $800 million Canadian revolving credit facility through September 2015, which may be subject to potential reserves, and $1.24 billion of senior secured notes due in 2018. Further, there is approximately $338 million of remaining Sears debt from the Merger. These funding resources are described in more detail below. At February 2, 2013, we had liquid assets of $5.4 billion consisting of cash balances of $618 million and $4.8 billion of inventory, net of payables.

The domestic revolving credit facility and senior secured notes are firmly in place for the next several years and are supported by an asset base which includes $6.8 billion of inventory, owned and leased real estate assets,

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market leading proprietary brands such as Kenmore, Craftsman and DieHard, and well-established stand-alone businesses such as Lands’ End and Sears Canada. This asset base provides us flexibility as we continue to transform our business.

We took several actions in 2012 to enhance our financial flexibility, generate liquidity and financially de-risk our Company. By transforming our Company to a more nimble, less asset-intensive business model, we are reducing the level of risk in our operational structure and balance sheet while concurrently improving the returns on our invested capital. The focus of this model is to win in the new retail marketplace by leveraging our stores, brands, online channels, social media assets and membership programs as an integrated retailer.

In summary, our actions positively impacted our liquidity by $1.8 billion, even after consideration of the $203 million domestic pension contribution we chose to make in September 2012, while unlocking the value in our asset portfolio. These actions have included:

• the separation of our Sears Hometown and Outlet businesses through a rights offering transaction, which generated gross proceeds of approximately $447 million;

• the partial spin-off of 45% of Sears Canada;

• the execution of various real estate transactions which generated cash proceeds of approximately $440 million;

• Reducing inventory by nearly $1.0 billion below last year's level and adjusting our promotional cadence to be more targeted;

• Reducing our fixed cost structure by over $500 million; and

• Capitalizing on an opportunity to reduce risk related to our legacy pension obligation by making a voluntary offer to former employees to pay a lump sum.

We expect to generate at least $500 million in additional liquidity through monetization of assets over the next 12 months through selective actions that are consistent with our focus on creating long-term value. The exact form and amount will depend on specific circumstances and opportunities, including market conditions. In addition to our asset monetizations, we currently expect to reduce 2013 peak domestic inventory by $500 million from the 2012 level of $8.6 billion at the end of the third quarter as a result of stores already or expected to be closed, initiatives underway to reduce slow-moving inventory and modest productivity improvement. This action is expected to generate $300 million of cash after consideration of related payables. We also expect to further reduce our fixed cost base by another $200 million in 2013.

Our outstanding borrowings at February 2, 2013 and January 28, 2012 were as follows:

millions	February 2, 2013		January 28, 2012
Short-term borrowings:
Unsecured commercial paper	$	345	$	337
Secured borrowings	749		838
Long-term debt, including current portion:
Notes and debentures outstanding	1,593		1,863
Capitalized lease obligations	433		455
Total borrowings	$	3,120	$	3,493

Domestic Credit Agreement

During the first quarter of 2011, we entered into a $3.275 billion credit agreement (the “Domestic Credit Agreement”) which expires in April 2016. We view this credit facility as our most cost efficient funding mechanism and therefore use it as a primary source of funding.

Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate (“LIBOR”) or a base rate, in either case plus an applicable margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the

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range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on usage.

The Domestic Credit Agreement includes a $1.5 billion letter of credit sub-limit and an uncommitted accordion feature that provides us the flexibility, subject to certain terms and conditions, to use the existing collateral under the credit facility to obtain an aggregate amount of up to $1.0 billion in additional borrowing capacity. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.2 billion in second lien notes were outstanding at February 2, 2013, providing the Company the capacity to issue up to an additional $760 million in second lien indebtedness. The Domestic Credit Agreement is in place as a funding source for general corporate purposes and is an asset based revolving credit facility under which Sears Roebuck Acceptance Corp. (“SRAC”) and Kmart Corporation are the borrowers. The Domestic Credit Agreement is secured by a first lien on most of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability.

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, under certain circumstances, including if availability under the credit facility, as defined, is less than 15%. It also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.    

At February 2, 2013 and January 28, 2012, we had $749 million and $838 million respectively, of borrowings and $754 million and $626 million, respectively, of letters of credit outstanding under the Domestic Credit Agreement. As a result, our availability under the agreement was $1.8 billion at both February 2, 2013 and January 28, 2012. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs.

Senior Secured Notes

In October 2010, we sold $1 billion aggregate principal amount of senior secured notes (the “Notes”), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold $250 million aggregate principal amount of Notes to the Company’s domestic pension plan in a private placement. The Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables (the “Collateral”). The lien that secures the Notes is junior in priority to the lien on such assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events. The Company may call the Notes at a premium based on the “Treasury Rate” as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended.

Sears Canada Credit Agreement

In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving credit facility (the “Sears Canada Facility”). The Sears Canada Facility is available for Sears Canada’s general corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the

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Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card receivables, subject to certain limitations. At February 2, 2013 we had no borrowings outstanding under the Sears Canada Facility. At January 28, 2012, we had approximately $101 million ($101 million Canadian) of borrowings outstanding under the Sears Canada Facility. Availability under this agreement was approximately $503 million ($502 million Canadian) and $415 million ($415 million Canadian), respectively, at February 2, 2013 and January 28, 2012. The current availability may be reduced by reserves currently estimated by the Company to be approximately $300 million, which may be applied by the lenders at their discretion pursuant to the Credit Facility agreement. As a result of judicial developments relating to the priorities of pension liability relative to certain secured obligations, Sears Canada has executed an amendment to the Sears Canada Credit Facility which would provide additional security to lenders, with respect to the Company's unfunded pension liability by pledging certain real estate assets as collateral thereby partially reducing the potential reserve amounts by up to $150 million the lenders could apply. The potential additional reserve amount may increase or decrease in the future based on estimated net pension liabilities.

Letters of Credit Facility

Effective March 15, 2013, we agreed to terminate our $500 million uncommitted letter of credit facility dated January 20, 2011 with Wells Fargo Bank, National Association ("Wells Fargo") in advance of the scheduled termination date of January 20, 2014, as no letters of credit have been issued and outstanding under the facility since May 2011. The facility was secured by a first priority lien on cash placed on deposit at Wells Fargo in an amount equal to 103% of the face value of all issued and outstanding letters of credit.

Debt Repurchase Authorization

In 2005, our Finance Committee of the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or privately negotiated transactions. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. (“SRAC”), has repurchased $215 million of its outstanding notes. In 2011, Sears Holdings repurchased $10 million of senior secured notes, recognizing a gain of $2 million. The unused balance of this authorization is $275 million

Unsecured Commercial Paper

We borrow through the commercial paper markets. At February 2, 2013 and January 28, 2012 , we had outstanding commercial paper borrowings of $345 million and $337 million, respectively. ESL held $285 million and $250 million, respectively, of our commercial paper at February 2, 2013 and January 28, 2012, including $169 million and $130 million, respectively, held by Edward S. Lampert. See Note 15 for further discussion of these borrowings.

Debt Ratings

Our corporate family debt ratings at February 2, 2013 appear in the table below:

Moody’s Investors Service	Standard & Poor’s Ratings Services	Fitch Ratings
B3	CCC+	CCC

Domestic Pension Plan Funding

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2012, we contributed $516 million to our domestic pension plans. We estimate that the domestic pension contribution will be $352 million in 2013 and approximately $510 million in 2014, though the ultimate amount of pension contributions could be affected by changes in the applicable regulations as well as financial market and investment performance.

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As previously reported, on July 6, 2012, federal legislation signed into law allows pension plan sponsors to use higher interest rate assumptions in valuing plan liabilities and determining funding obligations. As a result of this legislation, the Company's domestic pension plan was within $203 million of being 80% funded under applicable law. In order to reduce the risks of gross pension obligations, the Company elected to contribute an additional $203 million to its domestic pension plan on September 14, 2012, after which its domestic pension plan was 80% funded under applicable law.

Effective September 17, 2012, the Company amended its domestic pension plan, primarily related to lump sum benefit eligibility, and began notifying certain former employees of the Company of its offer to pay those employees' pension benefit in a lump sum. These amendments did not have a significant impact on our plan. Former employees eligible for the voluntary lump sum payment option are generally those who are vested traditional formula participants of the Plan who terminated employment prior to January 1, 2012 and who have not yet started receiving monthly payments of their pension benefits.

The Company offered the one-time voluntary lump sum window in an effort to reduce its long-term pension obligations and ongoing annual pension expense. This voluntary offer was made to approximately 86,000 eligible terminated vested participants, representing approximately $2.0 billion of the Company's total qualified pension plan liabilities. Eligible participants had until November 19, 2012 to make their election. The Company made payments of approximately $1.5 billion to employees who made the election in December 2012 and funded the payments from existing pension plan assets. In connection with this transaction, the Company incurred a non-cash charge to operations of approximately $452 million pre-tax in the fourth quarter of 2012 as a result of the requirement to expense the unrealized actuarial losses. The charge had no effect on equity because the unrealized actuarial losses are already recognized in accumulated other comprehensive income/(loss). Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.

Wholly owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers’ compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. In addition, we provide credit insurance to third party creditors of the Company to mitigate their credit risk with the Company. The associated risks are managed through Holdings’ wholly owned insurance subsidiary, Sears Reinsurance Company Ltd. (“Sears Re”), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears utilizes two securitization structures to issue specific securities in which Sears Re invests its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 125 Full-line stores was contributed to indirect wholly owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued securities that are secured by the mortgages and collateral assignments of the store leases. Sears Re and two other indirect wholly owned subsidiaries of Holdings own $1.3 billion (par value) of these mortgage-backed securities. Payments to Sears Re on these securities are funded by the lease payments. In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to Sears Re on these asset-backed securities are funded by the royalty payments. The issuers of these mortgage-backed and asset-backed securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities. Since the inception of the REMIC and KCD IP, LLC, these mortgage-backed and asset-backed securities have been entirely held by our wholly owned consolidated subsidiaries in support of our insurance activities. At February 2, 2013 and January 28, 2012, the net book value of the securitized trademark rights was approximately $1.0 billion. The net book value of the securitized real estate assets was approximately $0.8 billion at February 2, 2013 and January 28, 2012.

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Contractual Obligations and Off-Balance Sheet Arrangements

Information concerning our obligations and commitments to make future payments under contracts such as debt and lease agreements, and under contingent commitments, is aggregated in the following tables.

	Total		Payments Due by Period
Contractual Obligations			Within 1  Year		1-3 Years		4-5 Years		After 5  Years		Other
millions
Operating leases	$	4,535	$	720	$	1,148	$	739	$	1,928	$	—
Short-term debt	1,094		1,094		—		—		—		—
Capital lease obligations	643		113		201		125		204		—
Royalty license fees(1)	91		59		30		2		—		—
Purchase obligations	102		19		41		40		2		—
Pension funding obligations	2,475		381		928		660		506		—
Long-term debt including current portion and interest	2,095		47		71		116		1,861		—
Liability and interest related to uncertain tax positions(2)	218		—		—		—		—		218
Total contractual obligations	$	11,253	$	2,433	$	2,419	$	1,682	$	4,501	$	218

__________________

⁽¹⁾  We pay royalties under various merchandise license agreements, which are generally based on sales of products covered under these agreements. We currently have license agreements for which we pay royalties, including those to use American Greetings and Joe Boxer. Royalty license fees represent the minimum the Company is obligated to pay, regardless of sales, as guaranteed royalties under these license agreements.

⁽²⁾  At February 2, 2013, our uncertain tax position liability and gross interest payable were $161 million and $57 million, respectively. We are unable to reasonably estimate the timing of liabilities and interest payments arising from uncertain tax positions in individual years due to the uncertainties in the timing of the effective settlement of tax positions.

Other Commercial Commitments

We issue various types of guarantees in the normal course of business. We had the following guarantees outstanding at February 2, 2013:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	774	$	47	$	—	$	821
Commercial letters of credit	8		133		—		141
Secondary lease obligations and performance guarantee	—		—		77		77

The secondary lease obligations relate to certain store leases of previously divested Sears businesses. We remain secondarily liable if the primary obligor defaults.

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Application of Critical Accounting Policies and Estimates

In preparing the financial statements, certain accounting policies require considerable judgment to select the appropriate assumptions to calculate financial estimates. These estimates are complex and subject to an inherent degree of uncertainty. We base our estimates on historical experience, terms of existing contracts, evaluation of trends and other assumptions that we believe to be reasonable under the circumstances. We continually evaluate the information used to make these estimates as our business and the economic environment change. Although the use of estimates is pervasive throughout the financial statements, we consider an accounting estimate to be critical if:

• it requires assumptions to be made about matters that were highly uncertain at the time the estimate was made, and

• changes in the estimate that are reasonably likely to occur from period to period or different estimates that could have been selected would have a material effect on our financial condition, cash flows or results of operations.

Management believes the current assumptions and other considerations used to estimate amounts reflected in the financial statements are appropriate. However, if actual experience differs from the assumptions and the considerations used in estimating amounts, the resulting changes could have a material adverse effect on our consolidated results of operations, and in certain situations, could have a material adverse effect on our financial condition.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed the disclosure presented below relating to the selection of these estimates.

The following is a summary of our most critical policies and estimates. See Note 1 of Notes to Consolidated Financial Statements for a listing of our other significant accounting policies.

Valuation of Inventory

Our inventory is valued at the lower of cost or market determined primarily using the retail inventory method (“RIM”). RIM is an averaging method that is commonly used in the retail industry. To determine inventory cost under RIM, inventory at its retail selling value is segregated into groupings of merchandise having similar characteristics, which are then converted to a cost basis by applying specific average cost factors for each grouping of merchandise. Cost factors represent the average cost-to-retail ratio for each merchandise group based upon the year purchasing activity for each store location. Accordingly, a significant assumption under the retail method is that inventory in each group is similar in terms of its cost-to-retail relationship and has similar turnover rates. Management monitors the content of merchandise in these groupings to prevent distortions that would have a material effect on inventory valuation.

RIM inherently requires management judgment and certain estimates that may significantly affect the ending inventory valuation, as well as gross margin. Among others, two significant estimates used in inventory valuation are the level and timing of permanent markdowns (clearance markdowns used to clear unproductive or slow-moving inventory) and shrinkage. Amounts are charged to cost of sales, buying and occupancy at the time the retail value of inventory is reduced through the use of permanent markdowns.

Factors considered in the determination of permanent markdowns include current and anticipated demand, customer preferences, age of the merchandise, fashion trends and weather conditions. In addition, inventory is also evaluated against corporate pre-determined historical markdown cadences. When a decision is made to permanently markdown merchandise, the resulting gross margin reduction is recognized in the period the markdown is recorded. The timing of the decision, particularly surrounding the balance sheet date, can have a significant effect on the results of operations.

Shrinkage is estimated as a percentage of sales for the period from the date of the last physical inventory to the end of the year. Physical inventories are taken annually for all stores and inventory records are adjusted accordingly. The shrinkage rate from the most recent physical inventory, in combination with historical experience, is used as the basis for the shrinkage accrual following the physical inventory.

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Self Insurance Reserves

We use a combination of third-party insurance and/or self-insurance for a number of risks including workers' compensation, asbestos and environmental, automobile, warranty, product and general liability claims. General liability costs relate primarily to litigation that arises from store operations. Self-insurance reserves include actuarial estimates of both claims filed and carried at their expected ultimate settlement value and claims incurred but not yet reported. Our estimated claim amounts are discounted using a rate with a duration that approximates the duration of our self-insurance reserve portfolio. Our liability reflected on the Consolidated Balance Sheets represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. These projections are subject to a high degree of variability based upon future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although we do not expect the amounts ultimately paid to differ significantly from our estimates, self-insurance reserves could be affected if future claim experience differs significantly from the historical trends and the actuarial assumptions.

Defined Benefit Pension Plans

The fundamental components of accounting for defined benefit pension plans consist of the compensation cost of the benefits earned, the interest cost from deferring payment of those benefits into the future and the results of investing any assets set aside to fund the obligation. Such retirement benefits were earned by associates ratably over their service careers. Therefore, the amounts reported in the income statement for these retirement plans have historically followed the same pattern. Accordingly, changes in the obligations or the value of assets to fund them have been recognized systematically and gradually over the associate's estimated period of service. The largest drivers of losses or charges in recent years have been the discount rate used to determine the present value of the obligation and the actual return on pension assets. We recognize the changes by amortizing experience gains/losses in excess of the 10% corridor into expense over the associated service period.

The Company's actuarial valuations utilize key assumptions including discount rates and expected returns on plan assets. We are required to consider current market conditions, including changes in interest rates and plan asset investment returns, in determining these assumptions. Actuarial assumptions may differ materially from actual results due to changing market and economic conditions, changes in investment strategies, higher or lower withdrawal rates, and longer or shorter life spans of participants.

The Sears Holdings Corporation Investment Committee is responsible for the investment of the assets of Holdings' domestic pension plan. The Investment Committee, made up primarily of select members of senior management, has appointed a non-affiliated third party professional to advise the Investment Committee with respect to the SHC domestic pension plan assets. The plan's overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plan's investment policy requires investments to be diversified across individual securities, industries, market capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.

For purposes of determining the periodic expense of our defined benefit plan, we use the fair value of plan assets as the market related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	30		$	(39	)
Effect on pension benefit obligation	$	(674	)	$	814

For 2013 and beyond, the domestic weighted-average health care cost trend rates used in measuring the postretirement benefit expense are a 8.5% trend rate in 2013 to an ultimate trend rate of 6.5% in 2017. A one-

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percentage-point change in the assumed health care cost trend rate would have the following effects on the postretirement liability:

millions	1 percentage-point Increase		1 percentage-point Decrease
Effect on total service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation	$	31	$	(27	)

Income Taxes

We account for income taxes according to accounting standards for such taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the book basis and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If future utilization of deferred tax assets is uncertain, the Company may record a valuation allowance against certain deferred tax assets. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past several years. These assumptions require significant judgment about the forecasts of future taxable income. After consideration of evidence regarding the ability to realize our deferred tax assets, we established a valuation allowance against certain deferred income tax assets in 2012 and 2011. The Company continues to monitor its operating performance and evaluate the likelihood of the future realization of these deferred tax assets. At the end of 2012, we had a state separate entity deferred tax asset of $145 million. In the event the Company does not achieve its forecasted results for 2013, an additional valuation allowance may be required.

In accordance with accounting standards for uncertain tax positions, we record unrecognized tax benefits for positions taken or expected to be taken on tax returns, including the decision to exclude certain income or transactions from a return, when a more-likely-than-not threshold is met for a tax position and management believes that the position will be sustained upon examination by the taxing authorities. Further, we record the largest amount of the unrecognized tax benefit that is greater than 50% likely of being realized upon settlement. Management evaluates each position based solely on the technical merits and facts and circumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevant information. Significant management judgment is required to determine whether the recognition threshold has been met and, if so, the appropriate amount of unrecognized tax benefits to be recorded in the Consolidated Financial Statements. Management reevaluates tax positions each period in which new information about recognition or measurement becomes available.

Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets, if any. As further described above, management considers estimates of the amount and character of future taxable income in assessing the likelihood of realization of deferred tax assets. Our actual effective tax rate and income tax expense could vary from estimated amounts due to the future impacts of various items, including changes in income tax laws, tax planning and the Company's forecasted financial condition and results of operations in future periods. Although management believes current estimates are reasonable, actual results could differ from these estimates.

Domestic and foreign tax authorities periodically audit our income tax returns. These audits include questions regarding our tax filing positions, including the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposures associated with our various tax filing positions, we record reserves in accordance with accounting standards for uncertain tax positions. A number of years may elapse before a particular matter, for which we have established a reserve, is audited and fully resolved. Management's

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estimates at the date of the financial statements reflect our best judgment, giving consideration to all currently available facts and circumstances. As such, these estimates may require adjustment in the future, as additional facts become known or as circumstances change. For further information, see Note 10 of Notes to Consolidated Financial Statements.

Goodwill and Intangible Asset Impairment Assessments

At February 2, 2013 and January 28, 2012, we had goodwill balances of $379 million and $841 million, respectively, and intangible asset balances of $2.9 billion at both periods. The Company evaluates the carrying value of goodwill and intangible assets for possible impairment under accounting standards governing goodwill and other intangible assets. The majority of our goodwill and intangible assets relate to Kmart's acquisition of Sears in March 2005. We allocated goodwill, which is defined as the total purchase price less the fair value of all assets and liabilities acquired, to reporting units at the acquisition date. As required by accounting standards, we perform annual goodwill and intangible impairment tests in the fourth quarter and update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within a reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill resides in multiple reporting units. The goodwill impairment test involves a two-step process. The first step is a comparison of each reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using both a market approach, as well as a discounted cash flow model, commonly referred to as the income approach. The market approach determines the value of a reporting unit by deriving market multiples for reporting units based on assumptions potential market participants would use in establishing a bid price for the unit. This approach therefore assumes strategic initiatives will result in improvements in operational performance in the event of purchase, and includes the application of a discount rate based on market participant assumptions with respect to capital structure and access to capital markets. The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate to each of our reporting units. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. Our final estimate of fair value of reporting units is developed by weighting the fair values determined through both the market participant and income approaches, where comparable market participant information is available.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. Specifically, we allocate the fair value to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, we record an impairment charge for the difference.

After performing the first step of the process, we determined goodwill recorded at reporting units within the Sears Canada and Sears Domestic segments in 2012 and 2011, respectively, was potentially impaired. The impairment determination was primarily driven by the combination of lower sales and continued margin pressure coupled with expense increases which led to a decline in our operating profit. After performing the second step of the process, we determined that the total amount of goodwill recorded at these reporting units was impaired and

51

recorded charges of $295 million and $551 million in 2012 and 2011, respectively. We did not record any goodwill impairment charges in 2010.

The use of different assumptions, estimates or judgments in either step of the goodwill impairment testing process, such as the estimated future cash flows of our reporting units, the discount rate used to discount such cash flows, or the estimated fair value of the reporting units' tangible and intangible assets and liabilities, could significantly increase or decrease the estimated fair value of a reporting unit or its net assets, and therefore, impact the related impairment charge. At the 2012 annual impairment test date, the conclusion that no indication of goodwill impairment existed for the remaining reporting units would not have changed had the test been conducted assuming: (1) a 100 basis point increase in the discount rate used to discount the aggregate estimated cash flows of our reporting units to their net present value in determining their estimated fair values and/or (2) a 100 basis point decrease in the estimated sales growth rate and/or terminal period growth rate.

Based on our sensitivity analysis, we do not believe that the remaining recorded goodwill balance is at risk of impairment at any reporting unit at the end of the year because the fair value is substantially in excess of the carrying value and not at risk of failing step one. However, goodwill impairment charges may be recognized in future periods in one or more of the reporting units to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, retail industry or in the equity markets, which includes the market value of our common shares, deterioration in our performance or our future projections, or changes in our plans for one or more reporting units.

Intangible Asset Impairment Assessments

We review indefinite-lived intangible assets, primarily trade names, for impairment by comparing the carrying amount of each asset to the sum of undiscounted cash flows expected to be generated by the asset. We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We determined that the income approach, specifically the Relief from Royalty Method, was most appropriate for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The Relief from Royalty Method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets. The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets. We did not record any intangible asset impairment charges in 2012, 2011 or 2010.

The use of different assumptions, estimates or judgments in our intangible asset impairment testing process, such as the estimated future cash flows of assets and the discount rate used to discount such cash flows, could significantly increase or decrease the estimated fair value of an asset, and therefore, impact the related impairment charge. At the 2012 annual impairment test date, the above-noted conclusion that no indication of significant intangible asset impairment existed at the test date would not have changed had the test been conducted assuming: (1) a 100 basis point increase in the discount rate used to discount the aggregate estimated cash flows of our assets to their net present value in determining their estimated fair values (without any change in the aggregate estimated cash flows of our intangibles), (2) a 100 basis point decrease in the terminal period growth rate without a change in the discount rate of each intangible, or (3) a 10 basis point decrease in the royalty rate applied to the forecasted net sales stream of our assets.

Based on our sensitivity analysis, we do not believe that the indefinite-lived intangible balance is at risk of impairment at the end of the year because the fair values are substantially in excess of the carrying values. However, indefinite-lived intangible impairment charges may be recognized in future periods to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment, retail industry, deterioration in our performance or our future projections, or changes in our plans for one or more indefinite-lived intangible asset.

New Accounting Pronouncements

See Note 1 of Notes to Consolidated Financial Statements for information regarding new accounting pronouncements.

52

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements made in this Annual Report on Form 10-K and in other public announcements by us contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements preceded or followed by, or that otherwise include, the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “forecast,” “is likely to” and similar expressions or future or conditional verbs such as “will,” “may” and “could” are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.

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 our liquidity through inventory management and other actions; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, including the availability of consumer and commercial credit, changes in consumer confidence and spending, the impact of rising fuel prices, and changes in vendor relationships; vendors’ lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; possible limits on our access to capital markets and other financing sources, including incremental financings under the accordion feature of our domestic credit agreement and additional second lien financings, with respect to which we do not have commitments from lenders; our ability to successfully achieve our plans to generate liquidity, reduce inventory and reduce fixed costs; 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, including legacy systems, to implement our integrated retail strategy, process transactions, summarize results and manage our business, which may be subject to disruptions or security breaches; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business and the transfer of significant internal historical knowledge to such parties; 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; our ability to protect or preserve the image of our brands; 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.

Certain of these and other factors are discussed in more detail in Part I, Item 1A of this Annual Report on Form 10-K. While we believe that our forecasts and assumptions are reasonable, we caution that actual results may differ materially. 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.

53

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We face market risk exposure in the form of interest rate risk. This market risk arises from our debt obligations.

Interest Rate Risk

We manage interest rate risk through the use of fixed and variable-rate funding. All debt securities are considered non-trading. At February 2, 2013, 35% of our debt portfolio was variable rate. Based on the size of this variable rate debt portfolio at February 2, 2013, which totaled approximately $1.1 billion, an immediate 100 basis point change in interest rates would have affected annual pretax funding costs by $11 million. These estimates do not take into account the effect on income resulting from invested cash or the returns on assets being funded. These estimates also assume that the variable rate funding portfolio remains constant for an annual period and that the interest rate change occurs at the beginning of the period.

54

Item 8. Financial Statements and Supplementary Data

	Page
Consolidated Statements of Operations for the years ended February 2, 2013, January 28, 2012 and January 29, 2011	56
Consolidated Statements of Comprehensive Income (Loss) for the years ended February 2, 2013, January 28, 2012 and January 29, 2011	57
Consolidated Balance Sheets at February 2, 2013 and January 28, 2012	58
Consolidated Statements of Cash Flows for the years ended February 2, 2013, January 28, 2012 and January 29, 2011	59
Consolidated Statements of Equity for the years ended February 2, 2013, January 28, 2012 and January 29, 2011	60
Notes to Consolidated Financial Statements	61
Schedule II—Valuation and Qualifying Accounts	118
Management's Annual Report on Internal Control over Financial Reporting	119
Report of Independent Registered Public Accounting Firm	120

55

SEARS HOLDINGS CORPORATION

Consolidated Statements of Operations

millions, except per share data	2012			2011			2010
REVENUES
Merchandise sales and services	$	39,854		$	41,567		$	42,664
COSTS AND EXPENSES
Cost of sales, buying and occupancy	29,340			30,966			31,000
Selling and administrative	10,660			10,664			10,425
Depreciation and amortization	830			853			869
Impairment charges	330			649			—
Gain on sales of assets	(468		)	(64		)	(67		)
Total costs and expenses	40,692			43,068			42,227
Operating income (loss)	(838		)	(1,501		)	437
Interest expense	(267		)	(289		)	(293		)
Interest and investment income	94			41			36
Other income (loss)	1			(2		)	(14		)
Income (loss) from continuing operations before income taxes	(1,010		)	(1,751		)	166
Income tax expense	(44		)	(1,369		)	(27		)
Income (loss) from continuing operations	(1,054		)	(3,120		)	139
Income (loss) from discontinued operations, net of tax	—			(27		)	11
Net income (loss)	(1,054		)	(3,147		)	150
(Income) loss attributable to noncontrolling interests	124			7			(17		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(930	)	$	(3,140	)	$	133
Amounts attributable to Holdings’ shareholders:
Income (loss) from continuing operations, net of tax	$	(930	)	$	(3,113	)	$	122
Income (loss) from discontinued operations, net of tax	—			(27		)	11
Net income (loss)	$	(930	)	$	(3,140	)	$	133
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic:
Continuing operations	$	(8.78	)	$	(29.15	)	$	1.09
Discontinued operations	—			(0.25		)	0.10
	$	(8.78	)	$	(29.40	)	$	1.19
Diluted:
Continuing operations	$	(8.78	)	$	(29.15	)	$	1.09
Discontinued operations	—			(0.25		)	0.10
	$	(8.78	)	$	(29.40	)	$	1.19
Basic weighted average common shares outstanding	105.9			106.8			111.5
Diluted weighted average common shares outstanding	105.9			106.8			111.7

See accompanying Notes to Consolidated Financial Statements.

56

SEARS HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

millions	2012			2011			2010
Net income (loss)	$	(1,054	)	$	(3,147	)	$	150
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	74			(789		)	(12		)
Deferred gain (loss) on derivatives, net of tax	5			(6		)	(9		)
Currency translation adjustments, net of tax	5			(38		)	93
Total other comprehensive income (loss)	84			(833		)	72
Comprehensive income (loss)	(970		)	(3,980		)	222
Comprehensive (income) loss attributable to noncontrolling interests	124			12			(71		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(846	)	$	(3,968	)	$	151

See accompanying Notes to Consolidated Financial Statements.

57

SEARS HOLDINGS CORPORATION

Consolidated Balance Sheets

millions	February 2, 2013			January 28, 2012
ASSETS
Current assets
Cash and cash equivalents	$	609		$	747
Restricted cash	9			7
Accounts receivable	635			695
Merchandise inventories	7,558			8,407
Prepaid expenses and other current assets	454			388
Total current assets	9,265			10,244
Property and equipment
Land	1,875			1,924
Buildings and improvements	6,072			6,186
Furniture, fixtures and equipment	2,950			2,786
Capital leases	347			314
Gross property and equipment	11,244			11,210
Less accumulated depreciation and amortization	(5,191		)	(4,633		)
Total property and equipment, net	6,053			6,577
Goodwill	379			841
Trade names and other intangible assets	2,881			2,937
Other assets	762			782
TOTAL ASSETS	$	19,340		$	21,381
LIABILITIES
Current liabilities
Short-term borrowings (1)	$	1,094		$	1,175
Current portion of long-term debt and capitalized lease obligations	83			230
Merchandise payables	2,761			2,912
Other current liabilities	2,683			2,892
Unearned revenues	931			964
Other taxes	480			523
Short-term deferred tax liabilities	382			516
Total current liabilities	8,414			9,212
Long-term debt and capitalized lease obligations (2)	1,943			2,088
Pension and postretirement benefits	2,730			2,738
Other long-term liabilities	2,126			2,186
Long-term deferred tax liabilities	955			816
Total Liabilities	16,168			17,040
Commitments and contingencies
EQUITY
Sears Holdings Corporation equity
Preferred stock, 20 shares authorized; no shares outstanding	—			—
Common stock $0.01 par value; 500 shares authorized; 106 and 106 shares outstanding, respectively	1			1
Treasury stock—at cost	(5,970		)	(5,981		)
Capital in excess of par value	9,298			10,005
Retained earnings	885			1,865
Accumulated other comprehensive loss	(1,459		)	(1,609		)
Total Sears Holdings Corporation equity	2,755			4,281
Noncontrolling interest	417			60
Total Equity	3,172			4,341
TOTAL LIABILITIES AND EQUITY	$	19,340		$	21,381

⁽¹⁾ Includes $285 million and $250 million at February 2, 2013 and January 28, 2012, respectively, of unsecured commercial paper held by ESL

and its affiliates.

⁽²⁾ Includes $95 million at both February 2, 2013 and January 28, 2012 of senior secured notes held by ESL and its affiliates; and $3 million and

$14 million at February 2, 2013 and January 28, 2012, respectively, of subsidiary notes held by ESL and its affiliates.

See accompanying Notes to Consolidated Financial Statements.

58

SEARS HOLDINGS CORPORATION

Consolidated Statements of Cash Flows

millions	2012			2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(1,054	)	$	(3,147	)	$	150
(Income) loss from discontinued operations, net of tax	—			27			(11		)
Income (loss) from continuing operations	(1,054		)	(3,120		)	139
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred tax valuation allowance	237			1,798			—
Depreciation and amortization	830			853			869
Impairment charges	330			649			—
Gain on sales of assets	(468		)	(64		)	(67		)
Gain on sales of investments	(28		)	—			—
Pension and postretirement plan contributions	(593		)	(390		)	(316		)
Pension and postretirement plan settlements	455			—			—
Settlement of Canadian dollar hedges	6			—			(3		)
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	(206		)	(533		)	(15		)
Merchandise inventories	427			545			(353		)
Merchandise payables	(117		)	(134		)	(285		)
Income and other taxes	(63		)	(50		)	(34		)
Mark-to-market adjustments and settlements on Sears Canada U.S. dollar collar contracts	1			2			7
Other operating assets	(100		)	67			(7		)
Other operating liabilities	40			70			142
Net cash provided by (used in) operating activities—continuing operations	(303		)	(307		)	77
Net cash provided by operating activities—discontinued operations	—			32			46
Net cash provided by (used in) operating activities	(303		)	(275		)	123
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	532			72			35
Net decrease in investments and restricted cash	37			8			—
Purchases of property and equipment	(378		)	(432		)	(426		)
Net cash provided by (used in) investing activities—continuing operations	191			(352		)	(391		)
Net cash provided by (used in) investing activities—discontinued operations	—			43			(15		)
Net cash provided by (used in) investing activities	191			(309		)	(406		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	5			104			1,353
Repayments of long-term debt	(335		)	(611		)	(358		)
Increase (decrease) in short-term borrowings, primarily 90 days or less	(81		)	815			35
Sears Hometown and Outlet Stores, Inc. pre-separation funding	100			—			—
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347			—			—
Debt issuance costs	(3		)	(35		)	(28		)
Purchase of Sears Canada shares	(10		)	(43		)	(603		)
Sears Canada dividends paid to minority shareholders	(50		)	—			(69		)
Purchase of treasury stock	—			(183		)	(394		)
Net cash provided by (used in) financing activities—continuing operations	(27		)	47			(64		)
Net cash used in financing activities—discontinued operations	—			(75		)	(31		)
Net cash used in financing activities	(27		)	(28		)	(95		)
Effect of exchange rate changes on cash and cash equivalents	1			—			57
NET DECREASE IN CASH AND CASH EQUIVALENTS	(138		)	(612		)	(321		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	747			1,359			1,680
CASH AND CASH EQUIVALENTS, END OF YEAR	$	609		$	747		$	1,359
SUPPLEMENTAL INFORMATION:
Capital lease obligation incurred	$	61		$	3		$	15
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	$	40		$	94		$	47
Cash interest paid	199			223			164
Unpaid liability to acquire equipment and software	30			52			56
Non-cash dividend in connection with Spin-Off transactions	(542		)	(74		)	—

See accompanying Notes to Consolidated Financial Statements.

59

SEARS HOLDINGS CORPORATION

Consolidated Statements of Equity

	Equity Attributable to Holdings’ Shareholders
dollars and shares in millions	Number of Shares		Common Stock		Treasury Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at January 30, 2010	115		$	1	$	(5,446	)	$	10,465		$	4,797		$	(721	)	$	339		$	9,435
Comprehensive income
Net income	—		—		—			—			133			—			17			150
Pension and postretirement adjustments, net of tax	—		—		—			—			—			(41		)	29			(12		)
Deferred loss on derivatives, net of tax	—		—		—			—			—			(9		)	—			(9		)
Currency translation adjustments, net of tax	—		—		—			—			—			68			25			93
Total Comprehensive Income																				222
Stock awards	—		—		10			(11		)	—			—			—			(1		)
Purchase of Sears Canada shares	—		—		—			(269		)	—			(76		)	(236		)	(581		)
Sears Canada dividend paid to minority shareholders	—		—		—			—			—			—			(69		)	(69		)
Shares repurchased	(6	)	—		(394		)	—			—			—			—			(394		)
Associate stock purchase	—		—		4			—			—			—			—			4
Other	—		—		—			—			—			—			(2		)	(2		)
Balance at January 29, 2011	109		$	1	$	(5,826	)	$	10,185		$	4,930		$	(779	)	$	103		$	8,614
Comprehensive loss
Net loss	—		—		—			—			(3,140		)	—			(7		)	(3,147		)
Pension and postretirement adjustments, net of tax	—		—		—			—			—			(789		)	—			(789		)
Deferred loss on derivatives, net of tax	—		—		—			—			—			(6		)	—			(6		)
Currency translation adjustments, net of tax	—		—		—			—			—			(33		)	(5		)	(38		)
Total Comprehensive Loss																				(3,980		)
Stock awards	—		—		23			(19		)	—			—			—			4
Purchase of Sears Canada shares	—		—		—			(24		)	—			(2		)	(17		)	(43		)
Shares repurchased	(3	)	—		(183		)	—			—			—			—			(183		)
Associate stock purchase	—		—		5			—			—			—			—			5
Non-cash dividend issued in connection with Spin-Off	—		—		—			(137		)	75			—			(12		)	(74		)
Other	—		—		—			—			—			—			(2		)	(2		)
Balance at January 28, 2012	106		$	1	$	(5,981	)	$	10,005		$	1,865		$	(1,609	)	$	60		$	4,341
Comprehensive loss
Net loss	—		—		—			—			(930		)	—			(124		)	(1,054		)
Pension and postretirement adjustments, net of tax	—		—		—			—			—			74			—			74
Deferred gain on derivatives, net of tax	—		—		—			—			—			5			—			5
Currency translation adjustments, net of tax	—		—		—			—			—			5			—			5
Total Comprehensive Loss																				(970		)
Stock awards	—		—		7			(1		)	—			—			—			6
Purchase of Sears Canada shares	—		—		—			(3		)	—			(1		)	(6		)	(10		)
Associate stock purchase	—		—		4			—			—			—			—			4
Separation of Sears Hometown and Outlet Stores, Inc.	—		—		—			(149		)	—			—			—			(149		)
Sears Canada dividend paid to minority shareholders	—		—		—			—			(50		)	—			—			(50		)
Non-cash dividend issued in connection with spin-off of 45 million common shares of Sears Canada	—		—		—			(554		)	—			67			487			—
Balance at February 2, 2013	106		$	1	$	(5,970	)	$	9,298		$	885		$	(1,459	)	$	417		$	3,172

See accompanying Notes to Consolidated Financial Statements.

60

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements

NOTE 1—SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

Nature of Operations, Consolidation and Basis of Presentation

Sears Holdings Corporation (“Holdings”) is the parent company of Kmart Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings (together with its subsidiaries, “we,” “us,” “our,” or the “Company”) was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”), on March 24, 2005. We are an integrated retailer with 2,019 full-line and 54 specialty retail stores in the United States, operating through Kmart and Sears, and 475 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 51%-owned subsidiary. We have three reportable segments: Kmart, Sears Domestic and Sears Canada.

The consolidated financial statements include all majority-owned subsidiaries in which Holdings exercises control. Investments in companies in which Holdings exercises significant influence, but which we do not control (generally 20% to 50% ownership interest), are accounted for under the equity method of accounting. Investments in companies in which we have less than a 20% ownership interest and do not exercise significant influence are accounted for at cost. All intercompany transactions and balances have been eliminated.

Separation of Sears Hometown and Outlet Businesses

On October 11, 2012, we completed the separation of our Sears Hometown and Outlet businesses through a rights offering transaction. Holdings received gross proceeds of $446.5 million with respect to the transaction, consisting of $346.5 million for the sale of Sears Hometown and Outlet Stores, Inc. ("SHO") common shares and $100 million through a dividend from SHO prior to the separation. Prior to the separation, SHO entered into an asset-based senior secured revolving credit facility with a group of financial institutions to provide (subject to availability under a borrowing base) for aggregate maximum borrowings of $250 million. Borrowings of $100 million from this revolving credit facility were used to fund the dividend paid to Holdings. We accounted for this separation in accordance with accounting standards applicable to common control transactions as ESL Investments, Inc. (together with its affiliated fund, "ESL") is a majority shareholder of Holdings and became a majority shareholder of SHO as a result of exercising subscription rights pursuant to the rights offering. Accordingly, we classified the difference between the proceeds received and the carrying value of net assets contributed to SHO as a reduction of capital in excess of par value in the Consolidated Statement of Equity for the period ended February 2, 2013.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with SHO under the terms described in Note 15. Because of the various agreements with SHO, the Company has determined that it has significant continuing cash flows with SHO. Accordingly, the operating results for SHO through the date of the separation are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Consolidated Financial Statements. See Note 15 to the Consolidated Financial Statements for further information related to the agreements with SHO.

Spin-Off of Orchard Supply Hardware Stores Corporation

On December 30, 2011, we completed the spin-off to our shareholders of all the capital stock of Orchard Supply Hardware Stores Corporation (“Orchard”) that was owned by Holdings immediately prior to the spin-off, consisting of common stock that represented approximately 80% of the voting power of Orchard's outstanding capital stock and preferred stock that represented 100% of Orchard's outstanding nonvoting capital stock. In connection with the spin-off, Holdings and certain of its subsidiaries entered into various agreements with Orchard, including a distribution agreement, a transition services agreement, an appliance sale and consignment agreement and brand license agreements. In addition, certain tax matters between Holdings and Orchard are governed by a tax sharing agreement entered into in 2005.

Holdings has no significant continuing involvement in the operations of Orchard. Accordingly, the operating results for Orchard are presented as discontinued operations in the accompanying Consolidated Statements of Operations for the years ended January 28, 2012 and January 29, 2011. In addition, the cash flows from operating, investing and financing activities for Orchard have been separately stated as discontinued operations in the

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Notes to Consolidated Financial Statements—(Continued)

accompanying Consolidated Statement of Cash Flows for the years ended January 28, 2012 and January 29, 2011. The Notes to Consolidated Financial Statements exclude the impact of Orchard for all periods presented. Prior to completion of the spin-off, Orchard’s results of operations, financial position and cash flows were presented within the Sears Domestic segment.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31 each year. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The following fiscal periods are presented in this report.

Fiscal Year	Ended	Weeks
2012	February 2, 2013	53
2011	January 28, 2012	52
2010	January 29, 2011	52

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill, intangible and long-lived asset impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures, and calculating retirement benefits.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. We also include deposits in-transit from banks for payments related to third-party credit card and debit card transactions within cash equivalents. The deposits in-transit balances included within cash equivalents were $148 million and $173 million at February 2, 2013 and January 28, 2012, respectively.

We classify cash balances which have been pledged as collateral, and for which we do not have the ability to substitute letters of credit, as restricted cash on our Consolidated Balance Sheet.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash and cash equivalents when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit included in other current liabilities were $114 million and $68 million at February 2, 2013 and January 28, 2012, respectively.

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on both historical experience and a specific identification basis. Allowances for doubtful accounts on accounts receivable balances were $26 million and $28 million at February 2, 2013 and January 28, 2012, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations.

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Notes to Consolidated Financial Statements—(Continued)

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. For Kmart and Sears Domestic, cost is primarily determined using the retail inventory method (“RIM”). Kmart merchandise inventories are valued under the RIM using primarily a first-in, first-out (“FIFO”) cost flow assumption. Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out (“LIFO”) cost flow assumption. For Sears Canada, cost is determined using the average cost method based on individual items.

Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markons, markups, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost, as well as resulting gross margins. The methodologies utilized by us in our application of the RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the groupings of homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable). Management believes that the RIM provides an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Approximately 45% of consolidated merchandise inventories are valued using LIFO. To estimate the effects of inflation on inventories, we utilize external price indices determined by an outside source, the Bureau of Labor Statistics. If the FIFO method of inventory valuation had been used instead of the LIFO method, merchandise inventories would have been $72 million higher at February 2, 2013 and $70 million higher at January 28, 2012.

Vendor Rebates and Allowances

We receive rebates and allowances from certain vendors through a variety of programs and arrangements intended to offset our costs of promoting and selling certain vendor products. These vendor payments are recognized and recorded as a reduction to the cost of merchandise inventories when earned and, thereafter, as a reduction of cost of sales, buying and occupancy as the merchandise is sold. Upfront consideration received from vendors linked to purchases or other commitments is initially deferred and amortized ratably to cost of sales, buying and occupancy over the life of the contract or as performance of the activities specified by the vendor to earn the fee is completed.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred.

Depreciation expense, which includes depreciation on assets under capital leases, is recorded over the estimated useful lives of the respective assets using the straight-line method for financial statement purposes, and accelerated methods for tax purposes. The range of lives are generally 20 to 50 years for buildings, 3 to 10 years for furniture, fixtures and equipment, and 3 to 5 years for computer systems and computer equipment. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense included within depreciation and amortization expense reported on the Consolidated Statements of Operations was $778 million, $798 million, and $809 million for the years ended February 2, 2013, January 28, 2012 and January 29, 2011, respectively.

Primarily as a result of store closing actions, certain property and equipment are considered held for sale. The value of assets held for sale was $57 million and $55 million at February 2, 2013 and January 28, 2012, respectively. These assets were included in prepaid expenses and other current assets in the Consolidated Balance Sheets at February 2, 2013 and January 28, 2012 at the lower of their historical net book value or their estimated fair value, less estimated costs to sell. We expect to sell the properties within a year and we continually remarket them. Substantially all assets held for sale are held within the Sears Domestic segment.

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment and definite-lived intangible assets, is

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Notes to Consolidated Financial Statements—(Continued)

evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Factors that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the assets or significant changes in business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. See Note 13 for further information regarding long-lived asset impairment charges recorded during 2012.

We account for costs associated with location closings in accordance with accounting standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance, inventory markdowns and other liquidation fees when management makes the decision to exit a location. We record a liability for future lease costs (net of estimated sublease income) when we cease to use the location.

Goodwill, Trade Names, Other Intangible Assets and Related Impairments

Trade names acquired as part of the Merger account for the majority of our intangible assets recognized in the Consolidated Balance Sheet. The majority of these trade name assets, such as Kenmore, Craftsman and Lands' End, are expected to generate cash flows indefinitely, do not have estimable or finite useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain intangible assets, including favorable lease rights, contractual arrangements and customer lists, have estimable, finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are determined using a number of factors, including the demand for the asset, competition and the level of expenditure required to maintain the cash flows associated with the asset.

Our goodwill results from the Merger. We perform annual goodwill and indefinite-lived intangible asset impairment tests at the last day of our November accounting period each year and assess the need to update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within a reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill resides in multiple reporting units. The goodwill impairment test involves a two-step process. The first step is a comparison of each reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using both a market approach, as well as a discounted cash flow model, commonly referred to as the income approach. The market approach determines the value of a reporting unit by deriving market multiples for reporting units based on assumptions potential market participants would use in establishing a bid price for the unit. This approach therefore assumes strategic initiatives will result in improvements in operational performance in the event of purchase, and includes the application of a discount rate based on market participant assumptions with respect to capital structure and access to capital markets. The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate for the reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

working capital requirements. Our final estimate of fair value of reporting units is developed by weighting the fair values determined through both the market and income approaches.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. See Note 12 for further information regarding goodwill and related impairment charges recorded during 2012 and 2011.

Intangible Asset Impairment Assessments

We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We utilize the income approach, specifically the relief from royalty method, for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets. The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets.

Financial Instruments and Hedging Activities

We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. As a result, we primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market. We primarily use foreign currency forward contracts to hedge the foreign currency exposure of our net investment in Sears Canada against adverse changes in exchange rates and foreign currency collar contracts to hedge against foreign currency exposure arising from Sears Canada's inventory purchase contracts denominated in U.S. dollars.

Hedges of Net Investment in Sears Canada

When applying hedge accounting treatment to our derivative transactions, we formally document our hedge relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge transaction. We also formally assess, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, we discontinue hedge accounting.

For derivatives that are designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivatives are recorded in the currency translation adjustments line in Accumulated Other Comprehensive Income (Loss) and remain there until such time that we substantially liquidate or sell our holdings in Sears Canada.

Sears Canada Hedges of Merchandise Purchases

Sears Canada mitigates the risk of currency fluctuations on offshore merchandise purchases denominated in U.S. currency by purchasing U.S. dollar denominated collar contracts for a portion of its expected requirements. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada's merchandise purchases, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk. Changes in the fair value of these contracts are recorded in the Consolidated Statements of Operations as a component of other income (loss) each period.

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Hedges of Foreign Currency

The foreign currency forward contracts are recorded on the Consolidated Balance Sheet at fair value and, to the extent they have been designated and qualify for hedge accounting treatment, an offsetting amount is recorded as a component of other comprehensive income, net of income tax effects. Changes in the fair value of those forward contracts for which hedge accounting is not applied are recorded in the Consolidated Statements of Operations as a component of other income (loss). Certain of our currency forward contracts require collateral to be posted in the event our liability under such contracts reaches a predetermined threshold. Cash collateral posted under these contracts is recorded as part of our restricted cash balance.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with credit ratings of single-A or better at January 28, 2012. We had no derivative instruments at February 2, 2013.

Fair Value of Financial Instruments

We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. See Note 4 to the Consolidated Financial Statements for further information regarding our derivative positions.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments, accounts receivable and derivative financial instruments. We place our cash and cash equivalents in investment-grade, short-term instruments with high quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument. We use high credit quality counterparties to transact our derivative transactions.

Cash and cash equivalents, accounts receivable, merchandise payables, credit facility borrowings and accrued liabilities are reflected in the Consolidated Balance Sheet at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our debt is disclosed in Note 3 to the Consolidated Financial Statements.

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Notes to Consolidated Financial Statements—(Continued)

Self-insurance Reserves

We are self-insured for certain costs related to workers' compensation, asbestos and environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain of these self-insured risks. A portion of these self-insured risks is managed through a wholly-owned insurance subsidiary. Our liability reflected on the Consolidated Balance Sheet, classified within other liabilities (current and long-term), represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. The liabilities for self-insured risks are discounted to their net present values using an interest rate which is based upon the expected duration of the liabilities. Expected payments as of February 2, 2013 were as follows:

millions
2013	$	266
2014	163
2015	120
2016	87
2017	66
Later years	371
Total undiscounted obligation	1,073
Less—discount	(95		)
Net obligation	$	978

Loss Contingencies

We account for contingent losses in accordance with accounting standards pertaining to loss contingencies. Under accounting standards, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known.

Revenue Recognition

Revenues include sales of merchandise, services and extended service contracts, net commissions earned from leased departments in retail stores, delivery and handling revenues related to merchandise sold, and fees earned from co-branded credit card programs. We recognize revenues from retail operations at the later of the point of sale or the delivery of goods to the customer. Direct to customer revenues are recognized when the merchandise is delivered to the customer. Revenues from product installation and repair services are recognized at the time the services are provided. Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while the associated service costs are expensed as incurred.

We earn revenues through arrangements with third-party financial institutions that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in the period earned, which is when our related performance obligations have been met. We sell gift cards to customers at our retail stores and through our direct to customer operations. The gift cards generally do not have expiration dates. Revenues from gift cards are recognized when (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) based on historical redemption patterns and we determine that we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions.

Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The reserve for returns and allowances is calculated as a percentage of sales based on historical

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Notes to Consolidated Financial Statements—(Continued)

return percentages. Estimated returns are recorded as a reduction of sales and cost of sales. We defer the recognition of layaway sales and profit until the period in which the customer takes possession of the merchandise.

Cost of Sales, Buying and Occupancy Costs

Cost of sales, buying and occupancy are comprised principally of the costs of merchandise, buying, warehousing and distribution (including receiving and store delivery costs), retail store occupancy costs, product repair, and home service and installation costs, customer shipping and handling costs, vendor allowances, markdowns and physical inventory losses.

The Company has a SHOP YOUR WAY program in which customers earn points on purchases which may be redeemed to pay for future purchases. The expense for customer points earned is recognized as customers earn them and recorded in cost of sales.

Selling and Administrative Expenses

Selling and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, advertising, pre-opening costs and other administrative expenses.

Pre-Opening Costs

Pre-opening and start-up activity costs are expensed in the period in which they occur.

Advertising Costs

Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $1.6 billion, $1.9 billion and $2.0 billion for 2012, 2011 and 2010, respectively. These costs are included within selling and administrative expenses in the accompanying Consolidated Statements of Operations.

Income Taxes

We account for income taxes in accordance with accounting standards pertaining to such taxes. Accordingly, we provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by us are based on management's interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects our best estimates and assumptions regarding, among other things, the level of future taxable income, tax planning, and any valuation allowance. Future changes in tax laws, changes in projected levels of taxable income, tax planning, and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded by us. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past three years. These assumptions require significant judgment about the forecasts of future taxable income.

Stock-based Compensation

We account for stock-based compensation arrangements in accordance with accounting standards pertaining to share-based payment transactions, which requires us to both recognize as expense the fair value of all stock-based compensation awards (which includes stock options, although there were no options outstanding in 2012) and to classify excess tax benefits associated with share-based compensation deductions as cash from financing activities

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Notes to Consolidated Financial Statements—(Continued)

rather than cash from operating activities. We recognize compensation expense as awards vest on a straight-line basis over the requisite service period of the award.

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to Holdings' shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per common share also includes the dilutive effect of potential common shares, exercise of stock options and the effect of restricted stock when dilutive.

New Accounting Pronouncements

Disclosures about Reclassification Adjustments out of Accumulated Other Comprehensive Income

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update will be effective for us in the first quarter of 2013, but early adoption is permitted. The update will primarily impact our disclosures, but otherwise is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The update will be effective for us in the first quarter of 2013, but early adoption is permitted. The update may, under certain circumstances, reduce the complexity and costs of testing indefinite-lived intangible assets for impairment, but otherwise is not expected to have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Testing Goodwill for Impairment

In September 2011, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This update was effective and adopted by the Company in the first quarter of 2012 and did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Presentation of Comprehensive Income

In June 2011, the FASB issued an accounting standards update which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in existing guidance and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format previously used by us, and the second statement would include components of other comprehensive income (“OCI”). The update does not change the items that must be reported in OCI and must be applied retrospectively for all periods presented in the financial statements. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Company’s financial statement presentation, but otherwise did not impact the Company’s condensed consolidated financial position, results of operations or cash flows.

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Notes to Consolidated Financial Statements—(Continued)

Disclosures about Fair Value Measurements

In May 2011, the FASB issued an accounting standards update which amends the definition of fair value measurement principles and disclosure requirements to eliminate differences between U.S. GAAP and International Financial Reporting Standards. The update requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as disclosures of transfers between Level 1 and Level 2 of the fair value hierarchy. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Company’s disclosures, but otherwise did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

NOTE 2—SEARS CANADA

Sears Canada Share Repurchases

During the second quarter of 2011, Sears Canada renewed its Normal Course Issuer Bid with the Toronto Stock Exchange that permits it to purchase for cancellation up to 5% of its issued and outstanding common shares, representing approximately 5.3 million common shares. The purchase authorization expired on May 24, 2012. Prior to the expiration, Sears Canada purchased and canceled approximately 0.9 million common shares for $10 million, approximately 2.7 million common shares for $43 million and approximately 2.2 million common shares for $43 million during 2012, 2011 and 2010, respectively.

Sears Holdings Ownership of Sears Canada

At February 2, 2013 and January 28, 2012, Sears Holdings was the beneficial holder of approximately 52 million, or 51% and 97 million, or 95%, respectively, of the common shares of Sears Canada.

Partial Spin-Off

On November 13, 2012, we completed a partial spin-off (the “spin-off”) of our interest in Sears Canada. Prior to the spin-off, Holdings beneficially owned approximately 96% of the issued and outstanding common shares of Sears Canada. In connection with the spin-off, we distributed approximately 45 million common shares of Sears Canada held by Holdings on a pro rata basis to holders of Holdings' common stock. Following the spin-off, Holdings was the beneficial holder of approximately 51% of the issued and outstanding common shares of Sears Canada, and as such, Holdings has maintained control of Sears Canada and will continue to consolidate the results of Sears Canada. We accounted for the spin-off as an equity transaction in accordance with accounting standards applicable to noncontrolling interests. Accordingly, we reclassified a portion of our ownership interest in Sears Canada and accumulated other comprehensive loss to noncontrolling interest in the Consolidated Statement of Equity for the period ended February 2, 2013.

Acquisition of Noncontrolling Interest

During the first quarter of 2010, we acquired approximately 19 million additional common shares of Sears Canada. We paid a total of $560 million for the additional shares and accounted for the acquisition of additional interest in Sears Canada as an equity transaction in accordance with accounting standards applicable to noncontrolling interests. Accordingly, we reclassified an accumulated other comprehensive loss from noncontrolling interest to controlling interest in the Consolidated Statement of Equity for the period ended January 29, 2011.

Dividends

On December 12, 2012, Sears Canada announced that its Board of Directors declared a cash dividend of $1 Canadian per common share, or approximately $102 million Canadian ($102 million U.S.) which was paid on December 31, 2012 to shareholders of record at the close of business on December 24, 2012. Accordingly, the Company received dividends of $52 million and minority shareholders in Sears Canada received dividends of $50 million during the fourth quarter of 2012.

On May 18, 2010, Sears Canada announced that its Board of Directors declared a cash dividend of $3.50 Canadian per common share, or approximately $377 million Canadian ($352 million U.S.), which was paid on

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Notes to Consolidated Financial Statements—(Continued)

June 4, 2010 to shareholders of record at the close of business on May 31, 2010. Accordingly, the Company received dividends of $318 million and minority shareholders in Sears Canada received dividends of $34 million during the second quarter of 2010.

On September 10, 2010, Sears Canada announced that its Board of Directors declared an additional cash dividend of $3.50 Canadian per common share, or approximately $377 million Canadian ($356 million U.S.), which was paid on September 24, 2010 to shareholders of record at the close of business on September 22, 2010. Accordingly, the Company received dividends of $321 million and minority shareholders in Sears Canada received dividends of $35 million during the third quarter of 2010.

Sears Canada declared and paid total dividends of $754 million Canadian ($708 million U.S.) during 2010, of which the Company received $639 million and minority shareholders received $69 million.

NOTE 3—BORROWINGS

Total borrowings outstanding at February 2, 2013 and January 28, 2012 were $3.1 billion and $3.5 billion, respectively. At February 2, 2013, total short-term borrowings were $1.1 billion, consisting of $749 million secured borrowings and $345 million of unsecured commercial paper. At January 28, 2012, total short-term borrowings were $1.2 billion, consisting of $838 million secured borrowings and $337 million of unsecured commercial paper. The weighted-average annual interest rate paid on short-term debt was 2.7% in 2012 and 2.3% in 2011.

Long-term debt was as follows:

ISSUE	February 2, 2013			January 28, 2012
millions
SEARS ROEBUCK ACCEPTANCE CORP.
6.50% to 7.50% Notes, due 2017 to 2043	$	327		$	398
7.05% to 7.50% Medium-Term Notes, due 2013	11			80
SEARS HOLDINGS CORP.
6.625% Senior Secured Notes, due 2018	1,237			1,237
SEARS DC CORP.
9.07% to 9.20% Medium-Term Notes	—			23
SEARS CANADA INC.
Credit Facility, expires 2015	—			101
CAPITALIZED LEASE OBLIGATIONS	433			455
OTHER NOTES AND MORTGAGES	18			24
Total long-term borrowings	2,026			2,318
Current maturities	(83		)	(230		)
Long-term debt and capitalized lease obligations	$	1,943		$	2,088
Weighted-average annual interest rate on long-term debt	6.7		%	7.1		%

The fair value of long-term debt, excluding capitalized lease obligations, was $1.4 billion at February 2, 2013 and $1.5 billion at January 28, 2012. The fair value of our debt was estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. Our long-term debt instruments are valued using Level 2 measurements as defined in Note 5.

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At February 2, 2013, long-term debt maturities for the next five years and thereafter were as follows:

millions
2013	$	83
2014	67
2015	61
2016	50
2017	89
Thereafter	1,676
	$	2,026

Interest

Interest expense for years 2012, 2011 and 2010 was as follows:

millions	2012		2011		2010
COMPONENTS OF INTEREST EXPENSE
Interest expense	$	232	$	248	$	242
Accretion of lease obligations at net present value	17		20		21
Amortization of debt issuance costs	18		21		30
Interest expense	$	267	$	289	$	293

Debt Repurchase Authorization

In 2005, our Finance Committee of the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or privately negotiated transactions. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. (“SRAC”), has repurchased $215 million of its outstanding notes. In 2011, Sears Holdings repurchased $10 million of senior secured notes, recognizing a gain of $2 million. The unused balance of this authorization is $275 million.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At February 2, 2013 and January 28, 2012, we had outstanding commercial paper borrowings of $345 million and $337 million, respectively. ESL held $285 million and $250 million, respectively, of our commercial paper at February 2, 2013 and January 28, 2012, including $169 million and $130 million, respectively, held by Edward S. Lampert. See Note 15 for further discussion of these borrowings.

Domestic Credit Agreement

During the first quarter of 2011, we entered into a $3.275 billion credit agreement (the “Domestic Credit Agreement”) which expires in April 2016. We view this credit facility as our most cost efficient funding mechanism and therefore use it as a primary source of funding.

Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate (“LIBOR”) or a base rate, in either case plus an applicable margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on usage.

The Domestic Credit Agreement includes a $1.5 billion letter of credit sub-limit and an uncommitted accordion feature that provides us the flexibility, subject to certain terms and conditions, to use the existing collateral under the

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credit facility to obtain an aggregate amount of up to $1.0 billion in additional borrowing capacity. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.2 billion in second lien notes were outstanding at February 2, 2013, providing the Company the capacity to issue up to an additional $760 million in second lien indebtedness. The Domestic Credit Agreement is in place as a funding source for general corporate purposes and is an asset based revolving credit facility under which Sears Roebuck Acceptance Corp. (“SRAC”) and Kmart Corporation are the borrowers. The Domestic Credit Agreement is secured by a first lien on most of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability.

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, under certain circumstances, including if availability under the credit facility, as defined, is less than 15%. It also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.     

At February 2, 2013 and January 28, 2012, we had $749 million and $838 million, respectively, of borrowings and $754 million and $626 million, respectively, of letters of credit outstanding under the Domestic Credit Agreement. As a result, our availability under the agreement was $1.8 billion at both February 2, 2013 and January 28, 2012. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs.

Senior Secured Notes

In October 2010, we sold $1 billion aggregate principal amount of senior secured notes (the “Notes”), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold $250 million aggregate principal amount of Notes to the Company’s domestic pension plan in a private placement. The Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables (the “Collateral”). The lien that secures the Notes is junior in priority to the lien on such assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events. The Company may call the Notes at a premium based on the “Treasury Rate” as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended.

Sears Canada Credit Agreement

In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving credit facility (the “Sears Canada Facility”). The Sears Canada Facility is available for Sears Canada’s general corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card receivables, subject to certain limitations. At February 2, 2013 we had no borrowings outstanding under the Sears Canada Facility. At January 28, 2012, we had approximately $101 million ($101 million Canadian) of borrowings outstanding under the Sears Canada Facility. Availability under this agreement was approximately $503 million ($502 million Canadian) and $415 million ($415 million Canadian), respectively, at February 2, 2013 and

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January 28, 2012. The current availability may be reduced by reserves currently estimated by the Company to be approximately $300 million, which may be applied by the lenders at their discretion pursuant to the Credit Facility agreement. As a result of judicial developments relating to the priorities of pension liability relative to certain secured obligations, Sears Canada has executed an amendment to the Sears Canada Credit Facility which would provide additional security to lenders, with respect to the Company's unfunded pension liability by pledging certain real estate assets as collateral thereby partially reducing the potential reserve amounts by up to $150 million the lenders could apply. The potential additional reserve amount may increase or decrease in the future based on estimated net pension liabilities.

Letters of Credit Facility

Effective March 15, 2013, we agreed to terminate our $500 million uncommitted letter of credit facility dated January 20, 2011 with Wells Fargo Bank, National Association ("Wells Fargo") in advance of the scheduled termination date of January 20, 2014, as no letters of credit have been issued and outstanding under the facility since May 2011. The facility was secured by a first priority lien on cash placed on deposit at Wells Fargo in an amount equal to 103% of the face value of all issued and outstanding letters of credit.

Cash Collateral

We post cash collateral for certain self-insurance programs. We continue to classify the cash collateral posted for self-insurance programs as cash and cash equivalents due to our ability to substitute letters of credit for the cash at any time at our discretion. At February 2, 2013 and January 28, 2012, $19 million and $20 million of cash, respectively, was posted as collateral for self-insurance programs.

Wholly owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers’ compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. In addition, we provide credit insurance to third party creditors of the Company to mitigate their credit risk with the Company. The associated risks are managed through Holdings’ wholly owned insurance subsidiary, Sears Reinsurance Company Ltd. (“Sears Re”), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears utilizes two securitization structures to issue specific securities in which Sears Re invests its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 125 Full-line stores was contributed to indirect wholly owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued securities that are secured by the mortgages and collateral assignments of the store leases. Sears Re and two other indirect wholly owned subsidiaries of Holdings own $1.3 billion (par value) of these mortgage-backed securities. Payments to Sears Re on these securities are funded by the lease payments. In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to Sears Re on these asset-backed securities are funded by the royalty payments. The issuers of these mortgage-backed and asset-backed securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities. Since the inception of the REMIC and KCD IP, LLC, these mortgage-backed and asset-backed securities have been entirely held by our wholly owned consolidated subsidiaries in support of our insurance activities. At February 2, 2013 and January 28, 2012, the net book value of the securitized trademark rights was approximately $1.0 billion. The net book value of the securitized real estate assets was approximately $0.8 billion at February 2, 2013 and January 28, 2012.

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Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

NOTE 4—DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL GUARANTEES

We primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market. We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars.

Earnings Effects of Derivatives on the Statements of Operations

For derivatives that were designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in forward currency exchange rates. Changes in forward rates on the derivatives are recorded in the currency translation adjustments line in accumulated other comprehensive loss and will remain there until we substantially liquidate or sell our holdings in Sears Canada.

Changes in the fair value of any derivatives that are not designated as hedges are recorded in earnings each period. Sears Canada mitigates the risk of currency fluctuations on offshore merchandise purchases denominated in U.S. currency by purchasing U.S. dollar denominated collar contracts for a portion of its expected requirements. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada’s merchandise purchases, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk.

Sears Canada Hedges of Merchandise Purchases

Sears Canada had no outstanding foreign currency collar contracts at February 2, 2013 or January 28, 2012. As discussed previously, these collar contracts were used to hedge Sears Canada’s purchase of inventory under U.S. dollar denominated contracts. We record mark-to-market adjustments based on the total notional value of these outstanding collar contracts at the end of each period.

We record the earnings impact of mark-to-market and settlement adjustments for foreign currency collar contracts in other income (loss) at the end of each period. We recorded no mark-to-market and settlement gains on these contracts for the year ended February 2, 2013. We recorded mark-to-market and settlement gains on these contracts of $4 million in other loss for the year ended January 28, 2012, and mark-to-market and settlement losses on these contracts of $14 million in other loss for the year ended January 29, 2011.

Sears Canada’s above noted foreign currency collar contracts were entered into as a hedge of merchandise purchase contracts denominated in U.S. currency. We also record mark-to-market adjustments for the value of the merchandise purchase contracts (considered embedded derivatives under relevant accounting rules) at the end of each period. We recorded no assets at February 2, 2013, and assets of $1 million at January 28, 2012 related to the fair value of these embedded derivatives.

We record the earnings impact of mark-to-market and settlement adjustments related to the embedded derivative in the merchandise purchase contracts in other income (loss) at the end of each period. We recorded mark-to-market and settlement gains of $2 million for the year ended February 2, 2013. We recorded mark-to-market and settlement losses of $5 million and $1 million for the years ended January 28, 2012 and January 29, 2011, respectively.

We recorded total mark-to-market gains and settlements of $2 million in other loss for the year ended February 2, 2013. We recorded total mark-to-market losses and settlements of $1 million and $15 million in other loss for the years ended January 28, 2012 and January 29, 2011, respectively. At February 2, 2013, we had no derivative mark-to-market assets related to the embedded derivatives, and at January 28, 2012, we had total derivative mark-to-market assets related to the collar contracts and embedded derivatives of $1 million. See Note 5

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for further information regarding fair value of these collar and merchandise purchase contracts and the respective balance sheet classifications.

Hedges of Net Investment in Sears Canada

We had no foreign currency forward contracts outstanding at February 2, 2013. At January 28, 2012, we had a foreign currency forward contract outstanding with a total Canadian notional value of $629 million, and with a weighted-average remaining life of 0.1 years. This contract was designated and qualified as a hedge of the foreign currency exposure of our net investment in Sears Canada. Accordingly, we recorded no liability related to the forward contracts at February 2, 2013, and the aggregate fair value of the forward contract outstanding at January 28, 2012 of approximately $(6) million was recorded as a liability on our Consolidated Balance Sheet. The change in fair value of approximately $6 million related to these forward contracts, net of tax, was recorded as a component of other comprehensive loss for the year ended February 2, 2013.

We settled foreign currency forward contracts during 2012 and 2011 and received net amounts of $6 million and $0.1 million, respectively, relative to these contract settlements. We settled foreign currency forward contracts during 2010 and paid net amounts of $3 million relative to these contract settlements. As hedge accounting was applied to these contracts, an offsetting amount was recorded as a component of other comprehensive loss.

Our currency forward contracts require collateral be posted in the event our liability under such contracts reaches a predetermined threshold. Cash collateral posted under these contracts is recorded as part of our accounts receivable balance. We had no cash collateral posted under these contracts at February 2, 2013 and $5 million at January 28, 2012.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with credit ratings of single-A or better at January 28, 2012. We had no derivative instruments at February 2, 2013.

Financial Guarantees

We issue various types of guarantees in the normal course of business. We had the following guarantees outstanding at February 2, 2013:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	774	$	47	$	—	$	821
Commercial letters of credit	8		133		—		141
Secondary lease obligations	—		—		77		77

The secondary lease obligations related to certain store leases of previously divested Sears businesses. We remain secondarily liable if the primary obligor defaults.

NOTE 5—FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that

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are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs – unobservable inputs for the asset or liability.

Accounts receivable, merchandise payables, short-term borrowings, accrued liabilities and domestic cash and cash equivalents are reflected in the Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our debt is disclosed in Note 3 to the Consolidated Financial Statements. The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Consolidated Balance Sheets at fair value at February 2, 2013 and January 28, 2012:

	Total Fair Value Amounts at
millions	February 2, 2013		Level 1		Level 2		Level 3
Cash equivalents(1)	$	181	$	181	$	—	$	—
Restricted cash(2)	9		9		—		—
Total	$	190	$	190	$	—	$	—

	Total Fair Value Amounts at
millions	January 28, 2012			Level 1		Level 2			Level 3
Cash equivalents(1)	$	341		$	341	$	—		$	—
Restricted cash(2)	7			7		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(6		)	—		(6		)	—
Total	$	343		$	348	$	(5	)	$	—

__________________

⁽¹⁾  Included within Cash and cash equivalents on the Consolidated Balance Sheets.

⁽²⁾  Included within Restricted cash on the Consolidated Balance Sheets.

⁽³⁾  Included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

⁽⁴⁾  Included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple inputs including interest rates, prices and indices to generate pricing and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Our derivative instruments are valued using Level 2 measurements.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value as discussed in Note 1. With the exception of the goodwill and fixed asset impairments described in Note 12 and Note 13, respectively, we had no significant remeasurements of such assets or liabilities to fair value during 2012 and 2011.

All of the fair value remeasurements were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived based on discussions with real estate brokers, review of comparable properties, if available, and internal expertise related to the current marketplace conditions. Inputs for the goodwill included discounted cash flow analyses, comparable marketplace fair value data, as well as management's assumptions in valuing significant tangible and intangible assets, as described in Note 1, Summary of Significant Accounting Policies.

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NOTE 6—INTEREST AND INVESTMENT INCOME

The following table sets forth the components of interest and investment income as reported in our Consolidated Statements of Operations:

millions	2012		2011		2010
Interest income on cash and cash equivalents	$	7	$	4	$	4
Other investment income	87		37		32
Total	$	94	$	41	$	36

Interest Income on Cash and Cash Equivalents

We recorded interest income of $7 million in 2012, $4 million in 2011, and $4 million in 2010, primarily related to interest earned on cash and cash equivalents. These cash and cash equivalents consist of highly liquid investments with original maturities of three months or less at the date of purchase. Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. All invested cash amounts are readily available to us.

Other Investment Income

Other investment income primarily includes income generated by (and sales of investments in) certain real estate joint ventures and other equity investments in which we do not have a controlling interest. Investment income from equity investments was $47 million, $27 million and $17 million in 2012, 2011 and 2010, respectively. During 2012, the investment income from equity investments included a gain of $25 million related to the sale of a real estate joint venture held by Sears Canada. Other investment income also included a $30 million, $4 million and $6 million dividend received on our cost method investment in Sears Mexico for 2012, 2011 and 2010, respectively.

NOTE 7—BENEFIT PLANS

We sponsor a number of pension and postretirement benefit plans. Expenses for retirement and savings-related benefit plans were as follows:

millions	2012		2011		2010
Retirement/401(k) Savings Plans	$	10	$	11	$	11
Pension plans	630		78		119
Postretirement benefits	24		24		27
Total	$	664	$	113	$	157

Retirement Savings Plans

We sponsor Sears and Kmart 401(k) retirement savings plans for employees meeting service eligibility requirements. The Company does not match employee contributions.

Other Benefit Plans

Certain domestic full-time and part-time employees of Sears are eligible to participate in noncontributory defined benefit plans after meeting age and service requirements. Effective January 1, 2006, the Sears domestic pension plan was frozen and domestic associates no longer earn additional benefits under the plan.

Substantially all full-time Canadian employees, as well as some part-time employees, are eligible to participate in contributory defined benefit plans. Effective July 1, 2008, the Sears Canada defined pension plan was amended and a defined contribution component was added. The defined benefit service accrual ceased and all plan

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members earn pensionable service under the defined contribution component of the Sears Canada Inc. Registered Retirement Plan.

Pension benefits are based on length of service, compensation and, in certain plans, social security or other benefits. Funding for the various plans is determined using various actuarial cost methods.

In addition to providing pension benefits, Sears provides domestic and Canadian employees and retirees certain medical benefits. These benefits provide access to medical plans, with Company subsidies for certain eligible retirees. Certain domestic Sears retirees are also provided life insurance benefits. To the extent we share the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of retirement. Sears' postretirement benefit plans are not funded. We have the right to modify or terminate these plans.

Pension Plans

	2012									2011
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Change in projected benefit obligation:
Beginning balance	$	6,109		$	1,426		$	7,535		$	5,623		$	1,401		$	7,024
Interest cost	291			65			356			314			74			388
Actuarial loss	639			64			703			531			70			601
Benefits paid	(323		)	(122		)	(445		)	(359		)	(120		)	(479		)
Settlements	(1,405		)	—			(1,405		)	—			—			—
Foreign currency exchange impact	—			5			5			—			1			1
Balance at the measurement date	$	5,311		$	1,438		$	6,749		$	6,109		$	1,426		$	7,535
Change in assets at fair value:
Beginning balance	$	4,051		$	1,227		$	5,278		$	4,054		$	1,288		$	5,342
Actual return on plan assets	382			130			512			4			51			55
Company contributions	516			33			549			352			6			358
Benefits paid	(323		)	(122		)	(445		)	(359		)	(120		)	(479		)
Settlements	(1,405		)	—			(1,405		)	—			—			—
Foreign currency exchange impact	—			4			4			—			2			2
Balance at the measurement date	$	3,221		$	1,272		$	4,493		$	4,051		$	1,227		$	5,278
Net amount recognized	$	(2,090	)	$	(166	)	$	(2,256	)	$	(2,058	)	$	(199	)	$	(2,257	)

The accumulated benefit obligation for the SHC Domestic pension plan was $5.3 billion at February 2, 2013 and $6.1 billion at January 28, 2012. The accumulated benefit obligation for the Sears Canada pension plan was $1.4 billion at both February 2, 2013 and January 28, 2012.

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Postretirement Obligations

	2012									2011
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Change in accumulated postretirement benefit obligation:
Beginning balance	$	253		$	321		$	574		$	286		$	303		$	589
Interest cost	10			14			24			13			16			29
Plan participants' contributions	42			—			42			43			—			43
Actuarial (gain) loss	9			16			25			(15		)	19			4
Settlement gain	—			(22		)	(22		)	—			—			—
Benefits paid	(67		)	(17		)	(84		)	(74		)	(17		)	(91		)
Benefits paid - settlements	—			(18		)	(18		)	—			—			—
Foreign currency exchange rate impact and other	—			1			1			—			—			—
Balance at the measurement date	$	247		$	295		$	542		$	253		$	321		$	574
Change in plan assets at fair value:
Beginning of year balance	$	—		$	69		$	69		$	—		$	90		$	90
Actual return on plan assets	—			—			—			—			3			3
Company contributions	25			19			44			31			1			32
Plan participants' contributions	42			—			42			43			—			43
Benefits paid	(67		)	(17		)	(84		)	(74		)	(17		)	(91		)
Benefits paid - settlements	—			(18		)	(18		)	—			—			—
Foreign currency exchange rate impact and other	—			(8		)	(8		)	—			(8		)	(8		)
Balance at the measurement date	$	—		$	45		$	45		$	—		$	69		$	69
Funded status	$	(247	)	$	(250	)	$	(497	)	$	(253	)	$	(252	)	$	(505	)

The current portion of our liability for postretirement obligations is $27 million, which we expect to pay during fiscal 2013.

Weighted-average assumptions used to determine plan obligations were as follows:

	2012		2011		2010
	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada
Pension benefits:
Discount Rate	4.25%	4.20%	4.90%	4.70%	5.75%	5.40%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%
Postretirement benefits:
Discount Rate	3.55%	4.20%	4.20%	4.60%	5.00%	5.40%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%

80

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Net Periodic Benefit Cost

The components of net periodic benefit cost were as follows:

	2012									2011									2010
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Pension benefits:
Interest cost	$	291		$	65		$	356		$	314		$	74		$	388		$	320		$	76		$	396
Expected return on plan assets	(291		)	(76		)	(367		)	(302		)	(80		)	(382		)	(287		)	(77		)	(364		)
Cost of settlements	452			—			452			—			—			—			—			—			—
Recognized net loss	165			24			189			63			9			72			87			—			87
Net periodic benefit cost (benefit)	$	617		$	13		$	630		$	75		$	3		$	78		$	120		$	(1	)	$	119
Postretirement benefits:
Benefits earned during the period	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	1		$	1
Interest cost	10			14			24			13			16			29			16			16			32
Expected return on assets	—			(3		)	(3		)	—			(5		)	(5		)	—			(6		)	(6		)
Cost of settlements	—			3			3			—			—			—			—			—			—
Net periodic benefit cost	$	10		$	14		$	24		$	13		$	11		$	24		$	16		$	11		$	27

Weighted-average assumptions used to determine net cost were as follows:

	2012		2011		2010
	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada
Pension benefits:
Discount Rate	4.90%	4.70%	5.75%	5.40%	6.00%	6.00%
Return of plan assets	7.25%	6.50%	7.50%	6.50%	8.00%	6.50%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%
Postretirement benefits:
Discount Rate	4.20%	4.60%	5.00%	5.40%	6.00%	6.00%
Return of plan assets	N/A	3.75%	N/A	6.50%	N/A	6.50%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%

For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	30		$	(39	)
Effect on pension benefit obligation	$	(674	)	$	814

81

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

For 2013 and beyond, the domestic weighted-average health care cost trend rates used in measuring the postretirement benefit expense are an 8.5% trend rate in 2013 to an ultimate trend rate of 6.5% in 2017. A one-percentage-point change in the assumed health care cost trend rate would have the following effects on the postretirement liability:

millions	1 percentage-point Increase		1 percentage-point Decrease
Effect on total service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation	$	31	$	(27	)

$195 million of the unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost during 2013.

Investment Strategy

The Investment Committee, made up of select members of senior management, has appointed a non-affiliated third party professional to advise the Committee with respect to the SHC domestic pension plan assets. The plan's overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plan's investment policy requires investments to be diversified across individual securities, industries, market capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.

Domestic plan assets were invested in the following classes of securities:

	Plan Assets at
	February 2, 2013		January 28, 2012
Equity securities	31	%	32	%
Fixed income and other debt securities	64		67
Other	5		1
Total	100	%	100	%

The domestic plan's target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 2, 2013, the plan's target asset allocation was 35% equity and 65% fixed income. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

Sears Canada plan assets were invested in the following classes of securities (none of which were securities of the Company):

	Plan Assets at
	February 2, 2013		January 28, 2012
Equity securities	26	%	27	%
Fixed income and other debt securities	74		72
Alternative investment securities	—		1
Total	100	%	100	%

The Sears Canada plans' target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 2, 2013, the

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SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

plan's target asset allocation was 55% to 75% fixed income and 25% to 45% equity. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

Future Cash Flows of Benefit Plans

Information regarding expected future cash flows for our benefit plans is as follows:

millions	SHC Domestic		Sears Canada		Total
Pension benefits:
Employer contributions:
2013 (expected)	$	352	$	29	$	381
Expected benefit payments:
2013	$	335	$	93	$	428
2014	337		93		430
2015	340		92		432
2016	342		92		434
2017	344		91		435
2018-2022	1,725		450		2,175
Postretirement benefits:
Employer contributions:
2013 (expected)	$	28	$	1	$	29
Expected employer contribution for benefit payments:
2013	$	28	$	17	$	45
2014	26		17		43
2015	25		17		42
2016	24		18		42
2017	22		18		40
2018-2022	90		88		178

Domestic Pension Plan Funding

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the Company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2012, we contributed $516 million to our domestic pension plans. We estimate that the domestic pension contribution will be $352 million in 2013 and approximately $510 million in 2014, though the ultimate amount of pension contributions could be affected by changes in the applicable regulations as well as financial market and investment performance.

As previously reported, on July 6, 2012, federal legislation signed into law allows pension plan sponsors to use higher interest rate assumptions in valuing plan liabilities and determining funding obligations. As a result of this legislation, the Company's domestic pension plan was within $203 million of being 80% funded under applicable law. In order to reduce the risks of gross pension obligations, the Company elected to contribute an additional $203 million to its domestic pension plan on September 14, 2012, after which its domestic pension plan was 80% funded under applicable law.

Effective September 17, 2012, the Company amended its domestic pension plan, primarily related to lump sum benefit eligibility, and began notifying certain former employees of the Company of its offer to pay those employees' pension benefit in a lump sum. These amendments did not have a significant impact on our plan. Former employees eligible for the voluntary lump sum payment option are generally those who are vested traditional formula

83

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

participants of the Plan who terminated employment prior to January 1, 2012 and who have not yet started receiving monthly payments of their pension benefits.

The Company offered the one-time voluntary lump sum window in an effort to reduce its long-term pension obligations and ongoing annual pension expense. This voluntary offer was made to approximately 86,000 eligible terminated vested participants, representing approximately $2.0 billion of the Company's total qualified pension plan liabilities. Eligible participants had until November 19, 2012 to make their election. The Company made payments of approximately $1.5 billion to employees who made the election in December 2012 and funded the payments from existing pension plan assets. In connection with this transaction, the Company incurred a non-cash charge to operations of approximately $452 million pre-tax in the fourth quarter of 2012 as a result of the requirement to expense the unrealized actuarial losses. The charge had no effect on equity because the unrealized actuarial losses are already recognized in accumulated other comprehensive income/(loss). Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.

Fair Value of Pension and Postretirement Benefit Plan Assets

The following table presents our plan assets using the fair value hierarchy at February 2, 2013 and January 28, 2012:

	Investment Assets at Fair Value at
SHC Domestic	February 2, 2013
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	187		$	—	$	187	$	—
Equity securities:
U.S. companies	848			848		—		—
International companies	138			138		—		—
Registered investment companies	1			1		—		—
Fixed income securities:
Corporate bonds and notes	1,840			—		1,840		—
Sears Holdings Corporation senior secured notes	176			—		176		—
U.S. government and agencies	1			—		1		—
Mortgage-backed and asset-backed	6			—		6		—
Ventures and partnerships	12			—		—		12
Total investment assets at fair value	$	3,209		$	987	$	2,210	$	12
Accounts receivable	44
Accounts payable	(32		)
Net assets available for plan benefits	$	3,221

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Notes to Consolidated Financial Statements—(Continued)

	Investment Assets at Fair Value at
SHC Domestic	January 28, 2012
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	216		$	—	$	216	$	—
Equity securities:
U.S. companies	1,102			1,102		—		—
International companies	120			120		—		—
Registered investment companies	1			1		—		—
Fixed income securities:
Corporate bonds and notes	2,186			—		2,184		2
Sears Holdings Corporation senior secured notes	203			—		203		—
U.S. government and agencies	39			—		39		—
Mortgage-backed and asset-backed	9			—		9		—
Municipal and foreign government	20			—		20		—
Ventures and partnerships	15			—		—		15
Total investment assets at fair value	$	3,911		$	1,223	$	2,671	$	17
Cash	111
Accounts receivable	54
Accounts payable	(25		)
Net assets available for plan benefits	$	4,051

	Investment Assets at Fair Value at
Sears Canada	February 2, 2013
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	67		$	—	$	67	$	—
Equity securities:
U.S. companies	177			177		—		—
International companies	5			5		—		—
Common collective trusts	277			—		277		—
Fixed income securities:
Corporate bonds and notes	613			—		612		1
U.S. government and agencies	1			—		1		—
Mortgage-backed and asset-backed	66			—		7		59
Municipal and foreign government	34			—		34		—
Hedge and pooled equity funds	3			—		—		3
Total investment assets at fair value	$	1,243		$	182	$	998	$	63
Cash	42
Refundable deposits	25
Accounts receivable	567
Accounts payable	(560		)
Net assets available for plan benefits	$	1,317

85

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

	Investment Assets at Fair Value at
Sears Canada	January 28, 2012
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	7		$	—	$	7	$	—
Equity securities:
U.S. companies	190			189		1		—
International companies	30			30		—		—
Common collective trusts	306			—		306		—
Fixed income securities:
Corporate bonds and notes	560			—		560		—
U.S. government and agencies	2			—		2		—
Mortgage-backed and asset-backed	73			—		9		64
Municipal and foreign government	57			—		57		—
Hedge and pooled equity funds	16			—		—		16
Total investment assets at fair value	$	1,241		$	219	$	942	$	80
Cash	26
Refundable deposits	25
Accounts receivable	484
Accounts payable	(480		)
Net assets available for plan benefits	$	1,296

Equity securities, which include common and preferred stocks and registered investment companies (mutual funds), are actively traded and valued at the closing price reported in the active market in which the security is traded and are assigned to Level 1.

Common collective trusts are portfolios of underlying investments held by investment managers and are valued at the unit value reported by the investment managers as of the end of each period presented. Collective short-term investment funds are stated at net asset value (NAV) as determined by the investment managers. Investment managers value the underlying investments of the funds at amortized cost, which approximates fair value, and have assigned a Level 2 to the valuation of those investments. Fixed income securities are assigned to Level 2 as they are primarily valued by institutional bid evaluation, which determines the estimated price a dealer would pay for a security and which is developed using proprietary models established by the pricing vendors for this purpose.

Certain corporate and mortgage-backed debt securities are assigned to Level 3 based on the relatively low position in the preferred hierarchy of the pricing source. Valuation of the Plan's non-public limited partnerships requires significant judgment by the general partners due to the absence of quoted market value, inherent lack of liquidity, and the long-term nature of the assets, and may result in fair value measurements that are not indicative of ultimate realizable value. Hedge funds consist of fund-of-funds investments and direct hedge funds and are assigned to Level 3. The fund-of-funds investments are primarily valued using a market approach based on the NAVs calculated by the fund and are not publicly available. Direct hedge funds are primarily valued by each fund's third party administrator based on the valuation of the underlying type of security held and are not publicly available. All hedge fund investments are in the process of being redeemed.

86

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

A rollforward of our Level 3 assets each year is as follows:

SHC Domestic	January 28, 2012 Balance		Net Realized and Unrealized Gains/(Losses)			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		February 2, 2013 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	2	$	(2	)	$	—	$	—		$	—	$	—
Mortgage-backed and asset-backed	—		—			—		—			—		—
Venture and partnerships	15		1			—		(4		)	—		12
Total Level 3 investments	$	17	$	(1	)	$	—	$	(4	)	$	—	$	12

SHC Domestic	January 29, 2011 Balance		Net Realized and Unrealized Losses			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		January 28, 2012 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	—	$	—		$	2	$	—		$	—	$	2
Mortgage-backed and asset-backed	1		—			—		(1		)	—		—
Venture and partnerships	20		(3		)	—		(2		)	—		15
Total Level 3 investments	$	21	$	(3	)	$	2	$	(3	)	$	—	$	17

Sears Canada	January 28, 2012 Balance		Net Realized and Unrealized Gains		Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		February 2, 2013 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	—	$	—	$	1	$	—		$	—	$	1
Mortgage-backed and asset-backed	64		5		—		(10		)	—		59
Hedge and pooled equity funds	16		—		—		(13		)	—		3
Total Level 3 investments	$	80	$	5	$	1	$	(23	)	$	—	$	63

87

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Sears Canada	January 29, 2011 Balance		Net Realized and Unrealized Gains/(Losses)			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3			January 28, 2012 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	2	$	—		$	—	$	—		$	(2	)	$	—
Mortgage backed-and asset-backed	69		5			—		(10		)	—			64
Hedge and pooled equity funds	113		(3		)	—		(94		)	—			16
Total Level 3 investments	$	184	$	2		$	—	$	(104	)	$	(2	)	$	80

NOTE 8—EARNINGS PER SHARE

The following tables set forth the components used to calculate basic and diluted earnings (loss) per share from continuing operations attributable to Holdings' shareholders. Restricted stock awards for 2012 and 2011 were not included in the computation of diluted loss per share from continuing operations attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive.

millions, except earnings per share	2012			2011			2010
Basic weighted average shares	105.9			106.8			111.5
Dilutive effect of restricted stock and stock options	—			—			0.2
Diluted weighted average shares	105.9			106.8			111.7
Net income (loss) from continuing operations attributable to Holdings' shareholders	$	(930	)	$	(3,113	)	$	122
Earnings (loss) per share from continuing operations attributable to Holdings' shareholders:
Basic	$	(8.78	)	$	(29.15	)	$	1.09
Diluted	$	(8.78	)	$	(29.15	)	$	1.09

NOTE 9—EQUITY

Stock-based Compensation

We account for stock-based compensation using the fair value method in accordance with accounting standards regarding share-based payment transactions. We recorded $15 million, $14 million and $9 million in total compensation expense relative to stock-based compensation arrangements during 2012, 2011, and 2010, respectively. At February 2, 2013, we had $10 million in total compensation cost related to nonvested awards, which is expected to be recognized over approximately the next three years.

We do not currently have an employee stock option plan and at February 2, 2013, there are no outstanding options.

88

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

We granted restricted stock awards to certain associates. These restricted stock awards typically vest in one to three years from the date of grant, provided the grantee remains employed by us at the vesting date. The fair value of these awards is equal to the market price of our common stock on the date of grant. We do not currently have a broad-based program that provides for restricted stock awards on an annual basis. Changes in restricted stock awards for 2012, 2011, and 2010 were as follows:

	2012				2011				2010
(Shares in thousands)	Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant
Beginning of year balance	496		$	65.02	313		$	74.09	279		$	80.73
Granted	175		49.20		386		59.60		176		83.09
Vested	(172	)	60.89		(72	)	81.55		(110	)	103.19
Forfeited	(75	)	78.59		(131	)	61.62		(32	)	81.38
End of year balance	424		$	57.72	496		$	65.02	313		$	74.09

millions	2012		2011		2010
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$	9	$	23	$	15
Aggregate fair value of shares vesting during period	10		5		10
Aggregate fair value of shares forfeited during period	4		8		2

Approximately 205,000 shares of the 424,000 shares of unvested restricted stock outstanding at February 2, 2013 are scheduled to vest during 2013, subject to satisfaction of applicable vesting conditions.

Common Share Repurchase Program

From time to time, we repurchase shares of our common stock under a common share repurchase program authorized by our Board of Directors. The common share repurchase program was initially announced in 2005 with a total authorization since inception of the program of $6.5 billion. During 2012, we repurchased no shares of our common stock under our common share repurchase program. During 2011, we repurchased approximately 2.8 million of our common shares at a total cost of approximately $183 million, or an average price $65.66 per share. During 2010, we repurchased approximately 5.5 million of our common shares at a total cost of approximately $394 million, or an average price of $71.76 per share. At February 2, 2013, we had approximately $504 million of remaining authorization under our common share repurchase program.

The share repurchase program has no stated expiration date and 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.

89

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	February 2, 2013			January 28, 2012			January 29, 2011
Pension and postretirement adjustments (net of tax of $(443), $(492) and $(480), respectively)	$	(1,408	)	$	(1,575	)	$	(783	)
Cumulative unrealized derivative gain (loss) (net of tax of $0, $0 and $0, respectively)	—			(5		)	1
Currency translation adjustments (net of tax of $(39), $(26) and $(7), respectively)	(51		)	(29		)	3
Accumulated other comprehensive loss	$	(1,459	)	$	(1,609	)	$	(779	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Accumulated other comprehensive loss attributable to noncontrolling interests at February 2, 2013, January 28, 2012, and January 29, 2011 was $(64) million, $(9) million and $(4) million, respectively.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income (loss) was as follows:

	2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain (loss)	$	(564	)	$	1		$	(563	)
Less: cost of settlements	454			—			454
Less: amortization of prior service cost included in net period pension cost	189			(6		)	183
Pension and postretirement adjustments, net of tax	79			(5		)	74
Deferred gain on derivatives	5			—			5
Currency translation adjustments	(8		)	13			5
Total other comprehensive income	$	76		$	8		$	84

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Notes to Consolidated Financial Statements—(Continued)

	2011
millions	Before Tax Amount			Tax Benefit			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments
Experience gain (loss)	$	(872	)	$	14		$	(858	)
Less: amortization of prior service cost included in net period pension cost	72			(3		)	69
Pension and postretirement adjustments, net of tax	(800		)	11			(789		)
Deferred loss on derivatives	(6		)	—			(6		)
Currency translation adjustments	(57		)	19			(38		)
Total other comprehensive income (loss)	$	(863	)	$	30		$	(833	)

	2010
millions	Before Tax Amount			Tax (Expense) or Benefit			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain (loss)	$	(116	)	$	51		$	(65	)
Less: amortization of prior service cost included in net period pension cost	87			(34		)	53
Pension and postretirement adjustments, net of tax	(29		)	17			(12		)
Deferred gain (loss) on derivatives	(15		)	6			(9		)
Currency translation adjustments	115			(22		)	93
Total other comprehensive income	$	71		$	1		$	72

91

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Notes to Consolidated Financial Statements—(Continued)

NOTE 10—INCOME TAXES

millions	2012			2011			2010
Income (loss) before income taxes:
U.S.	$	(1,226	)	$	(1,809	)	$	(157	)
Foreign	216			58			323
Total	$	(1,010	)	$	(1,751	)	$	166
Income tax expense (benefit):
Current:
Federal	$	17		$	19		$	1
State and local	15			—			(7		)
Foreign	27			2			110
Total current	59			21			104
Deferred:
Federal	8			1,357			(84		)
State and local	(41		)	(35		)	7
Foreign	18			26			—
Total deferred	(15		)	1,348			(77		)
Total	$	44		$	1,369		$	27

	2012		2011		2010
Effective tax rate reconciliation:
Federal income tax rate (benefit rate)	(35.0	)%	(35.0	)%	35.0	%
State and local tax (benefit) net of federal tax benefit	(3.0	)	(1.3	)	0.1
Federal and state valuation allowance	23.5		104.1		—
Tax on separation of Sears Hometown and Outlet Stores, Inc.	10.3		—		—
Nondeductible goodwill impairment	10.2		11.4		—
Tax on partial spin-off of Sears Canada	3.9		—		—
Adjust foreign statutory rates	(3.2	)	—		—
Tax credits	(1.0	)	(1.5	)	(13.0	)
Long life land and intangibles	(0.8	)	—		—
Resolution of income tax matters	(0.5	)	0.7		(9.2	)
Canadian repatriation cost on Sears Canada dividend received	0.5		—		5.3
Canadian rate differential on noncontrolling interest	—		—		(0.1	)
Other	(0.5	)	(0.2	)	(1.8	)
	4.4	%	78.2	%	16.3	%

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Notes to Consolidated Financial Statements—(Continued)

millions	February 2, 2013			January 28, 2012
Deferred tax assets and liabilities:
Deferred tax assets:
Federal benefit for state and foreign taxes	$	151		$	151
Accruals and other liabilities	179			188
Capital leases	114			125
NOL carryforwards	722			672
Postretirement benefit plans	78			134
Pension	1,208			818
Deferred revenue	202			236
Credit carryforwards	605			385
Other	163			216
Total deferred tax assets	3,422			2,925
Valuation allowance	(2,743		)	(2,268		)
Net deferred tax assets	679			657
Deferred tax liabilities:
Trade names/Intangibles	1,071			1,097
Property and equipment	156			166
Inventory	453			378
Other	117			104
Total deferred tax liabilities	1,797			1,745
Net deferred tax liability	$	(1,118	)	$	(1,088	)

We account for income taxes in accordance with accounting standards for such taxes, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Accounting standards also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of or all of the deferred tax asset will not be realized.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year periods ended February 2, 2013 and January 28, 2012. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this analysis and the significant negative objective evidence, for the year ended January 28, 2012, a valuation allowance of $2.1 billion was added to record only the portion of the deferred tax asset that more likely than not will be realized. Of the total valuation allowance recorded, $317 million was recorded through other comprehensive income. For the year ended February 2, 2013, $213 million of the valuation allowance increase was recorded through other comprehensive income.

At February 2, 2013 and January 28, 2012, we had a valuation allowance of $2.7 billion and $2.3 billion, respectively, to record only the portion of the deferred tax asset that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if estimates of future taxable income during the carryforward period are reduced or increased, or if the objective negative evidence is in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance in future years for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset.

93

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

At the end of 2012 and 2011, we had a federal and state net operating loss (“NOL”) deferred tax asset of $722 million and $672 million, respectively, which will expire predominately between 2019 and 2033. We have credit carryforwards of $605 million, which will expire between 2015 and 2033.

In connection with the separation of SHO, the Company incurred a taxable gain of $266 million. The gain primarily related to the determination that the fair value of the consideration received exceeded the tax basis of the net assets of SHO at the date of the separation. The amount of taxes otherwise payable resulting from the gain was reduced by utilization of $105 million of deferred tax assets, primarily NOL carryforwards. As the Company had previously recorded a valuation allowance against these NOL carryforwards, $105 million of the related valuation allowance was released upon their utilization.

In connection with the taxable spin of approximately 45 percent of the Company's common shares in Sears Canada Inc., the Company incurred a taxable gain of $367 million. The gain primarily relates to the determination that the fair market value of the common shares distributed to the public shareholders exceeded the tax basis of the shares distributed. The amount of taxes otherwise payable resulting from the gain was reduced by utilization of $40 million of net deferred tax assets, primarily NOL carryforwards. As the Company had previously recorded a valuation allowance against these NOL carryforwards, $40 million of the related valuation allowance was released upon their utilization.

Accounting for Uncertainties in Income Taxes

We account for uncertainties in income taxes according to accounting standards for uncertain tax positions. We are present in a large number of taxable jurisdictions, and at any point in time, can have audits underway at various stages of completion in any of these jurisdictions. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by federal, foreign and/or local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described above. At this time, we are not able to make a reasonable estimate of the range of impact on the balance of unrecognized tax benefits or the impact on the effective tax rate related to these items. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:

	Federal, State, and Foreign Tax
millions	February 2, 2013			January 28, 2012			January 29, 2011
Gross UTB Balance at Beginning of Period	$	192		$	192		$	310
Tax positions related to the current period:
Gross increases	21			22			25
Gross decreases	(8		)	(8		)	(10		)
Tax positions related to prior periods:
Gross increases	—			20			51
Gross decreases	(33		)	(19		)	(161		)
Settlements	(1		)	(4		)	(13		)
Lapse of statute of limitations	(10		)	(10		)	(10		)
Exchange rate fluctuations	—			(1		)	—
Gross UTB Balance at End of Period	$	161		$	192		$	192

At the end of 2012, we had gross unrecognized tax benefits of $161 million. Of this amount, $94 million would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax benefits related to gross temporary differences or any other indirect benefits. We expect that our unrecognized tax

94

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

benefits could decrease up to $30 million over the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. At February 2, 2013, the total amount of interest and penalties recognized within the related tax liability in our Consolidated Balance Sheet was $57 million ($39 million net of federal benefit). The total amount of net interest expense recognized in our Consolidated Statement of Operations for 2012 was $2 million.

We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal Revenue Service (“IRS”) has completed its examination of Holdings' 2006 through 2009 federal income tax returns, and we are currently working with the IRS appeals division to resolve a single issue arising from these exams. We have resolved all matters arising from prior IRS exams. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2010, and Kmart is under examination by such jurisdictions for the years 2003 through 2010.

NOTE 11—REAL ESTATE TRANSACTIONS

Gain on Sales of Assets

We recognized $468 million, $64 million, and $67 million in gains on sales of assets during 2012, 2011, and 2010, respectively. These gains were primarily a function of several large real estate transactions. During 2012, the gain on sales of assets included gains of $386 million recognized in connection with real estate transactions which included a gain of $223 million recognized on the sale of eleven (6 owned and 5 leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds, and a gain of $163 million recognized on the surrender and early termination of the leases on three properties operated by Sears Canada, under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds. In connection with these transactions, we surrendered substantially all of our rights and obligations under our preexisting lease agreements and agreed to surrender each of the premises in periods ranging from 6 to 23 months from the date of closing. The gain on sales of assets recorded during 2012 also included a gain of $33 million related to the sale of a store operated under The Great Indoors format, one Sears Full-line store, and one Kmart store.

During 2011, the gain on sales of assets included a gain of $33 million recognized on the sale of two stores operated under The Great Indoors format and one Kmart store.

During 2010, the gain on sales of assets included a gain recognized on a Sears Auto Center we sold in October 2006, at which time we leased back the property for a period of time. Given the terms of the contract, for accounting purposes, the excess of proceeds received over the carrying value of the associated property was deferred. We closed our operations at this location during the first quarter of 2010 and, as a result, recognized a gain of $35 million on this sale at that time.

Property Acquisitions

During 2012, we purchased one previously leased operating property for $6 million. During 2011, we purchased five previously leased operating properties for $17 million. During 2010, we did not purchase any previously leased operating properties. In the normal course of business, we consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash. In addition, we review leases that will expire in the short-term in order to determine the appropriate action to take with respect to them.

95

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

NOTE 12—GOODWILL AND INTANGIBLE ASSETS

The following summarizes our intangible assets at February 2, 2013 and January 28, 2012, respectively, the amortization expenses recorded for the years then ended, as well as our estimated amortization expense for the next five years and thereafter.

		February 2, 2013				January 28, 2012
millions	Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Favorable lease rights	29	$	293	$	148	$	360	$	194
Contractual arrangements and customer lists	9	218		188		224		170
Trade names	7	74		71		74		60
		585		407		658		424
Non-amortizing intangible assets:
Trade names		2,703		—		2,703		—
Total		$	3,288	$	407	$	3,361	$	424

Annual Amortization Expense
2012	$	56
2011	56
2010	60

Estimated Amortization
2013	$	29
2014	22
2015	10
2016	8
2017	7
Thereafter	102

Goodwill is the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method. We recorded $1.7 billion in goodwill in connection with the Merger. We recorded $12 million in connection with our acquisition of an additional 3% interest in Sears Canada during 2008.

96

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Changes in the carrying amount of goodwill by segment during years 2011 and 2012 were as follows:

millions	Sears Domestic			Sears Canada			Total
Balance, January 29, 2011:
Goodwill	$	1,097		$	295		$	1,392
2011 activity:
Impairment charges	(551		)	—			(551		)
Balance, January 28, 2012	546			295			841
2012 activity:
Separation of Sears Hometown and Outlet Stores, Inc.	(167		)	—			(167		)
Impairment charges	—			(295		)	(295		)
Balance, February 2, 2013	$	379		$	—		$	379

In accordance with accounting standards for goodwill and other intangible assets, goodwill is not amortized but requires testing for potential impairment, at a minimum on an annual basis, or when indications of potential impairment exist. The impairment test for goodwill utilizes a fair value approach. The impairment test for identifiable intangible assets not subject to amortization is also performed annually or when impairment indications exist, and consist of a comparison of the fair value of the intangible asset with its carrying amount. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate other long-lived assets. Our annual impairment analysis is performed at the last day of our November accounting period each year.

We perform our annual goodwill and intangible impairment test required under accounting standards at the last day of our November accounting period each year, or when an indication of potential impairment exists. The goodwill impairment test involves a two-step process as described in the “Summary of Significant Accounting Policies” in Note 1. The first step is a comparison of each reporting unit's fair value to its carrying value. If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss.

After performing the first step of the process, we determined goodwill recorded at reporting units within the Sears Canada segment in 2012 and the Sears Domestic segment in 2011 were potentially impaired. The impairment charge was primarily driven by the combination of lower sales and continued margin pressure coupled with expense increases which led to a decline in our operating profit. After performing the second step of the process, we determined that the total amount of goodwill recorded at these reporting units was impaired and recorded charges of $295 million and $551 million in 2012 and 2011, respectively.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred at a date other than the annual impairment test date. Such indicators may include, among others: a significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates.

97

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

NOTE 13—STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

Store Closings and Severance

We made the decision to close 48, 74 and 11 stores in our Kmart segment, and 12, 173 and 15 stores in our Sears Domestic segment during 2012, 2011 and 2010, respectively, and changed the format of 22 Essentials/Grands stores in our Sears Domestic segment during 2011. Store closing costs recorded during 2012, 2011 and 2010 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)			Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	21	$	13	$	34		$	8		$	9	$	85
Sears Domestic	14		2		34			(6		)	13		57
Sears Canada	—		16		(1		)	5			—		20
Total 2012 costs	$	35	$	31	$	67		$	7		$	22	$	162
Kmart	$	46	$	14	$	1		$	15		$	5	$	81
Sears Domestic	84		41		4			31			85		245
Sears Canada	—		18		—			—			—		18
Total 2011 costs	$	130	$	73	$	5		$	46		$	90	$	344
Kmart	$	6	$	1	$	4		$	2		$	—	$	13
Sears Domestic	6		2		2			3			10		23
Total 2010 costs	$	12	$	3	$	6		$	5		$	10	$	36

_____________

⁽¹⁾  Recorded within Cost of sales, buying and occupancy on the Consolidated Statements of Operations.

⁽²⁾  Recorded within Selling and administrative on the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  2011 costs include $82 million recorded within impairment charges and $8 million recorded within Depreciation and amortization on the Consolidated Statements of Operations. 2012 and 2010 costs are recorded within Depreciation and amortization on the Consolidated Statements of Operations.

In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer intend to receive any economic benefit are accrued for when we cease to use the leased space and have been reduced for any income that we believe can be realized through sub-leasing the leased space. We do not expect additional charges recorded during 2013 related to stores we made the decision to close in 2012 to be material.

98

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Store closing cost accruals of $193 million and $159 million at February 2, 2013 and January 28, 2012, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at January 29, 2011	$	2		$	68		$	2		$	72
Store closing costs	73			5			46			124
Payments/utilizations	(16		)	(9		)	(12		)	(37		)
Balance at January 28, 2012	59			64			36			159
Store closing costs	31			86			7			124
Store closing capital lease obligations	—			9			—			9
Payments/utilizations	(49		)	(21		)	(29		)	(99		)
Balance at February 2, 2013	$	41		$	138		$	14		$	193

Goodwill

See Note 12 for further information regarding our goodwill impairment charges recorded in 2012 and 2011.

Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, we performed an impairment test of certain of our long-lived assets (principally the value of buildings and other fixed assets associated with our stores) due to events and changes in circumstances during 2012 and 2011 that indicated an impairment might have occurred. The impairment review was triggered by the non-cash charges related to impairment of goodwill balances and establishing a valuation allowance against certain deferred income tax assets as well as a decline in operating performance at certain locations. As a result of this impairment testing, the Company recorded impairment charges of $35 million and $16 million during 2012 and 2011, respectively. The impairment charges recorded during 2012 included a $10 million charge at Kmart and a $25 million charge at Sears Domestic. The impairment charges recorded during 2011 included a $10 million charge at Kmart and a $6 million charge at Sears Domestic.

NOTE 14—LEASES

We lease certain stores, office facilities, warehouses, computers and transportation equipment.

Operating and capital lease obligations are based upon contractual minimum rents and, for certain stores, amounts in excess of these minimum rents are payable based upon specified percentages of sales. Contingent rent is accrued over the lease term, provided that the achievement of the specified sales level that triggers the contingent rental is probable. Certain leases include renewal or purchase options.

Rental expense for operating leases was as follows:

millions	2012			2011			2010
Minimum rentals	$	824		$	837		$	844
Percentage rentals	17			19			21
Less-Sublease rentals	(47		)	(30		)	(52		)
Total	$	794		$	826		$	813

99

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases in effect at February 2, 2013, were as follows:

	Minimum Lease Commitments
millions	Capital			Operating
2013	$	113		$	720
2014	107			621
2015	94			527
2016	74			422
2017	51			317
Later years	204			1,928
Total minimum lease payments(1)	643			4,535
Less-minimum sublease income				(192		)
Net minimum lease payments				$	4,343
Less:
Estimated executory costs	(56		)
Interest at a weighted average rate of 7.2%	(154		)
Capital lease obligations	433
Less current portion of capital lease obligations	(69		)
Long-term capital lease obligations	$	364

_____________

⁽¹⁾  Sears Canada: Total operating minimum lease payments of $433 million.

NOTE 15—RELATED PARTY DISCLOSURE

Investment of Surplus Cash

Our Board has delegated authority to direct investment of our surplus cash to Edward S. Lampert, subject to various limitations that have been or may be from time to time adopted by the Board of Directors and/or the Finance Committee of the Board of Directors. Mr. Lampert is Chairman of our Board of Directors and its Finance Committee and is the Chairman and Chief Executive Officer of ESL. Additionally, on February 1, 2013, Mr. Lampert became our Chief Executive Officer, in addition to his role as Chairman of the Board. Neither Mr. Lampert nor ESL will receive compensation for any such investment activities undertaken on our behalf, other than Mr. Lampert's compensation as our Chief Executive Officer. ESL beneficially owned approximately 55% of our outstanding common stock at March 11, 2013.

Further, to clarify the expectations that the Board of Directors has with respect to the investment of our surplus cash, the Board has renounced, in accordance with Delaware law, any interest or expectancy of the Company associated with any investment opportunities in securities that may come to the attention of Mr. Lampert or any employee, officer, director or advisor to ESL and its affiliated investment entities (each, a “Covered Party”) who also serves as an officer or director of the Company other than (a) investment opportunities that come to such Covered Party’s attention directly and exclusively in such Covered Party’s capacity as a director, officer or employee of the Company, (b) control investments in companies in the mass merchandising, retailing, commercial appliance distribution, product protection agreements, residential and commercial product installation and repair services and automotive repair and maintenance industries and (c) investment opportunities in companies or assets with a significant role in our retailing business, including investment in real estate currently leased by the Company or in suppliers for which the Company is a substantial customer representing over 10% of such companies’ revenues, but excluding investments of ESL that were existing as of May 23, 2005.

100

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Unsecured Commercial Paper

During 2012 and 2011, ESL and its affiliates purchased unsecured commercial paper issued by Sears Roebuck Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 31.6 days, 2.38% and $202 million and 29.2 days, 1.51% and $230 million, respectively, in 2012 and 2011. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2012 was $325 million and the aggregate amount of interest paid by SRAC to ESL during 2012 was $4 million. ESL held $285 million, and $250 million, respectively, in principal amount of commercial paper at February 2, 2013, and January 28, 2012, which included $169 million, and $130 million, respectively, held by Mr. Lampert. The commercial paper purchases were made in the ordinary course of business on substantially the same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not present features unfavorable to the Company.

Senior Secured Notes

In 2011, Mr. Lampert and ESL purchased an aggregate of $95 million of principal amount of the Company’s 6 5/8% Senior Secured Notes due 2018 (the "65/8% Notes") and $10 million of principal amount of unsecured notes issued by SRAC and another indirect wholly owned subsidiary of Sears Holdings, Sears DC Corp. (the “Subsidiary Notes”). At February 2, 2013, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 65/8% Notes and $1 million and $2 million, respectively, of principal amount of Subsidiary Notes. At January 28, 2012, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 65/8% Notes and $4 million and $10 million, respectively, of principal amount of Subsidiary Notes.

Trade Receivable Put Agreements

On January 26, 2012, ESL entered into an agreement with a financial institution to acquire from the financial institution an undivided participating interest in a certain percentage of its rights and obligations under trade receivable put agreements that were entered into with certain vendors of the Company. These agreements generally provide that, in the event of a bankruptcy filing by the Company, the financial institution will purchase such vendors’ accounts receivable arising from the sale of goods or services to the Company. ESL may from time to time choose to purchase an 80% undivided participating interest in the rights and obligations primarily arising under future trade receivable put agreements that the financial institution enters into with our vendors during the term of its agreement. The Company is neither a party nor will it become a party to any of these agreements. At February 2, 2013 and January 28, 2012, ESL held a participation interest totaling $234 million and $93 million, respectively, in the financial institution’s agreements relating to the Company.

Sears Canada

ESL owns approximately 28% of the outstanding common shares of Sears Canada.

SHO

Holdings, and certain of its subsidiaries, engage in transactions with SHO pursuant to various agreements with SHO which, among other things, (1) govern the principal transactions relating to the rights offering and certain aspects of our relationship with SHO following the separation, (2) establish terms under which Holdings and certain of its subsidiaries will provide SHO with services, and (3) establish terms pursuant to which Holdings and certain of its subsidiaries will obtain merchandise for SHO. ESL owns approximately 63% of the outstanding common stock of SHO (based on publicly available information as of October 11, 2012).

These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the separation. The Company believes that the methods by which costs are allocated are reasonable and are based on prorated estimates of costs expected to be incurred by the Company. A summary of the nature of related party transactions involving SHO is as follows:

• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the SHOP YOUR WAY program.

101

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

• SHO receives commissions from the Company for the sale of merchandise made through www.sears.com, extended service agreements, delivery and handling services and credit revenues.

• The Company provides SHO with shared corporate services. These services include accounting and finance, legal, human resources, information technology and real estate.

Amounts due to or from SHO are non-interest bearing, settled on a net basis, and have payment terms of 10 days after the invoice date. The Company invoices SHO on a weekly basis. At February 2, 2013, Holdings reported a net amount receivable from SHO of $79 million in the Accounts receivable line of the Consolidated Balance Sheet. Amounts related to the sale of inventory and related services, royalties, and corporate shared services was $513 million, and the net amounts SHO earned related to commissions was $60 million during the period following the separation of SHO from October 12, 2012 through February 2, 2013. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 4 for further information related to these guarantees.

Also in connection with the separation, the Company entered into an agreement with SHO and the agent under SHO's secured credit facility, whereby the Company committed to continue to provide services to SHO in connection with a realization on the lender's collateral after default under the secured credit facility, notwithstanding SHO's default under the underlying agreement with us, and to provide certain notices and services to the agent, for so long as any obligations remain outstanding under the secured credit facility.

NOTE 16—SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at February 2, 2013 and January 28, 2012 consisted of the following:

millions	February 2, 2013		January 28, 2012
Unearned revenues	$	843	$	778
Self-insurance reserves	714		743
Other	569		665
Total	$	2,126	$	2,186

NOTE 17—SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart and Sears Canada formats each represent both an operating and reportable segment. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

On February 1, 2013, Mr. Lampert became Chief Executive Officer in addition to his role as Chairman of the Board. We will assess any potential impact on the business segment information used by our CODM to operate the Company on an ongoing basis.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States and Canada. The merchandise and service categories are as follows:

(i) Hardlines—consists of appliances, consumer electronics, lawn and garden, tools and hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women’s, men’s, kids, footwear, jewelry, accessories and soft home;

(iii) Food and Drug—consists of grocery and household, pharmacy and drugstore; and

(iv) Service and Other—includes repair, installation and automotive service and extended contract revenue as well as revenues earned in connection with our agreements with SHO.

102

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

	2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,486		$	11,870		$	2,246		$	18,602
Apparel and Soft Home	4,588			5,434			1,856			11,878
Food and Drug	5,398			38			—			5,436
Service and Other	95			3,635			208			3,938
Total merchandise sales and services	14,567			20,977			4,310			39,854
Costs and expenses:
Cost of sales, buying and occupancy	11,158			15,107			3,075			29,340
Selling and administrative	3,284			6,184			1,192			10,660
Depreciation and amortization	147			578			105			830
Impairment charges	10			25			295			330
Gain on sales of assets	(37		)	(261		)	(170		)	(468		)
Total costs and expenses	14,562			21,633			4,497			40,692
Operating income (loss)	$	5		$	(656	)	$	(187	)	$	(838	)
Total assets	$	4,304		$	12,648		$	2,388		$	19,340
Capital expenditures	$	122		$	171		$	85		$	378

	2011
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,765		$	13,022		$	2,377		$	20,164
Apparel and Soft Home	4,723			5,471			2,011			12,205
Food and Drug	5,705			41			—			5,746
Service and Other	92			3,115			245			3,452
Total merchandise sales and services	15,285			21,649			4,633			41,567
Costs and expenses:
Cost of sales, buying and occupancy	11,818			15,849			3,299			30,966
Selling and administrative	3,371			6,042			1,251			10,664
Depreciation and amortization	149			601			103			853
Impairment charges	15			634			—			649
Gain on sales of assets	(34		)	(30		)	—			(64		)
Total costs and expenses	15,319			23,096			4,653			43,068
Operating loss	$	(34	)	$	(1,447	)	$	(20	)	$	(1,501	)
Total assets	$	4,548		$	13,913		$	2,920		$	21,381
Capital expenditures	$	118		$	225		$	89		$	432

103

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

	2010
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,879		$	13,692		$	2,440		$	21,011
Apparel and Soft Home	4,809			5,454			2,088			12,351
Food and Drug	5,810			38			—			5,848
Service and Other	95			3,091			268			3,454
Total merchandise sales and services	15,593			22,275			4,796			42,664
Costs and expenses:
Cost of sales, buying and occupancy	11,757			15,910			3,333			31,000
Selling and administrative	3,341			5,940			1,144			10,425
Depreciation and amortization	149			620			100			869
Gain on sales of assets	(7		)	(46		)	(14		)	(67		)
Total costs and expenses	15,240			22,424			4,563			42,227
Operating income (loss)	$	353		$	(149	)	$	233		$	437
Total assets	$	6,085		$	15,299		$	2,976		$	24,360
Capital expenditures	$	153		$	216		$	57		$	426

NOTE 18—LEGAL PROCEEDINGS

We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and regulations pertaining to alleged misclassification of certain of our employees and the failure to pay overtime and/or the failure to pay for missed meal and rest periods. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We also are a defendant in several putative or certified class action lawsuits in California relating to alleged failure to comply with California laws pertaining to certain operational, marketing and payroll practices. The California laws alleged to have been violated in each of these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.

We are subject to various other legal and governmental proceedings and investigations, including some involving the practices and procedures in our more highly regulated businesses and many involving litigation incidental to those and other businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations and other consumer-based, regulatory or qui tam claims, each of which may seek compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief.

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently

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determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.

NOTE 19—QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	2012
millions, except per share data	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	9,270	$	9,467		$	8,857		$	12,260
Cost of sales, buying and occupancy	6,703		6,936			6,604			9,097
Selling and administrative	2,445		2,437			2,496			3,282
Net income (loss) from continuing operations attributable to Holdings' shareholders	189		(132		)	(498		)	(489		)
Basic net income (loss) per share from continuing operations attributable to Holdings' shareholders	1.78		(1.25		)	(4.70		)	(4.61		)
Diluted net income (loss) per share from continuing operations attributable to Holdings' shareholders	1.78		(1.25		)	(4.70		)	(4.61		)

	2011
millions, except per share data	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	9,540		$	10,138		$	9,405		$	12,484
Cost of sales, buying and occupancy	6,996			7,537			7,011			9,422
Selling and administrative	2,507			2,601			2,635			2,921
Net loss from continuing operations attributable to Holdings' shareholders	(165		)	(152		)	(410		)	(2,386		)
Basic net loss per share from continuing operations attributable to Holdings' shareholders	(1.53		)	(1.42		)	(3.85		)	(22.47		)
Diluted net loss per share from continuing operations attributable to Holdings' shareholders	(1.53		)	(1.42		)	(3.85		)	(22.47		)

Earnings (loss) per share amounts for each quarter are required to be computed independently and may not equal the amount computed for the total year.

NOTE 20—GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At February 2, 2013, the principal amount outstanding of the Company’s 65/8% senior secured notes due 2018 was $1.24 billion. These notes were issued in 2010 by Sears Holdings Corporation (“Parent”). The 65/8% Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by Sears Holdings Management Corporation and SRAC (the “guarantor subsidiaries”). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at February 2, 2013 and January 28, 2012, and the Condensed Consolidating Statements of Operations, the Consolidating Statements of Comprehensive Income (Loss) and the Condensed Consolidating Statements of Cash flows for 2012, 2011 and 2010 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

The following condensed consolidated financial statements had total assets and total liabilities of approximately $650 million and $115 million, respectively, at January 28, 2012 attributable to SHO. Merchandise

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sales and services included revenues of $1.7 billion, $2.3 billion and $2.3 billion from SHO for 2012, 2011 and 2010, respectively. Net income (loss) attributable to Holdings' shareholders included net income of approximately $51 million, $33 million and $50 million from SHO for 2012, 2011 and 2010, respectively. The financial information for SHO is reflected within the guarantor subsidiaries balances for these periods. The condensed consolidated financial information as of and for the periods ended February 2, 2013 reflect the effects of the separation of SHO.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company’s general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

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Condensed Consolidating Balance Sheet

February 2, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	320	$	289	$	—		$	609
Intercompany receivables	—		—		25,553		(25,553		)	—
Accounts receivable	—		506		129		—			635
Merchandise inventories	—		6,709		849		—			7,558
Prepaid expenses and other current assets	92		970		461		(1,060		)	463
Total current assets	92		8,505		27,281		(26,613		)	9,265
Total property and equipment, net	—		4,412		1,641		—			6,053
Goodwill and intangible assets	—		968		2,292		—			3,260
Other assets	17		223		3,147		(2,625		)	762
Investment in subsidiaries	16,413		24,988		—		(41,401		)	—
TOTAL ASSETS	$	16,522	$	39,096	$	34,361	$	(70,639	)	$	19,340
Current liabilities
Short-term borrowings	$	—	$	1,094	$	—	$	—		$	1,094
Current portion of long-term debt and capitalized lease obligations	—		66		17		—			83
Merchandise payables	—		2,392		369		—			2,761
Intercompany payables	12,594		12,959		—		(25,553		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,640		2,455		(1,027		)	4,094
Total current liabilities	12,623		19,563		2,841		(26,613		)	8,414
Long-term debt and capitalized lease obligations	1,237		3,081		135		(2,510		)	1,943
Pension and postretirement benefits	—		2,310		420		—			2,730
Long-term deferred tax liabilities	—		—		914		41			955
Other long-term liabilities	—		861		1,513		(248		)	2,126
Total Liabilities	13,860		25,815		5,823		(29,330		)	16,168
EQUITY
Shareholder’s equity	2,662		13,281		28,538		(41,726		)	2,755
Noncontrolling interest	—		—		—		417			417
Total Equity	2,662		13,281		28,538		(41,309		)	3,172
TOTAL LIABILITIES AND EQUITY	$	16,522	$	39,096	$	34,361	$	(70,639	)	$	19,340

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Condensed Consolidating Balance Sheet

January 28, 2012

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	411	$	—		$	747
Intercompany receivables	—		—		25,129		(25,129		)	—
Accounts receivable	—		486		209		—			695
Merchandise inventories	—		7,590		817		—			8,407
Prepaid expenses and other current assets	42		760		458		(865		)	395
Total current assets	42		9,172		27,024		(25,994		)	10,244
Total property and equipment, net	—		4,837		1,740		—			6,577
Goodwill and intangible assets	—		1,178		2,600		—			3,778
Other assets	22		190		2,589		(2,019		)	782
Investment in subsidiaries	17,332		25,648		—		(42,980		)	—
TOTAL ASSETS	$	17,396	$	41,025	$	33,953	$	(70,993	)	$	21,381
Current liabilities
Short-term borrowings	$	—	$	1,175	$	—	$	—		$	1,175
Current portion of long-term debt and capitalized lease obligations	—		213		17		—			230
Merchandise payables	—		2,476		436		—			2,912
Intercompany payables	11,844		13,285		—		(25,129		)	—
Short-term deferred tax liabilities	5		541		—		(30		)	516
Other current liabilities	29		2,856		2,329		(835		)	4,379
Total current liabilities	11,878		20,546		2,782		(25,994		)	9,212
Long-term debt and capitalized lease obligations	1,237		2,396		240		(1,785		)	2,088
Pension and postretirement benefits	—		2,283		455		—			2,738
Long-term deferred tax liabilities	—		5		817		(6		)	816
Other long-term liabilities	—		900		1,514		(228		)	2,186
Total Liabilities	13,115		26,130		5,808		(28,013		)	17,040
EQUITY
Shareholder’s equity	4,281		14,895		28,145		(43,040		)	4,281
Noncontrolling interest	—		—		—		60			60
Total Equity	4,281		14,895		28,145		(42,980		)	4,341
TOTAL LIABILITIES AND EQUITY	$	17,396	$	41,025	$	33,953	$	(70,993	)	$	21,381

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Condensed Consolidating Statement of Operations

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	35,417		$	8,032		$	(3,595	)	$	39,854
Cost of sales, buying and occupancy	—			26,531			4,619			(1,810		)	29,340
Selling and administrative	2			10,054			2,389			(1,785		)	10,660
Depreciation and amortization	—			634			196			—			830
Impairment charges	—			35			295			—			330
Gain on sales of assets	—			(298		)	(170		)	—			(468		)
Total costs and expenses	2			36,956			7,329			(3,595		)	40,692
Operating income (loss)	(2		)	(1,539		)	703			—			(838		)
Interest expense	(227		)	(391		)	(107		)	458			(267		)
Interest and investment income	—			43			509			(458		)	94
Other income	—			—			1			—			1
Income (loss) from continuing operations before income taxes	(229		)	(1,887		)	1,106			—			(1,010		)
Income tax (expense) benefit	89			527			(660		)	—			(44		)
Equity in earnings in subsidiaries	(914		)	65			—			849			—
Net income (loss)	(1,054		)	(1,295		)	446			849			(1,054		)
Loss attributable to noncontrolling interests	—			—			—			124			124
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(1,054	)	$	(1,295	)	$	446		$	973		$	(930	)

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Condensed Consolidating Statement of Operations

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	36,714		$	8,354		$	(3,501	)	$	41,567
Cost of sales, buying and occupancy	—			27,850			4,862			(1,746		)	30,966
Selling and administrative	2			9,926			2,491			(1,755		)	10,664
Depreciation and amortization	—			680			173			—			853
Impairment charges	—			649			—			—			649
Gain on sales of assets	—			(63		)	(1		)	—			(64		)
Total costs and expenses	2			39,042			7,525			(3,501		)	43,068
Operating income (loss)	(2		)	(2,328		)	829			—			(1,501		)
Interest expense	(224		)	(388		)	(112		)	435			(289		)
Interest and investment income	—			41			435			(435		)	41
Other loss	—			—			(2		)	—			(2		)
Income (loss) from continuing operations before income taxes	(226		)	(2,675		)	1,150			—			(1,751		)
Income tax (expense) benefit	43			(785		)	(627		)	—			(1,369		)
Equity in earnings in subsidiaries	(2,964		)	151			—			2,813			—
Income (loss) from continuing operations	(3,147		)	(3,309		)	523			2,813			(3,120		)
Loss from discontinued operations, net of tax	—			—			(27		)	—			(27		)
Net income (loss)	(3,147		)	(3,309		)	496			2,813			(3,147		)
Loss attributable to noncontrolling interests	—			—			—			7			7
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(3,147	)	$	(3,309	)	$	496		$	2,820		$	(3,140	)

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Condensed Consolidating Statement of Operations

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	37,587		$	8,573		$	(3,496	)	$	42,664
Cost of sales, buying and occupancy	—			27,877			4,830			(1,707		)	31,000
Selling and administrative	2			9,794			2,418			(1,789		)	10,425
Depreciation and amortization	—			694			175			—			869
Gain on sales of assets	—			(52		)	(15		)	—			(67		)
Total costs and expenses	2			38,313			7,408			(3,496		)	42,227
Operating income (loss)	(2		)	(726		)	1,165			—			437
Interest expense	(166		)	(429		)	(113		)	415			(293		)
Interest and investment income	—			38			413			(415		)	36
Other income (loss)	1			1			(16		)	—			(14		)
Income (loss) from continuing operations before income taxes	(167		)	(1,116		)	1,449			—			166
Income tax (expense) benefit	58			422			(507		)	—			(27		)
Equity in earnings in subsidiaries	259			567			—			(826		)	—
Income (loss) from continuing operations	150			(127		)	942			(826		)	139
Income from discontinued operations, net of tax	—			—			11			—			11
Net income (loss)	150			(127		)	953			(826		)	150
Income attributable to noncontrolling interests	—			—			—			(17		)	(17		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	150		$	(127	)	$	953		$	(843	)	$	133

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Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net income (loss)	$	(1,054	)	$	(1,295	)	$	446		$	849	$	(1,054	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			60			14			—		74
Deferred gain on derivatives, net of tax	5			—			—			—		5
Currency translation adjustments, net of tax	6			—			(1		)	—		5
Unrealized net gain (loss), net of tax	—			(270		)	177			93		—
Total other comprehensive income	11			(210		)	190			93		84
Comprehensive income (loss)	(1,043		)	(1,505		)	636			942		(970		)
Comprehensive income attributable to noncontrolling interest	—			—			—			124		124
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(1,043	)	$	(1,505	)	$	636		$	1,066	$	(846	)

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Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net income (loss)	$	(3,147	)	$	(3,309	)	$	496		$	2,813	$	(3,147	)
Other comprehensive loss:
Pension and postretirement adjustments, net of tax	—			(750		)	(39		)	—		(789		)
Deferred loss on derivatives, net of tax	(6		)	—			—			—		(6		)
Currency translation adjustments, net of tax	—			—			(38		)	—		(38		)
Unrealized net gain (loss), net of tax	—			320			(320		)	—		—
Total other comprehensive loss	(6		)	(430		)	(397		)	—		(833		)
Comprehensive income (loss)	(3,153		)	(3,739		)	99			2,813		(3,980		)
Comprehensive loss attributable to noncontrolling interest	—			—			—			12		12
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(3,153	)	$	(3,739	)	$	99		$	2,825	$	(3,968	)

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Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	150		$	(127	)	$	953		$	(826	)	$	150
Other comprehensive income (loss):
Pension and postretirement adjustments, net of tax	—			38			(50		)	—			(12		)
Deferred loss on derivatives, net of tax	(9		)	—			—			—			(9		)
Currency translation adjustments, net of tax	(3		)	—			96			—			93
Unrealized net gain (loss), net of tax	—			62			(62		)	—			—
Total other comprehensive income (loss)	(12		)	100			(16		)	—			72
Comprehensive income (loss)	138			(27		)	937			(826		)	222
Comprehensive income attributable to noncontrolling interest	—			—			—			(71		)	(71		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	138		$	(27	)	$	937		$	(897	)	$	151

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Notes to Consolidated Financial Statements—(Continued)

Condensed Consolidating Statement of Cash Flows

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,356	)	$	1,053		$	—		$	(303	)
Proceeds from sales of property and investments	—			353			179			—			532
Net increase in investments and restricted cash	—			—			37			—			37
Purchases of property and equipment	—			(293		)	(85		)	—			(378		)
Net investing with Affiliates	—			—			(236		)	236			—
Net cash provided by (used in) investing activities	—			60			(105		)	236			191
Proceeds from debt issuances	—			—			5			—			5
Repayments of long-term debt	—			(214		)	(121		)	—			(335		)
Increase in short-term borrowings, primarily 90 days or less	—			(81		)	—			—			(81		)
Sears Hometown and Outlet Stores, Inc. pre-separation funding	—			100			—			—			100
Intercompany dividend	100			(100		)	—			—			—
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347			—			—			—			347
Debt issuance costs	—			(3		)	—			—			(3		)
Purchase of Sears Canada shares	—			—			(10		)	—			(10		)
Sears Canada dividend paid to minority shareholders	—			52			(102		)	—			(50		)
Net borrowing with Affiliates	(447		)	1,526			(843		)	(236		)	—
Net cash provided by (used in) financing activities	—			1,280			(1,071		)	(236		)	(27		)
Effect of exchange rate changes on cash and cash equivalents	—			—			1			—			1
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			(16		)	(122		)	—			(138		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			336			411			—			747
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	320		$	289		$	—		$	609

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Notes to Consolidated Financial Statements—(Continued)

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities – continuing operations	$	—		$	(1,506	)	$	1,199		$	—		$	(307	)
Net cash provided by operating activities – discontinued operations	—			—			32			—			32
Net cash provided by (used in) operating activities	—			(1,506		)	1,231			—			(275		)
Proceeds from sales of property and investments	—			72			—			—			72
Net increase in investments and restricted cash	—			—			8			—			8
Purchases of property and equipment	—			(342		)	(90		)	—			(432		)
Net investing with Affiliates	—			—			(275		)	275			—
Net cash used in investing activities – continuing operations	—			(270		)	(357		)	275			(352		)
Net cash provided by investing activities – discontinued operations	—			—			43			—			43
Net cash used in investing activities	—			(270		)	(314		)	275			(309		)
Proceeds from debt issuances	—			—			104			—			104
Repayments of long-term debt	—			(481		)	(130		)	—			(611		)
Increase in short-term borrowings, primarily 90 days or less	—			815			—			—			815
Debt issuance costs	—			(35		)	—			—			(35		)
Purchase of Sears Canada shares	—			—			(43		)	—			(43		)
Purchase of treasury stock	—			(183		)	—			—			(183		)
Net borrowing with Affiliates	(140		)	1,190			(775		)	(275		)	—
Net cash provided by (used in) financing activities – continuing operations	(140		)	1,306			(844		)	(275		)	47
Net cash provided by (used in) financing activities – discontinued operations	—			28			(103		)	—			(75		)
Net cash provided by (used in) financing activities	(140		)	1,334			(947		)	(275		)	(28		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(140		)	(442		)	(30		)	—			(612		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	140			778			441			—			1,359
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	336		$	411		$	—		$	747

116

SEARS HOLDINGS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities – continuing operations	$	—		$	(1,115	)	$	1,192		$	—		$	77
Net cash provided by operating activities – discontinued operations	—			—			46			—			46
Net cash provided by (used in) operating activities	—			(1,115		)	1,238			—			123
Proceeds from sales of property and investments	—			16			19			—			35
Net (decrease) increase in investments and restricted cash	—			3			(3		)	—			—
Purchases of property and equipment	—			(369		)	(57		)	—			(426		)
Net investing with Affiliates	—			—			(288		)	288			—
Net cash used in investing activities – continuing operations	—			(350		)	(329		)	288			(391		)
Net cash used in investing activities – discontinued operations	—			—			(15		)	—			(15		)
Net cash used in investing activities	—			(350		)	(344		)	288			(406		)
Proceeds from debt issuances	1,246			—			107			—			1,353
Repayments of long-term debt	—			(51		)	(307		)	—			(358		)
Increase in short-term borrowings, primarily 90 days or less	—			35			—			—			35
Debt issuance costs	—			(18		)	(10		)	—			(28		)
Purchase of Sears Canada shares	—			(560		)	(43		)	—			(603		)
Sears Canada dividends paid to minority shareholders	—			639			(708		)				(69		)
Purchase of treasury stock	—			(394		)	—			—			(394		)
Net borrowing with Affiliates	(1,106		)	2,207			(813		)	(288		)	—
Net cash provided by (used in) financing activities – continuing operations	140			1,858			(1,774		)	(288		)	(64		)
Net cash provided by (used in) financing activities – discontinued operations	—			15			(46		)	—			(31		)
Net cash provided by (used in) financing activities	140			1,873			(1,820		)	(288		)	(95		)
Effect of exchange rate changes on cash and cash equivalents	—			—			57			—			57
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	140			408			(869		)	—			(321		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			370			1,310			—			1,680
CASH AND CASH EQUIVALENTS, END OF YEAR	$	140		$	778		$	441		$	—		$	1,359

117

Sears Holdings Corporation

Schedule II-Valuation and Qualifying Accounts

Years 2012, 2011 and 2010

millions	Balance at beginning of period		Additions charged to costs and expenses		(Deductions)			Balance at end of period
Allowance for Doubtful Accounts(1):
2012	$	28	$	5	$	(5	)	$	28
2011	35		1		(8		)	28
2010	38		7		(10		)	35
Allowance for Deferred Tax Assets(2):
2012	2,268		531		(56		)	2,743
2011	153		2,118		(3		)	2,268
2010	131		27		(5		)	153

__________________

⁽¹⁾  Charges to the account are for the purposes for which the reserves were created.

⁽²⁾  At the end of 2011 we had a federal and state net operating loss (“NOL”) deferred tax asset of $672 million and a valuation allowance of $2,268 million. In 2012, there was a net increase to the federal and state NOL deferred tax asset of $50 million, bringing the ending balance to $722 million. The increase in NOLs resulted from federal utilization and state NOL expirations, netted against additional state losses incurred during 2012. The valuation allowance increased to $2,743 million at the end of 2012. Included in the 2012 increase was $213 million recorded to other accumulated comprehensive income for minimum pension adjustments. Additional valuation allowances for federal and state were created against expiring state NOLs and other deferred assets, and were netted against state valuation allowance reversals due to expiring state NOLs and federal utilization of NOLs.

118

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Sears Holdings Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting at February 2, 2013. In making its assessment, management used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The assessment included the documentation and understanding of the Company's internal control over financial reporting. Management evaluated the design effectiveness and tested the operating effectiveness of internal controls over financial reporting to form its conclusion.

Based on this evaluation, management concluded that, at February 2, 2013, the Company's internal control over financial reporting is effective to provide reasonable assurance that the Company's financial statements are fairly presented in conformity with generally accepted accounting principles.

Deloitte & Touche LLP, independent registered public accounting firm, has reported on the effectiveness of the Company's internal control over financial reporting at February 2, 2013, as stated in their report included herein.

119

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Sears Holdings Corporation

Hoffman Estates, Illinois

We have audited the accompanying consolidated balance sheets of Sears Holdings Corporation and subsidiaries (the “Company”) as of February 2, 2013 and January 28, 2012, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended February 2, 2013. Our audits also included the consolidated financial statement schedule listed in the Index at Item 8. We also have audited the Company's internal control over financial reporting as of February 2, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedules and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Sears Holdings Corporation and subsidiaries as of February 2, 2013 and January 28, 2012, and the results of their operations and their cash flows for each of the three years in the period ended February 2, 2013, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting at

120

February 2, 2013, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As disclosed in Note 1 to the Consolidated Financial Statements, the Company completed the spin-off of Orchard Supply Hardware Stores Corporation during 2011.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Chicago, Illinois

March 19, 2013

121

SEARS HOLDINGS CORPORATION

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Our management, with the participation of our principal executive and financial officers, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the principal executive and financial officers concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

In addition, based on that evaluation, no changes in our internal control over financial reporting have occurred during our last quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item  9B. Other Information

On March 18, 2013, the Compensation Committee of Holdings' Board of Directors (the “Board”) and the Board, with Edward S. Lampert recusing himself, approved the terms of an offer letter with Mr. Lampert under which he will continue to serve as the Company's Chief Executive Officer. Under the offer letter, Mr. Lampert will be paid an annual base salary of $1, effective as of February 1, 2013, the date on which Mr. Lampert began to serve as our Chief Executive Officer. In addition, during each of the first three years of Mr. Lampert's service as our Chief Executive Officer, Mr. Lampert will (1) participate in the Company's Annual Incentive Plan, with a target incentive opportunity of $2,000,000, payouts under which (if any) may be paid, at Mr. Lampert's election, in cash or in common stock of Holdings, and (2) receive Holdings common stock with value of $4,500,000 per annum, payable in equal monthly installments subject to his continued service as Chief Executive Officer. The number of shares issued to Mr. Lampert will be based on the value of Holdings' common stock on March 18, 2013 for shares issued through January 31, 2014, and on the February 1^st of each successive 12-month period of his employment. To the extent there is not a sufficient number of shares available under the Company's equity plans to make any award contemplated under Mr. Lampert's offer letter, Mr. Lampert will be entitled to receive compensation of substantially equivalent economic value in such form as the Company and Mr. Lampert agree upon. Mr. Lampert's primary place of employment will be located in the Miami, Florida metropolitan area. He is not eligible to participate in the Company's long-term incentive programs. Mr. Lampert is not entitled to severance benefits if his employment with the Company is terminated for any reason, and has not entered into a severance agreement with the Company.

122

PART III

Item  10. Directors, Executive Officers and Corporate Governance

Information required by Item 10 with respect to directors, the audit committee, audit committee financial experts and Section 16(a) beneficial ownership reporting compliance is included under the headings “Item 1. Election of Directors,” “Committees of the Board of Directors,” “Director Independence” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our definitive proxy statement for our annual meeting of stockholders to be held on May 1, 2013 (the “2013 Proxy Statement.”) and is incorporated herein by reference.

The information required by this Item 10 regarding the Company's executive officers is set forth under the heading “Executive Officers of the Registrant” in Part I of this Form 10-K and is incorporated herein by reference.

Holdings has adopted a Code of Conduct, which applies to all employees, including our principal executive officer, principal financial officer and principal accounting officer, and a Code of Conduct for its Board of Directors. Directors who are also officers of Holdings are subject to both codes of conduct. Each code of conduct is a code of ethics as defined in Item 406 of SEC Regulation S-K. The codes of conduct are available on the Corporate Governance section of our website at www.searsholdings.com. Any amendment to, or waiver from, a provision of the codes of conduct will be posted to the above-referenced website.

There were no changes to the process by which stockholders may recommend nominees to the Board of Directors during the last year.

Item  11. Executive Compensation

Information regarding executive and director compensation is incorporated by reference to the material under the headings “Executive Compensation,” “Compensation of Directors,” and “Compensation Committee Report” of the 2013 Proxy Statement.

Item  12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference to the material under the heading “Amount and Nature of Beneficial Ownership” of the 2013 Proxy Statement.

See also “Equity Compensation Plan Information” in Item 5 of this Report for a discussion of securities authorized for issuance under equity compensation plans.

Item  13. Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions and director independence is incorporated herein by reference to the material under the headings “Certain Relationships and Transactions,” “Review and Approval of Transactions with Related Persons” and “Corporate Governance” of the 2013 Proxy Statement.

Item 14. Principal Accountant Fees and Services

Information regarding principal accountant fees and services is incorporated herein by reference to the material under the heading “Independent Registered Public Accounting Firm Fees” of the 2013 Proxy Statement.

123

PART IV

Item  15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

1. Financial Statements

Financial statements filed as part of this Form 10-K are listed under Item 8.

2. Financial Statement Schedule

The financial statement schedule filed as part of this Form 10-K is listed under Item 8.

The separate financial statements and summarized financial information of majority-owned subsidiaries not consolidated and of 50% or less owned persons have been omitted because they are not required pursuant to conditions set forth in Rules 3-09 and 1-02(w) of Regulation S-X.

All other schedules have been omitted because they are not required under the instructions contained in Regulation S-X because the information called for is contained in the financial statements and notes thereto.

(b) Exhibits

An “Exhibit Index” has been filed as part of this Report beginning on Page E-1 and is incorporated herein by this reference.

Certain of the agreements incorporated by reference into this report contain representations and warranties and other agreements and undertakings by us and third parties. These representations and warranties, agreements and undertakings have been made as of specific dates, may be subject to important qualifications and limitations agreed to by the parties to the agreement in connection with negotiating the terms of the agreement, and have been included in the agreement for the purpose of allocating risk between the parties to the agreement rather than to establish matters as facts. Any such representations and warranties, agreements, and undertakings have been made solely for the benefit of the parties to the agreement and should not be relied upon by any other person.

124

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SEARS HOLDINGS CORPORATION
By:	/S/    ROBERT A. RIECKER
Name:	Robert A. Riecker
Title:	Vice President, Controller and Chief Accounting Officer
Date: March 19, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities stated and on the dates indicated.

* EDWARD S. LAMPERT		Director, Chairman of the Board of Directors, and Chief Executive Officer (principal executive officer)	March 19, 2013
Edward S. Lampert
* ROBERT A. SCHRIESHEIM		Executive Vice President and Chief Financial Officer (principal financial officer)	March 19, 2013
Robert A. Schriesheim
* ROBERT A. RIECKER		Vice President, Controller and Chief Accounting Officer (principal accounting officer)	March 19, 2013
Robert A. Riecker
* LOUIS J. D'AMBROSIO		Director	March 19, 2013
Louis J. D'Ambrosio
* PAUL G. DEPODESTA		Director	March 19, 2013
Paul G. DePodesta
* WILLIAM C. KUNKLER, III		Director	March 19, 2013
William C. Kunkler, III
* STEVEN T. MNUCHIN		Director	March 19, 2013
Steven T. Mnuchin
* ANN N. REESE		Director	March 19, 2013
Ann N. Reese
* EMILY SCOTT		Director	March 19, 2013
Emily Scott
* THOMAS J. TISCH		Director	March 19, 2013
Thomas J. Tisch
By	/S/    ROBERT A. RIECKER
	* Robert A. Riecker
	Individually and as Attorney-in-fact

125

EXHIBIT INDEX

3.1	Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Registrant's Current Report on Form 8-K, dated March 24, 2005, filed on March 24, 2005 (File No. 000-51217)).
3.2	Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to Registrant's Current Report on Form 8-K, dated December 2, 2009, filed on December 4, 2009 (File No. 000-51217)).
4.1	Registrant hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of holders of each issue of long-term debt of Registrant and its consolidated subsidiaries.
4.2	Indenture, dated as of October 12, 2010, among Sears Holdings Corporation, the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee and Collateral Agent (incorporated by reference to Exhibit 4.1 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
4.3	Security Agreement, dated as of October 12, 2010, among Sears Holdings Corporation, the guarantors party thereto and Wells Fargo Bank, National Association, as Collateral Agent (incorporated by reference to Exhibit 4.2 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
4.4	Intercreditor Agreement, dated as of October 12, 2010, among Bank of America, N.A., Wells Fargo Retail Finance, LLC and General Electric Capital Corporation, as ABL Agents, and Wells Fargo Bank, National Association, as Second Lien Agent (incorporated by reference to Exhibit 4.3 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
4.5	Registration Rights Agreement, dated as of October 12, 2010, by and among Sears Holdings Corporation and the guarantors party thereto and Banc of America Securities LLC (incorporated by reference to Exhibit 4.4 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
4.6	Registration Rights Agreement, dated as of October 12, 2010, by and among Sears Holdings Corporation and the guarantors party thereto, Sears Holdings Corporation Investment Committee on behalf of the Sears Holdings Pension Plan and Sears Holdings Pension Trust (incorporated by reference to Exhibit 4.5 to Registrant's Current Report on Form 8-K, dated October 12, 2010, filed on October 15, 2010 (File No. 000-51217)).
10.1	Guarantee executed by Sears, Roebuck and Co. under the Indenture, dated as of May 15, 1995, between Sears Roebuck Acceptance Corp. and JP Morgan Chase Bank (successor to The Chase Manhattan Bank, N.A.), as supplemented by the First Supplemental Indenture, dated as of November 3, 2003 (incorporated by reference to Exhibit 4(g) to Sears Roebuck Acceptance Corp.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 1-4040)).
10.2	Guarantee executed by Sears, Roebuck and Co. under the Indenture, dated as of October 1, 2002, between Sears Roebuck Acceptance Corp. and BNY Midwest Trust Company, as supplemented by the First Supplemental Indenture, dated as of November 3, 2003 (incorporated by reference to Exhibit 4(h) to Sears Roebuck Acceptance Corp.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 1-4040)).
10.3	Guarantee dated as of November 3, 2003 by Sears, Roebuck and Co. of the commercial paper master notes of Sears Roebuck Acceptance Corp. (incorporated by reference to Exhibit 10.38 to Sears, Roebuck and Co.'s Annual Report on Form 10-K for the fiscal year ended January 3, 2004 (File No. 1-416)).

E-1

10.4	Second Amended and Restated Credit Agreement, dated as of April 8, 2011, among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Kmart Corporation, the lenders party thereto, Wells Fargo Bank, National Association and General Electric Capital Corporation, as Co-Collateral Agents, Wells Fargo Capital Finance, LLC and General Electric Capital Corporation, as Co-Syndication Agents, Barclays Bank PLC, JPMorgan Chase Bank, N.A. and Citigroup Global Markets Inc. as Co-Documentation Agents, and Bank of America, N.A. as Agent, Co-Collateral Agent and Swingline Lender (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011 (File No. 000-51217)). (1)
10.5	Second Amended and Restated Guarantee and Collateral Agreement, dated as of April 8, 2011, among Sears Holdings Corporation, Sears, Roebuck and Co., Sears Roebuck Acceptance Corp., Kmart Holding Corporation, Kmart Corporation and certain of their respective subsidiaries, as Grantors, and Bank of America, N.A., Wells Fargo Bank, National Association and General Electric Capital Corporation, as Co-Collateral Agents (incorporated by reference to Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011 (File No. 000-51217)).
10.6	Purchase, Sale and Servicing Transfer Agreement, dated as of July 15, 2003, by and among Sears, Roebuck and Co., certain subsidiaries of Sears, Roebuck and Co. and Citicorp (incorporated by reference to Exhibit 10.1 to Sears, Roebuck and Co.'s Current Report on Form 8-K, dated July 15, 2003, filed on July 17, 2003 (File No. 1-416)).
10.7	Amendment No. 1, dated as of November 3, 2003, to the Purchase, Sale and Servicing Transfer Agreement, by and among Sears, Roebuck and Co., certain subsidiaries of Sears, Roebuck and Co. and Citicorp (incorporated by reference to Exhibit 2(b) to Sears, Roebuck and Co.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 1-416)).
10.8	Amended and Restated Program Agreement, dated as of July 15, 2003, amended and restated as of November 3, 2003, by and between Sears, Roebuck and Co., Sears Intellectual Property Management Company and Citibank (USA) N.A. (incorporated by reference to Exhibit 10(a) to Sears, Roebuck and Co.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2003 (File No. 1-416).
10.9	Terms Sheet For Revision of Program Agreement Between Sears, Roebuck and Co. and Citibank USA, N.A., dated April 29, 2005 (incorporated by reference to Exhibit 10.40 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2005 (File No. 000-51217)).
10.10	Sears Holdings Corporation Director Compensation Program, as amended (incorporated by reference to Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010 (File No. 000-51217)).**
10.11	Sears Holdings Corporation 2006 Stock Plan, as amended (incorporated by reference to Appendix C to Registrant's Proxy Statement dated March 15, 2006 (File No. 00051217)).**
10.12	Sears Holdings Corporation Umbrella Incentive Program (Amended and Restated Effective March 7, 2012) (incorporated by reference to Appendix A to Registrant's Proxy Statement dated March 16, 2012 (File No. 000-51217)).**
10.13	Form of Sears Holdings Corporation Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.44 to Registrant's Annual Report on Form 10-K for the fiscal year ended February 3, 2007 (the “2006 10-K”)) (File No. 000-51217).**
10.14	Form of Sears Holdings Corporation Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 30, 2010 (the “2009 10-K”))**
10.15	Form of Sears Holdings Corporation Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2011(File No. 000-51217)).**
10.16	Form of Cash Right - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.17 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 28, 2012 (the “2011 10-K”)).**

E-2

10.17	Form of Cash Award - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated September 28, 2012, filed on September 28, 2012 (File No. 000-51217)).**
10.18	Form of Cash Award - Addendum to Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated November 30, 2012, filed on November 30, 2012 (File No. 000-51217)).**
10.19	Form of LTIP Award Agreement (incorporated by reference to Exhibit 10.45 to the 2006 10-K) (File No. 000-51217).**
10.20	Sears Holdings Corporation 2010 Long-Term Incentive Program (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2010 (File No. 000-51217)).**
10.21	Sears Holdings Corporation Long-Term Incentive Program, effective April 27, 2011 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011 (File No. 000-51217)).**
10.22	2012 Additional Definitions under the Sears Holdings Corporation Long-Term Incentive Program (incorporated by reference to Exhibit 99.1 to Registrant's Current Report on Form 8-K, dated September 15, 2012, filed on September 20, 2012 (File No. 000-51217)).**
10.23	2013 Additional Definitions under Sears Holdings Corporation Long-Term Incentive Program (Amended and Restated Effective February 12, 2013) (incorporated by reference to Exhibit 10.3 to Registrant's Current Report on Form 8-K, dated February 12, 2013, filed on February 19, 2013 (File No. 000-51217)).**
10.24	Sears Holdings Corporation Cash Long-Term Incentive Plan (Effective February 12, 2013) (incorporated by reference to Exhibit 10.4 to Registrant's Current Report on Form 8-K, dated February 12, 2013, filed on February 19, 2013 (File No. 000-51217)).**
10.25	Sears Holdings Corporation Annual Incentive Plan, Amended and Restated Effective March 7, 2012 (incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 28, 2012 (File No. 000-51217)).**
10.26	2012 Additional Definitions Under Sears Holdings Corporation Annual Incentive Plan (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended April 28, 2012 (File No. 000-51217)).**
10.27	Sears Holdings Corporation Annual Incentive Plan (Amended and Restated Effective February 12, 2013) (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated February 12, 2013, filed on February 19, 2013 (File No. 000-51217)).**
10.28	2013 Additional Definitions under Sears Holdings Corporation Annual Incentive Plan (Amended and Restated Effective February 12, 2013) (incorporated by reference to Exhibit 10.2 to Registrant's Current Report on Form 8-K, dated February 12, 2013, filed on February 19, 2013 (File No. 000-51217)).**
10.29	Form of Executive Severance Agreement (incorporated by reference to Exhibit 10.26 to the 2011 10-K).**
*10.30	Form of letter from Registrant to Edward S. Lampert relating to employment dated March 18, 2013.**
10.31	Letter from Registrant to Louis J. D'Ambrosio relating to employment dated February 23, 2011 (incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K, dated February 23, 2011, filed on February 25, 2011 (File No. 000-51217)).**
*10.32	Letter Agreement between Registrant and Louis J. D'Ambrosio dated January 7, 2013 and amendment thereto dated January 14, 2013.**
10.33	Letter from Registrant to Ronald D. Boire relating to employment dated February 10, 2012 (incorporated by reference to Exhibit 10.38 to the 2011 10-K).**

E-3

10.34	Executive Severance Agreement, dated and effective as of January 8, 2012, between Sears Holdings Corporation and its affiliates and subsidiaries and Ronald D. Boire (incorporated by reference to Exhibit 10.39 to the 2011 10-K).**(1)
*10.35	Letter from Registrant to Imran Jooma relating to employment dated December 20, 2011.**
*10.36	Letter from Registrant to Imran Jooma relating to employment dated February 5, 2013.**
10.37	Letter from Registrant to Robert A. Schriesheim relating to employment dated August 15, 2011 (incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2011(File No. 000-51217)).**
10.38	Executive Severance Agreement, dated and effective as of August 16, 2011, between Sears Holdings Corporation and its affiliates and subsidiaries and Robert A. Schriesheim (incorporated by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2011(File No. 000-51217)).**(1)
10.39	Letter from Registrant to Dane A. Drobny relating to employment dated April 30, 2010 (incorporated by reference to Exhibit 10.38 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 29, 2011).**
*10.40	Letter from Registrant to Dane A. Drobny relating to employment dated February 5, 2013.**
*12.11	Computation of ratio of earnings to fixed charges for Registrant and consolidated subsidiaries.
*21.11	Subsidiaries of the Registrant.
*23.11	Consent of Deloitte & Touche LLP.
*24.11	Powers of Attorney of certain officers and directors of Registrant.
*31.111	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.211	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.11	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.11	The following financial information from the Annual Report on Form 10-K for the year ended February 2, 2013, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Operations for the years ended February 2, 2013, January 28, 2012 and January 29, 2011; (ii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended February 2, 2013, January 28, 2012 and January 29, 2011; (iii) the Consolidated Balance Sheets at February 2, 2013 and January 28, 2012; (iv) the Consolidated Statements of Cash Flows for the years ended February 2, 2013, January 28, 2012 and January 29, 2011; (v) the Consolidated Statements of Equity for the years ended February 2, 2013, January 28, 2012 and January 29, 2011; and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text.

__________________

* Filed herewith

** A management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 15(b) of Form 10-K.

(1) Confidential treatment was granted as to omitted portions of this Exhibit. The omitted material has been filed separately with the Securities and Exchange Commission.

E-4

EX-10.30

EXHIBIT 10.30

[SEARS HOLDINGS LETTERHEAD]

March 18, 2013

Mr. Edward S. Lampert

Dear Eddie,

We are pleased to confirm the terms of your employment as Chief Executive Officer (“CEO”) of Sears Holdings Corporation (“SHC”), reporting to the Board of Directors of SHC (the “Board”). You will continue to serve as Chairman of the Board, subject to the discretion of the Board.

In recognition of your assumption of the responsibilities of CEO of SHC on February 1, 2013, this letter serves as confirmation of our offer, subject to the contingencies listed below. The Compensation Committee of the Board (“Compensation Committee”) has approved this letter.

You will have all of the customary duties of a CEO. We acknowledge that you have other business interests and duties, including those incident to your role as Chairman and Chief Executive Officer of ESL Investments, Inc., and agree that you may continue to pursue such interests and discharge such duties during your employment as CEO of SHC.

The key elements of your compensation package are as follows:

• Annual base salary at a rate of $1.00.

• During each of the first three (3) years of your service as the CEO, you will participate in the Sears Holdings Corporation Annual Incentive Plan (“AIP”), with a target incentive award of $2,000,000, contingent upon the achievement of performance goals set by the Compensation Committee. The 2013 AIP financial performance goals, measures and other particulars have been approved by the Compensation Committee. This award and the applicable performance measure will be approved by the Compensation Committee no later than May 1, 2013. Any incentive payable with respect to a fiscal year will be paid by April 15 of the following fiscal year, provided that you are actively employed by SHC on the last day of the fiscal year. At your election, this incentive may be paid in cash or in SHC common stock. For avoidance of doubt, you will not be eligible to participate in the Sears Holdings Corporation Long-Term Incentive Program.

• During each of the first three (3) years of your service as CEO, you will be entitled to receive common stock of SHC valued on an annualized basis at $4,500,000 under the Sears Holdings Corporation 2006 Stock Plan, as amended, or a successor equity plan, subject to applicable taxes (the “Annual Stock Compensation”), provided that you remain employed by SHC on the applicable award date. The number of shares issued in respect

Mr. Edward S. Lampert

March 18, 2013

Page 2

of the Annual Stock Compensation each year will be determined using the NASDAQ regular market hours closing price of SHC common stock on the applicable Determination Date (rounded to the nearest whole share). For purposes hereof, the Determination Date shall be March 18, 2013 for stock issued through January 31, 2014 and February 1, 2014 and February 1, 2015 for stock issued from February 1, 2014 through January 31, 2015 and from February 1, 2015 through January 31, 2016, respectively. The Annual Stock Compensation will have grant dates and be paid in equal monthly installments over the twelve (12) month period following the applicable Determination Date (or February 1, 2013 for stock issued through January 31, 2014) on the last business day of the applicable month so long as you remain employed by SHC on that date; provided that the first installment of Annual Stock Compensation payable for service from February 1, 2013 shall represent two months’ of Annual Stock Compensation (valued at $750,000 on the applicable Determination Date) and it shall be paid on the last business day of March 2013. Shares paid in respect of the Annual Equity Compensation will be fully vested when issued. To the extent there is not a sufficient number shares available under SHC’s equity plans to make any grant contemplated under this letter, you will be entitled to receive compensation of substantially equivalent economic value in such form as SHC and you mutually agree.

• You will be eligible to receive four (4) weeks paid vacation. Added to this, you will qualify for six (6) paid National Holidays each year. You also will be eligible for up to four (4) Personal Days per year, after completing six (6) months of service.

• You will be eligible to participate in all of SHC’s retirement, health and welfare programs on a basis no less favorable than other senior executives of SHC, in accordance with and subject to the applicable terms, conditions and availability of those programs.

• You represent and warrant to SHC that (a) you are not a party to any agreement, written or oral, containing any non-competition provision or any other restriction (including, without limitation, any confidentiality provision) that would result in any restriction on your ability to accept and perform this or any other position with SHC or any of its affiliates and (b) except as disclosed to SHC, you are not (i) a member of any board of directors, board of trustees or similar governing body of any for-profit, non-profit or not-for-profit entity, or (ii) a party to any agreement, written or oral, with any entity under which you would receive remuneration for your services. You agree that you will not (A) become a member of any board or body described in clause (i) of the preceding sentence or (B) become a party to any agreement described in clause (ii) of the preceding sentence, in each case without having previously disclosed such relationship to SHC. Further, you agree you will not disclose to SHC or use for the benefit of SHC, in violation of an obligation of confidentiality, any information that you acquired as a result of any previous employment.

• You will be entitled to indemnification and directors and officers liability insurance to the same extent as other senior executives of SHC.

Mr. Edward S. Lampert

March 18, 2013

Page 3

• You will be reimbursed for business-related expenses, including reasonable out of pocket administrative and offices expenses, in accordance with the company’s standard corporate expense reporting policy incurred in connection with your services as CEO, as appropriate.

• Your office and primary place of employment will be in the Miami, Florida metropolitan area. You will be reimbursed for business-related travel expenses in accordance with the company’s travel policy, as appropriate.

• It is intended that the terms of this offer letter will comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended, and the offer letter shall be interpreted on a basis consistent with such intent.

To accept, sign below and return this letter to my attention.

Sincerely,

Chair of the Compensation Committee of the

Board of Sears Holdings Corporation

Accepted:

             Date: March , 2013

Edward S. Lampert

EX-10.32

EXHIBIT 10.32

[SEARS HOLDINGS LETTERHEAD]

January 7, 2013

Mr. Louis J. D’Ambrosio

Dear Lou:

This will confirm the terms and conditions of your departure as Chief Executive Officer, President and a director of Sears Holdings Corporation (“SHC”) and its affiliates, and an employee of Sears Holdings Management Corporation (“SHMC”).

You will continue to serve as Chief Executive Officer and President of SHC pursuant to your existing compensation and benefits arrangements through February 2, 2013, the last day of SHC’s 2013 fiscal year. Effective as of the close of business on February 2, 2013, you will step down from your role as Chief Executive Officer and President of SHC, and as an officer or director of any subsidiary or affiliate of SHC. From February 3, 2013 through February 28, 2013, you will continue to serve as an employee of SHMC, in a non-officer role without a title with respect to SHC, assisting with the leadership transition to the new SHC Chief Executive Officer and performing such other duties as may be delegated to you by the then-Chief Executive Officer of SHC. Your pay for the service described in the preceding sentence will be $25,000 for the period from February 3, 2013 through February 28, 2013, paid in accordance with SHC’s normal salaried payroll practices, and you will continue to be eligible for the employee benefits generally made available to all SHC employees. For purposes of clarity, your compensatory equity grants will continue to vest in the ordinary course through your last day of employment. Your employment with SHC will end at the close of business on February 28, 2013. For purposes of your employment letter with SHC dated February 23, 2011, your Executive Severance Agreement with SHC dated as of February 23, 2011, all equity awards denominated in SHC common stock held by you, and each and every other plan, agreement, policy and arrangement of SHC and any of its affiliates, you agree that the cessation of your employment with SHC is a voluntary resignation by you effective as of February 28, 2013. Moreover, in the case of any such plan, agreement, policy or arrangement that includes the concept of resignation with “good reason” or a similar term of like meaning, you agree that this voluntary resignation will be considered to have been made without “good reason” or such similar term.

Effective from and after February 2, 2013, you waive your right to resign from SHC for “good reason” or a similar term of like meaning for purposes of any plan, agreement, policy or arrangement of SHC and any of its affiliates.

You hereby agree to continue to serve as a member of the SHC Board of Directors until the expiration of your term at SHC’s 2013 annual meeting of stockholders, and will not stand for re-election.

Please indicate your agreement to the terms described in this letter by signing a copy of this letter where indicated below and returning such signed copy to SHC.

Sincerely,

/s/ Thomas J. Tisch            

Chairman, Compensation Committee

of the Board of Directors

AGREED AND ACCEPTED

/s/ Louis J. D’Ambrosio        1/7/2013

Louis J. D’Ambrosio        Date

[SEARS HOLDINGS CORPORATION LETTERHEAD]

January 14, 2013

Mr. Louis J. D’Ambrosio

Dear Lou:

This amends the letter agreement entered into by and between you and Sears Holdings Corportion (“SHC”) dated January 7, 2013 regarding the terms and conditions of your departure as Chief Executive Officer, President and a director of SHC and its affiliates, and an employee of Sears Holdings Management Corporation (the “Letter Agreement”). The Letter Agreement is hereby amended as follows:

1. Delete the words “February 2, 2013, the last day of SHC’s 2013 fiscal year” and replace them with “February 1, 2013, the day before the last day of SHC’s 2012 fiscal year”;

2. Delete all other references to “February 2, 2013” and replace each of them with “February 1, 2013”;

3. Delete each reference to “February 3, 2013” and replace it with “February 2, 2013”; and

4. Replace “$25,000” with “$26,000”.

All other terms of the Letter Agreement, as amended, remain unchanged and in full force and effect. Please indicate your agreement to the amended Letter Agreement by signing a copy of this letter where indicated below and returning such signed copy to SHC.

/s/ Thomas J. Tisch            

Chairman, Compensation Committee

of the Board of Directors

AGREED AND ACCEPTED

/s/ Louis J. D’Ambrosio

Louis J. D’Ambrosio

EX-10.35

EXHIBIT 10.35

[SEARS HOLDINGS LETTERHEAD]

December 20, 2011

Mr. Imran Jooma

Dear Imran,

I am pleased to inform you that the Compensation Committee of SHC’s Board of Directors has approved your promotion and base salary increase, which will be effective retroactive to November 2, 2011, subject to the contingency listed below. In addition, you will report to Lou D’Ambrosio, Chief Executive Officer and President in your new role.

Your base salary increase is as follows:

• Annual base salary at a rate of $650,000.

• Your annual incentive opportunity will remain at 75% of your base salary under Sears Holdings Annual Incentive Plan (“AIP”). Any incentive payable under the 2011 AIP will be prorated based on the amount of time spent at each salary level through January 28, 2012, the last day of Sears Holdings 2011 fiscal year.Your 2011 AIP also will continue to be measured 50% against the financial performance of Online BOP and 50% Online Total Gross Margin. Any annual incentive payable with respect to a fiscal year will be paid by April 15^th of the following fiscal year, provided that you are actively employed at the payment date.

The table below summarizes the changes in your compensation:

	Title	Base	AIP Target	Target Total Cash
Current	SVP and President, eCommerce	$500,000	75%	$875,000
New	SVP and President, Online, Marketing, Pricing, and Financial Services	$650,000	75%	$1,137,500
Increase		30%		30%

• You will be required to sign a new Executive Severance Agreement (“Agreement”).  If your employment with SHC is terminated by SHC (other than for Cause, death or Disability) or by you for Good Reason (as such capitalized terms are defined in the Agreement), you will receive twelve (12) months of salary continuation, equal to your base salary at the time of termination, subject to mitigation. Under the Agreement, you will agree, among other things, not to disclose confidential information and for twelve (12) months following employment not to solicit employees.  You also agree not to aid, assist or render services for any “Sears Competitor” or “Sears Vendor” (as such terms are defined in the Agreement) for twelve (12) months following termination of employment. The non-disclosure, non-solicitation, non-compete and non-affiliation provisions apply regardless of whether you are eligible for severance benefits under this Agreement. Please note that upon execution, this Agreement will supersede all previous severance agreements between you and SHC. The enclosed copy of this

Mr. Imran Jooma

December 20, 2011

Page 2

Agreement (including the Appendix A) also replaces the executive severance agreements sent to you August 31, 2011 and again September 6, 2011 in connection with the retention award. The new position, increase in annual base pay and the retention award are conditioned upon you signing this Agreement.

• This offer is also contingent upon satisfactory completion of a background reference check based on Company policy.

Imran, your new opportunity is a direct result of your leadership, performance and the many contributions you make to the Company every day. We appreciate everything you do to make a difference and bring value to our Company, our associates and our shareholders. I look forward to working with you in your new position.

This offer will expire if not accepted within one week from the date of this letter. To accept, sign below and return this letter along with your signed Executive Severance Agreement to me.

Sincerely,

/s/ J. David Works

J. David Works

Senior Vice President and President,

Talent and Human Capital Services

Accepted:

/s/ Imran Jooma	12/21/2011
Imran Jooma	Date

EX-10.36

EXHIBIT 10.36

[SEARS HOLDINGS LETTERHEAD]

February 5, 2013

Mr. Imran Jooma

Dear Imran,

As you continue in the role of Executive Vice President and President, Online, Marketing, Pricing and Financial Services, we are pleased to provide you with the following compensation changes effective February 4, 2013, subject to approval by the Compensation Committee of the Sears Holdings Corporation Board of Directors.

The changes to your compensation package are as follows:

• Annual base salary at a rate of $750,000.

• You will be eligible to receive a long-term incentive cash award of $1,250,000 (gross). The grant date of this award is February 4, 2013. This award will be scheduled to vest on a graded basis, with $350,000 of the award vesting on the first anniversary of the grant date, $450,000 of the award vesting on the second anniversary of the grant date, and $450,000 of the award vesting on the third anniversary of the grant date, provided you are actively employed on the applicable vesting date, and will be payable as soon as administratively possible following the applicable vesting date. This award is separate from and not in the place of your participation under the Sears Holdings Corporation Long-Term Incentive Program. Please refer to the enclosed Sears Holdings Corporation Executive LTI Cash Award Agreement for the specific terms of the award.

Imran, we are excited about the important contributions you will continue to make to the company as a member of the Executive Leadership Team. I look forward to your acceptance of our offer. If you need additional information or clarification, please call.

To accept, sign below and return this letter to me.

Sincerely,

/s/ Dean Carter

Dean Carter

Chief Human Resources Officer

Accepted:

/s/ Imran Jooma	3/5/2013
Imran Jooma	Date

EX-10.40

EXHIBIT 10.40

[SEARS HOLDINGS LETTERHEAD]

February 5, 2013

Mr. Dane Drobny

Dear Dane,

As you continue in the role of Senior Vice President, General Counsel and Corporate Secretary, we are pleased to provide you with the following compensation changes effective February 4, 2013, subject to approval by the Compensation Committee of the Sears Holdings Corporation Board of Directors.

The changes to your compensation package are as follows:

• Annual base salary at a rate of $700,000.

• You will be eligible to receive a long-term incentive cash award of $800,000 (gross). The grant date of this award is February 4, 2013. This award will be scheduled to vest on a graded basis, with $200,000 of the award vesting on the first anniversary of the grant date, $300,000 of the award vesting on the second anniversary of the grant date, and $300,000 of the award vesting on the third anniversary of the grant date, provided you are actively employed on the applicable vesting date, and will be payable as soon as administratively possible following the applicable vesting date. This award is separate from and not in the place of your participation under the Sears Holdings Corporation Long-Term Incentive Program. Please refer to the enclosed Sears Holdings Corporation Executive LTI Cash Award Agreement for the specific terms of the award.

Dane, we are excited about the important contributions you will continue to make to the company as a member of the Executive Leadership Team. I look forward to your acceptance of our offer. If you need additional information or clarification, please call.

To accept, sign below and return this letter to me.

Sincerely,

/s/ Dean Carter

Dean Carter

Chief Human Resources Officer

Accepted:

/s/ Dane Drobny	3/1/2013
Dane Drobny	Date

EX-12

Exhibit 12

COMPUTATION OF RATIO OF INCOME TO COMBINED FIXED CHARGES

SEARS HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES

	Year Ended
(millions, except ratios)	2012			2011			2010		2009		2008
Fixed Charges
Interest and amortization of debt discount and expense on all indebtedness		$216			$225			$211		$176		$179
Add interest element implicit in rentals	280			285			288		296		296
	496			510			499		472		475
Interest capitalized	1			1			—		—		—
Total fixed charges		$497			$511			$499		$472		$475
Income
Income before income taxes, noncontrolling interest, and extraordinary loss		($1,010	)		($1,751	)		$166		$391		$415
Deduct undistributed net income of unconsolidated companies	47			27			17		11		11
	(1,057		)	(1,778		)	149		380		404
Add
Fixed charges (excluding interest capitalized)	496			510			499		472		475
Income before fixed charges and income taxes		($561	)		($1,268	)		$648		$852		$879
Ratio of income to fixed charges	(1.13		)	(2.48		)	1.30		1.81		1.85

EX-21

EXHIBIT 21

Subsidiaries of the Registrant

The following is a list of subsidiaries of Sears Holdings Corporation, the names under which such subsidiaries do business, and the state or country in which each was organized, as of February 2, 2013. The list does not include subsidiaries which would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary within the meaning of Item 601(b)(21)(ii) of Regulation S-K.

Names	State or Other Jurisdiction of Organization
Consolidated Subsidiaries:
Kmart Holding Corporation*	Delaware
Kmart Corporation*	Michigan
KLC, Inc.*	Texas
Kmart of Michigan, Inc.*	Michigan
Kmart of Washington LLC*	Washington
Kmart Stores of Illinois LLC*	Illinois
Kmart Stores of Texas LLC*	Texas
Kmart.com LLC*1	Delaware
MyGofer LLC*	Delaware
Sears Holdings Global Sourcing Limited2	Hong Kong
Sears Reinsurance Company Ltd.	Bermuda
Sears, Roebuck and Co.*	New York
A&E Factory Service, LLC*	Delaware
A&E Home Delivery, LLC*	Delaware
A&E Lawn & Garden, LLC*	Delaware
A&E Signature Service, LLC*	Delaware
California Builder Appliances, Inc.*3	Delaware
Florida Builder Appliances, Inc.*3	Delaware
Lands' End, Inc.*4	Delaware
Lands' End Direct Merchants, Inc.*	Delaware
Private Brands, Ltd.*	Delaware
Sears Canada Inc.5	Canada
Sears Financial Holding Corporation	Delaware
Sears Holdings Management Corporation*6	Delaware
Sears Brands, L.L.C.7	Illinois
KCD IP, LLC8	Delaware
Sears Brands Management Corporation*9	Delaware
Sears Home Improvement Products, Inc.*	Pennsylvania
Sears Protection Company*	Illinois
Sears Protection Company (Florida), L.L.C.*	Florida
Sears Roebuck Acceptance Corp.*	Delaware
Sears, Roebuck de Puerto Rico, Inc.*	Delaware
SOE, Inc.*3	Delaware
SRC Depositor Corporation10	Delaware
SRC O.P. Corporation10	Delaware
SRC Facilities Statutory Trust No. 2003-A10	Delaware
SRC Real Estate Holdings (TX), LLC10	Delaware
SRC Real Estate (TX), LP10	Delaware
StarWest, LLC*3	Delaware

* Loan party under the Registrant's Second Amended and Restated Credit Agreement, dated as of April 8, 2011.

¹  Shares are owned by BlueLight.com, Inc., a Delaware corporation, which is a wholly-owned subsidiary of KBL Holding Inc., a Delaware corporation, which in turn is a wholly-owned subsidiary of Kmart Corporation.

²  Shares are owned by Kmart Overseas Corporation, a Nevada corporation, which is a wholly-owned subsidiary of Kmart Corporation.

³  Shares are owned by FBA Holdings, Inc., a Delaware corporation, which is a wholly-owned subsidiary of Sears, Roebuck and Co.

⁴  Six subsidiaries of Lands' End, Inc., which are in its same line of business, are omitted, three of which operate in the United States and three of which operate in foreign countries.

⁵  Shares are owned directly or indirectly (through SHLD Acquisition Corp., a Nova Scotia unlimited liability company) by Sears Canada Holdings Corp., a Delaware corporation, which is a wholly-owned subsidiary of Sears International Holdings Corp., a Delaware corporation, which in turn is a wholly-owned subsidiary of Sears, Roebuck and Co. Fourteen subsidiaries of Sears Canada Inc., which are in its same line of business, are omitted, only one of which operates in the United States.

⁶  Shares are owned by Sears, Roebuck and Co. and Kmart Holding Corporation.

⁷  The membership interest of Sears Brands, L.L.C. is owned by Sears Brands Business Unit Corporation, an Illinois corporation, which is a wholly-owned subsidiary of Sears Holdings Management Corporation.

⁸  Bankruptcy remote, special purpose entity that owns the U.S. rights to the Kenmore, Craftsman and DieHard trademarks and issuer of intercompany securities backed by such trademark rights.

⁹  Shares are owned by Sears Buying Services, Inc., a Delaware corporation, which is a wholly-owned subsidiary of Sears Brands Business Unit Corporation, an Illinois corporation, which in turn is a wholly-owned subsidiary of Sears Holdings Management Corporation.

¹⁰  REMIC-related subsidiary.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-173443 on Form S-3 and Registration Statements on Form S-8 (File Nos. 333-133247, 333-169747, and 333-176859) of our report dated March 19, 2013, relating to the consolidated financial statements and consolidated financial statement schedule of Sears Holdings Corporation and subsidiaries, and the effectiveness of Sears Holdings Corporation and subsidiaries’ internal control over financial reporting (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the spin-off of Orchard Supply Hardware Stores Corporation), appearing in this Annual Report on Form 10-K of Sears Holdings Corporation and subsidiaries for the year ended February 2, 2013.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Chicago, Illinois    

March 19, 2013

EX-24

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 18th day of March, 2013.

Signature	Title
/s/ Edward S. Lampert
Edward S. Lampert	Director, Chairman of the Board of Directors and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 18th day of March, 2013.

Signature	Title
/s/ Robert A. Schriesheim
Robert A. Schriesheim	Executive Vice President and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 18th day of March, 2013.

Signature	Title
/s/ Robert A. Riecker
Robert A. Riecker	Vice President, Controller and Chief Accounting Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 15th day of March, 2013.

Signature	Title
/s/ Louis J. D’Ambrosio
Louis J. D’Ambrosio	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 17th day of March, 2013.

Signature	Title
/s/ Paul G. DePodesta
Paul G. DePodesta	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 18th day of March, 2013

Signature	Title
/s/ William C. Kunkler, III
William C. Kunkler, III	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 18th day of March, 2013.

Signature	Title
/s/ Steven T. Mnuchin
Steven T. Mnuchin	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 16th day of March, 2013.

Signature	Title
/s/ Ann N. Reese
Ann N. Reese	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 14th day of March, 2013.

Signature	Title
/s/ Emily Scott
Emily Scott	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that of the undersigned, being a director or officer, or both, of SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Company”), does hereby constitute and appoint EDWARD S. LAMPERT, DANE A. DROBNY, ROBERT A. SCHRIESHEIM, and ROBERT A. RIECKER, with full power to each of them to act alone, as the true and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution to each of said attorneys, to execute, file and deliver any and all instruments and to do any and all acts and things which said attorneys and agents, or any of them, deem advisable to enable the Company to comply with the Securities Exchange Act of 1934, as amended, and any requirements of the Securities and Exchange Commission in respect thereto, relating to the annual report on Form 10-K for the year ended February 2, 2013, including specifically, but without limitation of the general authority hereby granted, the power and authority to sign his or her name in the name and on behalf of the Company or as a director or officer, or both, of the Company, as indicated below opposite his or her signature, to the annual report on Form 10-K for the year ended February 2, 2013 or any amendment or papers supplemental thereto; and the undersigned does hereby fully ratify and confirm all that said attorneys and agents or any of them, or the substitute of any of them, shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have subscribed these presents this 15th day of March, 2013.

Signature	Title
/s/ Thomas J. Tisch
Thomas J. Tisch	Director

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Edward S. Lampert, certify that:

1.	I have reviewed this annual report on Form 10-K of Sears Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 19, 2013

/s/ Edward S. Lampert       
Edward S. Lampert
Chairman of the Board and Chief Executive Officer
Sears Holdings Corporation

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Robert A. Schriesheim, certify that:

1.	I have reviewed this annual report on Form 10-K of Sears Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 19, 2013

/s/ Robert A. Schriesheim           

Robert A. Schriesheim
Executive Vice President and Chief Financial Officer

Sears Holdings Corporation

EX-32

EXHIBIT 32

CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

Each of the undersigned, Edward S. Lampert, Chairman of the Board and Chief Executive Officer of Sears Holdings Corporation (the “Company”) and Robert A. Schriesheim, Executive Vice President and Chief Financial Officer of the Company, has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2013 (the “Report”).

Each of the undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 19, 2013

/s/ Edward S. Lampert

Edward S. Lampert

Chairman of the Board and Chief Executive Officer

/s/ Robert A. Schriesheim

Robert A. Schriesheim

Executive Vice President and

Chief Financial Officer

XML

INCOME TAXES INCOME TAXES (Tables)

12 Months Ended

Feb. 02, 2013

Income Tax Disclosure [Abstract]

Income Taxes

millions	2012			2011			2010
Income (loss) before income taxes:
U.S.	$	(1,226	)	$	(1,809	)	$	(157	)
Foreign	216			58			323
Total	$	(1,010	)	$	(1,751	)	$	166
Income tax expense (benefit):
Current:
Federal	$	17		$	19		$	1
State and local	15			—			(7		)
Foreign	27			2			110
Total current	59			21			104
Deferred:
Federal	8			1,357			(84		)
State and local	(41		)	(35		)	7
Foreign	18			26			—
Total deferred	(15		)	1,348			(77		)
Total	$	44		$	1,369		$	27

Effective Tax Rate Reconsciliation

	2012		2011		2010
Effective tax rate reconciliation:
Federal income tax rate (benefit rate)	(35.0	)%	(35.0	)%	35.0	%
State and local tax (benefit) net of federal tax benefit	(3.0	)	(1.3	)	0.1
Federal and state valuation allowance	23.5		104.1		—
Tax on separation of Sears Hometown and Outlet Stores, Inc.	10.3		—		—
Nondeductible goodwill impairment	10.2		11.4		—
Tax on partial spin-off of Sears Canada	3.9		—		—
Adjust foreign statutory rates	(3.2	)	—		—
Tax credits	(1.0	)	(1.5	)	(13.0	)
Long life land and intangibles	(0.8	)	—		—
Resolution of income tax matters	(0.5	)	0.7		(9.2	)
Canadian repatriation cost on Sears Canada dividend received	0.5		—		5.3
Canadian rate differential on noncontrolling interest	—		—		(0.1	)
Other	(0.5	)	(0.2	)	(1.8	)
	4.4	%	78.2	%	16.3	%

Deferred Tax Assets and Liabilities

millions	February 2, 2013			January 28, 2012
Deferred tax assets and liabilities:
Deferred tax assets:
Federal benefit for state and foreign taxes	$	151		$	151
Accruals and other liabilities	179			188
Capital leases	114			125
NOL carryforwards	722			672
Postretirement benefit plans	78			134
Pension	1,208			818
Deferred revenue	202			236
Credit carryforwards	605			385
Other	163			216
Total deferred tax assets	3,422			2,925
Valuation allowance	(2,743		)	(2,268		)
Net deferred tax assets	679			657
Deferred tax liabilities:
Trade names/Intangibles	1,071			1,097
Property and equipment	156			166
Inventory	453			378
Other	117			104
Total deferred tax liabilities	1,797			1,745
Net deferred tax liability	$	(1,118	)	$	(1,088	)

Reconciliation of Beginning and Ending Amount of Gross Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:

	Federal, State, and Foreign Tax
millions	February 2, 2013			January 28, 2012			January 29, 2011
Gross UTB Balance at Beginning of Period	$	192		$	192		$	310
Tax positions related to the current period:
Gross increases	21			22			25
Gross decreases	(8		)	(8		)	(10		)
Tax positions related to prior periods:
Gross increases	—			20			51
Gross decreases	(33		)	(19		)	(161		)
Settlements	(1		)	(4		)	(13		)
Lapse of statute of limitations	(10		)	(10		)	(10		)
Exchange rate fluctuations	—			(1		)	—
Gross UTB Balance at End of Period	$	161		$	192		$	192

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BORROWINGS (Domestic Credit Agreement) (Details) (Domestic Credit Agreement, USD $)	3 Months Ended
	Apr. 30, 2011	Feb. 02, 2013	Jan. 28, 2012
Debt Instrument [Line Items]
Credit agreement	$ 3,275,000,000
Credit facility, amount outstanding		749,000,000	838,000,000
Credit Agreement available amount		1,800,000,000	1,800,000,000
Fixed charge ratio at the last day of any quarter		1.0
Letters of credit outstanding amount		754,000,000	626,000,000
Covenant terms	The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, if availability under the credit facility, as defined, is less than 15%. It also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.
Second Lien
Debt Instrument [Line Items]
Credit agreement		2,000,000,000
Credit facility, amount outstanding		1,200,000,000
Credit Agreement available amount		760,000,000
Minimum
Debt Instrument [Line Items]
Commitment fees	0.375%
Limit of availability under the credit facility to make restricted payments	15.00%
Minimum | LIBOR
Debt Instrument [Line Items]
Credit agreement, interest rates margin	2.00%
Minimum | Base Rate
Debt Instrument [Line Items]
Credit agreement, interest rates margin	1.00%
Maximum
Debt Instrument [Line Items]
Commitment fees	0.625%
Credit agreement, additional borrowing capacity	1,000,000,000
Maximum | LIBOR
Debt Instrument [Line Items]
Credit agreement, interest rates margin	2.50%
Maximum | Base Rate
Debt Instrument [Line Items]
Credit agreement, interest rates margin	1.50%
Letter of Credit
Debt Instrument [Line Items]
Credit agreement	$ 1,500,000,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Self-insurance Reserves (Details) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
2013	$ 266
2014	163
2015	120
2016	87
2017	66
Later years	371
Total undiscounted obligation	1,073
Less—discount	(95)
Net obligation	$ 978

XML

EARNINGS PER SHARE (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 02, 2013	Oct. 27, 2012	Jul. 28, 2012	Apr. 28, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 30, 2011	Apr. 30, 2011	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Earnings Per Share [Abstract]
Basic weighted average shares									105.9	106.8	111.5
Dilutive effect of restricted stock and stock options									0	0	0.2
Diluted weighted average shares									105.9	106.8	111.7
Net income (loss) from continuing operations attributable to Holdings' shareholders	$ (489)	$ (498)	$ (132)	$ 189	$ (2,386)	$ (410)	$ (152)	$ (165)	$ (930)	$ (3,113)	$ 122
Basic (in dollars per share)	$ (4.61)	$ (4.70)	$ (1.25)	$ 1.78	$ (22.47)	$ (3.85)	$ (1.42)	$ (1.53)	$ (8.78)	$ (29.15)	$ 1.09
Diluted (in dollars per share)	$ (4.61)	$ (4.70)	$ (1.25)	$ 1.78	$ (22.47)	$ (3.85)	$ (1.42)	$ (1.53)	$ (8.78)	$ (29.15)	$ 1.09

XML

BORROWINGS (Senior Secured Notes) (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended
	Oct. 31, 2010	Feb. 02, 2013
Debt Instrument [Line Items]
Senior secured notes, interest rate	6.625%
Senior Secured Note
Debt Instrument [Line Items]
Aggregate principal amount of notes purchased	$ 1,000	$ 1,240
Senior secured notes, interest rate	6.625%
Debt instrument maturity date	Oct. 15, 2018
Percentage of note repurchase price per principal amount	101.00%
SHC Domestic, Pension Plans | Senior Secured Note
Debt Instrument [Line Items]
Aggregate principal amount of notes purchased	$ 250
Treasury Rate | Senior Secured Note
Debt Instrument [Line Items]
Credit agreement, interest rates margin	0.50%

XML

INCOME TAXES Unrecognized Tax Benefits (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Gross UTB Balance at Beginning of Period	$ 192	$ 192	$ 310
Tax positions related to the current period:
Gross increases	21	22	25
Gross decreases	(8)	(8)	(10)
Tax positions related to prior periods:
Gross increases	0	20	51
Gross decreases	(33)	(19)	(161)
Settlements	(1)	(4)	(13)
Lapse of statute of limitations	(10)	(10)	(10)
Exchange rate fluctuations	0	(1)	0
Gross UTB Balance at End of Period	$ 161	$ 192	$ 192

XML

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Tables)

12 Months Ended

Feb. 02, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

February 2, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	320	$	289	$	—		$	609
Intercompany receivables	—		—		25,553		(25,553		)	—
Accounts receivable	—		506		129		—			635
Merchandise inventories	—		6,709		849		—			7,558
Prepaid expenses and other current assets	92		970		461		(1,060		)	463
Total current assets	92		8,505		27,281		(26,613		)	9,265
Total property and equipment, net	—		4,412		1,641		—			6,053
Goodwill and intangible assets	—		968		2,292		—			3,260
Other assets	17		223		3,147		(2,625		)	762
Investment in subsidiaries	16,413		24,988		—		(41,401		)	—
TOTAL ASSETS	$	16,522	$	39,096	$	34,361	$	(70,639	)	$	19,340
Current liabilities
Short-term borrowings	$	—	$	1,094	$	—	$	—		$	1,094
Current portion of long-term debt and capitalized lease obligations	—		66		17		—			83
Merchandise payables	—		2,392		369		—			2,761
Intercompany payables	12,594		12,959		—		(25,553		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,640		2,455		(1,027		)	4,094
Total current liabilities	12,623		19,563		2,841		(26,613		)	8,414
Long-term debt and capitalized lease obligations	1,237		3,081		135		(2,510		)	1,943
Pension and postretirement benefits	—		2,310		420		—			2,730
Long-term deferred tax liabilities	—		—		914		41			955
Other long-term liabilities	—		861		1,513		(248		)	2,126
Total Liabilities	13,860		25,815		5,823		(29,330		)	16,168
EQUITY
Shareholder’s equity	2,662		13,281		28,538		(41,726		)	2,755
Noncontrolling interest	—		—		—		417			417
Total Equity	2,662		13,281		28,538		(41,309		)	3,172
TOTAL LIABILITIES AND EQUITY	$	16,522	$	39,096	$	34,361	$	(70,639	)	$	19,340

Condensed Consolidating Balance Sheet

January 28, 2012

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	411	$	—		$	747
Intercompany receivables	—		—		25,129		(25,129		)	—
Accounts receivable	—		486		209		—			695
Merchandise inventories	—		7,590		817		—			8,407
Prepaid expenses and other current assets	42		760		458		(865		)	395
Total current assets	42		9,172		27,024		(25,994		)	10,244
Total property and equipment, net	—		4,837		1,740		—			6,577
Goodwill and intangible assets	—		1,178		2,600		—			3,778
Other assets	22		190		2,589		(2,019		)	782
Investment in subsidiaries	17,332		25,648		—		(42,980		)	—
TOTAL ASSETS	$	17,396	$	41,025	$	33,953	$	(70,993	)	$	21,381
Current liabilities
Short-term borrowings	$	—	$	1,175	$	—	$	—		$	1,175
Current portion of long-term debt and capitalized lease obligations	—		213		17		—			230
Merchandise payables	—		2,476		436		—			2,912
Intercompany payables	11,844		13,285		—		(25,129		)	—
Short-term deferred tax liabilities	5		541		—		(30		)	516
Other current liabilities	29		2,856		2,329		(835		)	4,379
Total current liabilities	11,878		20,546		2,782		(25,994		)	9,212
Long-term debt and capitalized lease obligations	1,237		2,396		240		(1,785		)	2,088
Pension and postretirement benefits	—		2,283		455		—			2,738
Long-term deferred tax liabilities	—		5		817		(6		)	816
Other long-term liabilities	—		900		1,514		(228		)	2,186
Total Liabilities	13,115		26,130		5,808		(28,013		)	17,040
EQUITY
Shareholder’s equity	4,281		14,895		28,145		(43,040		)	4,281
Noncontrolling interest	—		—		—		60			60
Total Equity	4,281		14,895		28,145		(42,980		)	4,341
TOTAL LIABILITIES AND EQUITY	$	17,396	$	41,025	$	33,953	$	(70,993	)	$	21,381

Condensed Consolidating Statement of Operations

Condensed Consolidating Statement of Operations

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	35,417		$	8,032		$	(3,595	)	$	39,854
Cost of sales, buying and occupancy	—			26,531			4,619			(1,810		)	29,340
Selling and administrative	2			10,054			2,389			(1,785		)	10,660
Depreciation and amortization	—			634			196			—			830
Impairment charges	—			35			295			—			330
Gain on sales of assets	—			(298		)	(170		)	—			(468		)
Total costs and expenses	2			36,956			7,329			(3,595		)	40,692
Operating income (loss)	(2		)	(1,539		)	703			—			(838		)
Interest expense	(227		)	(391		)	(107		)	458			(267		)
Interest and investment income	—			43			509			(458		)	94
Other income	—			—			1			—			1
Income (loss) from continuing operations before income taxes	(229		)	(1,887		)	1,106			—			(1,010		)
Income tax (expense) benefit	89			527			(660		)	—			(44		)
Equity in earnings in subsidiaries	(914		)	65			—			849			—
Net income (loss)	(1,054		)	(1,295		)	446			849			(1,054		)
Loss attributable to noncontrolling interests	—			—			—			124			124
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(1,054	)	$	(1,295	)	$	446		$	973		$	(930	)

Condensed Consolidating Statement of Operations

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	36,714		$	8,354		$	(3,501	)	$	41,567
Cost of sales, buying and occupancy	—			27,850			4,862			(1,746		)	30,966
Selling and administrative	2			9,926			2,491			(1,755		)	10,664
Depreciation and amortization	—			680			173			—			853
Impairment charges	—			649			—			—			649
Gain on sales of assets	—			(63		)	(1		)	—			(64		)
Total costs and expenses	2			39,042			7,525			(3,501		)	43,068
Operating income (loss)	(2		)	(2,328		)	829			—			(1,501		)
Interest expense	(224		)	(388		)	(112		)	435			(289		)
Interest and investment income	—			41			435			(435		)	41
Other loss	—			—			(2		)	—			(2		)
Income (loss) from continuing operations before income taxes	(226		)	(2,675		)	1,150			—			(1,751		)
Income tax (expense) benefit	43			(785		)	(627		)	—			(1,369		)
Equity in earnings in subsidiaries	(2,964		)	151			—			2,813			—
Income (loss) from continuing operations	(3,147		)	(3,309		)	523			2,813			(3,120		)
Loss from discontinued operations, net of tax	—			—			(27		)	—			(27		)
Net income (loss)	(3,147		)	(3,309		)	496			2,813			(3,147		)
Loss attributable to noncontrolling interests	—			—			—			7			7
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(3,147	)	$	(3,309	)	$	496		$	2,820		$	(3,140	)

Condensed Consolidating Statement of Operations

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	37,587		$	8,573		$	(3,496	)	$	42,664
Cost of sales, buying and occupancy	—			27,877			4,830			(1,707		)	31,000
Selling and administrative	2			9,794			2,418			(1,789		)	10,425
Depreciation and amortization	—			694			175			—			869
Gain on sales of assets	—			(52		)	(15		)	—			(67		)
Total costs and expenses	2			38,313			7,408			(3,496		)	42,227
Operating income (loss)	(2		)	(726		)	1,165			—			437
Interest expense	(166		)	(429		)	(113		)	415			(293		)
Interest and investment income	—			38			413			(415		)	36
Other income (loss)	1			1			(16		)	—			(14		)
Income (loss) from continuing operations before income taxes	(167		)	(1,116		)	1,449			—			166
Income tax (expense) benefit	58			422			(507		)	—			(27		)
Equity in earnings in subsidiaries	259			567			—			(826		)	—
Income (loss) from continuing operations	150			(127		)	942			(826		)	139
Income from discontinued operations, net of tax	—			—			11			—			11
Net income (loss)	150			(127		)	953			(826		)	150
Income attributable to noncontrolling interests	—			—			—			(17		)	(17		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	150		$	(127	)	$	953		$	(843	)	$	133

Condensed Consolidating Statement of Comprehensive Income

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net income (loss)	$	(1,054	)	$	(1,295	)	$	446		$	849	$	(1,054	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			60			14			—		74
Deferred gain on derivatives, net of tax	5			—			—			—		5
Currency translation adjustments, net of tax	6			—			(1		)	—		5
Unrealized net gain (loss), net of tax	—			(270		)	177			93		—
Total other comprehensive income	11			(210		)	190			93		84
Comprehensive income (loss)	(1,043		)	(1,505		)	636			942		(970		)
Comprehensive income attributable to noncontrolling interest	—			—			—			124		124
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(1,043	)	$	(1,505	)	$	636		$	1,066	$	(846	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net income (loss)	$	(3,147	)	$	(3,309	)	$	496		$	2,813	$	(3,147	)
Other comprehensive loss:
Pension and postretirement adjustments, net of tax	—			(750		)	(39		)	—		(789		)
Deferred loss on derivatives, net of tax	(6		)	—			—			—		(6		)
Currency translation adjustments, net of tax	—			—			(38		)	—		(38		)
Unrealized net gain (loss), net of tax	—			320			(320		)	—		—
Total other comprehensive loss	(6		)	(430		)	(397		)	—		(833		)
Comprehensive income (loss)	(3,153		)	(3,739		)	99			2,813		(3,980		)
Comprehensive loss attributable to noncontrolling interest	—			—			—			12		12
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(3,153	)	$	(3,739	)	$	99		$	2,825	$	(3,968	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	150		$	(127	)	$	953		$	(826	)	$	150
Other comprehensive income (loss):
Pension and postretirement adjustments, net of tax	—			38			(50		)	—			(12		)
Deferred loss on derivatives, net of tax	(9		)	—			—			—			(9		)
Currency translation adjustments, net of tax	(3		)	—			96			—			93
Unrealized net gain (loss), net of tax	—			62			(62		)	—			—
Total other comprehensive income (loss)	(12		)	100			(16		)	—			72
Comprehensive income (loss)	138			(27		)	937			(826		)	222
Comprehensive income attributable to noncontrolling interest	—			—			—			(71		)	(71		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	138		$	(27	)	$	937		$	(897	)	$	151

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,356	)	$	1,053		$	—		$	(303	)
Proceeds from sales of property and investments	—			353			179			—			532
Net increase in investments and restricted cash	—			—			37			—			37
Purchases of property and equipment	—			(293		)	(85		)	—			(378		)
Net investing with Affiliates	—			—			(236		)	236			—
Net cash provided by (used in) investing activities	—			60			(105		)	236			191
Proceeds from debt issuances	—			—			5			—			5
Repayments of long-term debt	—			(214		)	(121		)	—			(335		)
Increase in short-term borrowings, primarily 90 days or less	—			(81		)	—			—			(81		)
Sears Hometown and Outlet Stores, Inc. pre-separation funding	—			100			—			—			100
Intercompany dividend	100			(100		)	—			—			—
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347			—			—			—			347
Debt issuance costs	—			(3		)	—			—			(3		)
Purchase of Sears Canada shares	—			—			(10		)	—			(10		)
Sears Canada dividend paid to minority shareholders	—			52			(102		)	—			(50		)
Net borrowing with Affiliates	(447		)	1,526			(843		)	(236		)	—
Net cash provided by (used in) financing activities	—			1,280			(1,071		)	(236		)	(27		)
Effect of exchange rate changes on cash and cash equivalents	—			—			1			—			1
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			(16		)	(122		)	—			(138		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			336			411			—			747
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	320		$	289		$	—		$	609

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities – continuing operations	$	—		$	(1,506	)	$	1,199		$	—		$	(307	)
Net cash provided by operating activities – discontinued operations	—			—			32			—			32
Net cash provided by (used in) operating activities	—			(1,506		)	1,231			—			(275		)
Proceeds from sales of property and investments	—			72			—			—			72
Net increase in investments and restricted cash	—			—			8			—			8
Purchases of property and equipment	—			(342		)	(90		)	—			(432		)
Net investing with Affiliates	—			—			(275		)	275			—
Net cash used in investing activities – continuing operations	—			(270		)	(357		)	275			(352		)
Net cash provided by investing activities – discontinued operations	—			—			43			—			43
Net cash used in investing activities	—			(270		)	(314		)	275			(309		)
Proceeds from debt issuances	—			—			104			—			104
Repayments of long-term debt	—			(481		)	(130		)	—			(611		)
Increase in short-term borrowings, primarily 90 days or less	—			815			—			—			815
Debt issuance costs	—			(35		)	—			—			(35		)
Purchase of Sears Canada shares	—			—			(43		)	—			(43		)
Purchase of treasury stock	—			(183		)	—			—			(183		)
Net borrowing with Affiliates	(140		)	1,190			(775		)	(275		)	—
Net cash provided by (used in) financing activities – continuing operations	(140		)	1,306			(844		)	(275		)	47
Net cash provided by (used in) financing activities – discontinued operations	—			28			(103		)	—			(75		)
Net cash provided by (used in) financing activities	(140		)	1,334			(947		)	(275		)	(28		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(140		)	(442		)	(30		)	—			(612		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	140			778			441			—			1,359
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	336		$	411		$	—		$	747

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities – continuing operations	$	—		$	(1,115	)	$	1,192		$	—		$	77
Net cash provided by operating activities – discontinued operations	—			—			46			—			46
Net cash provided by (used in) operating activities	—			(1,115		)	1,238			—			123
Proceeds from sales of property and investments	—			16			19			—			35
Net (decrease) increase in investments and restricted cash	—			3			(3		)	—			—
Purchases of property and equipment	—			(369		)	(57		)	—			(426		)
Net investing with Affiliates	—			—			(288		)	288			—
Net cash used in investing activities – continuing operations	—			(350		)	(329		)	288			(391		)
Net cash used in investing activities – discontinued operations	—			—			(15		)	—			(15		)
Net cash used in investing activities	—			(350		)	(344		)	288			(406		)
Proceeds from debt issuances	1,246			—			107			—			1,353
Repayments of long-term debt	—			(51		)	(307		)	—			(358		)
Increase in short-term borrowings, primarily 90 days or less	—			35			—			—			35
Debt issuance costs	—			(18		)	(10		)	—			(28		)
Purchase of Sears Canada shares	—			(560		)	(43		)	—			(603		)
Sears Canada dividends paid to minority shareholders	—			639			(708		)				(69		)
Purchase of treasury stock	—			(394		)	—			—			(394		)
Net borrowing with Affiliates	(1,106		)	2,207			(813		)	(288		)	—
Net cash provided by (used in) financing activities – continuing operations	140			1,858			(1,774		)	(288		)	(64		)
Net cash provided by (used in) financing activities – discontinued operations	—			15			(46		)	—			(31		)
Net cash provided by (used in) financing activities	140			1,873			(1,820		)	(288		)	(95		)
Effect of exchange rate changes on cash and cash equivalents	—			—			57			—			57
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	140			408			(869		)	—			(321		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			370			1,310			—			1,680
CASH AND CASH EQUIVALENTS, END OF YEAR	$	140		$	778		$	441		$	—		$	1,359

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DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL GUARANTEES (Tables)

12 Months Ended

Feb. 02, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Guarantor Obligations

We had the following guarantees outstanding at February 2, 2013:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	774	$	47	$	—	$	821
Commercial letters of credit	8		133		—		141
Secondary lease obligations	—		—		77		77

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INCOME TAXES Narrative (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011	Jan. 30, 2010
Income Taxes [Line Items]
Valuation allowance change in amount		$ 2,100
Valuation allowance	2,743	2,268
NOL carryforwards	722	672
Credit carryforwards	605
Sale of stock, percentage of related party spinoff	45.00%
Unrecognized Tax Benefits	161	192	192	310
Unrecognized tax benefits that would, if recognized, impact effective tax rate	94
Expected decrease in unrecognized tax benefits over the next 12 months	30
Interest and penalties recognized on balance sheet	57
Interest and penalties recognized, net of federal benefit	39
Net interest expense recognized in statement of income	2
Income tax Examination	The U.S. Internal Revenue Service (“IRS”) has completed its examination of Holdings' 2006 through 2009 federal income tax returns, and we are currently working with the IRS appeals division to resolve a single issue arising from these exams. We have resolved all matters arising from prior IRS exams. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2010, and Kmart is under examination by such jurisdictions for the years 2003 through 2010.
Accumulated Minimum Pension Liability Adjustment
Income Taxes [Line Items]
Net increase (decrease)	213	317
Sears Hometown and Outlet Stores, Inc.
Income Taxes [Line Items]
Valuation allowance change in amount	105
Taxable gain on disposition of affiliate	266
Utilization of deferred tax assets, disposition of affiliate	105
Sears Canada
Income Taxes [Line Items]
Valuation allowance change in amount	40
Taxable gain on disposition of affiliate	367
Utilization of deferred tax assets, disposition of affiliate	$ 40

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EQUITY Components of Accumulated Other Comprehensive Loss (Detail) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Pension and postretirement adjustments (net of tax of $(443), $(492) and $(480), respectively)	$ (1,408)	$ (1,575)	$ (783)
Cumulative unrealized derivative gain (loss) (net of tax of $0, $0 and $0, respectively)	0	(5)	1
Currency translation adjustments (net of tax of $(39), $(26) and $(7), respectively)	(51)	(29)	3
Accumulated other comprehensive loss	(1,459)	(1,609)	(779)
Pension and postretirement adjustments, tax	(443.0)	(492.0)	(480.0)
Cumulative unrealized derivative gain (loss), tax	0	0	0
Currency translation adjustments, tax	(39.0)	(26.0)	(7.0)
Accumulated other comprehensive loss attributable to noncontrolling interests	$ (64)	$ (9)	$ (4)

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RELATED PARTY DISCLOSURE - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended			1 Months Ended		12 Months Ended			1 Months Ended							12 Months Ended				12 Months Ended				12 Months Ended
	Oct. 31, 2010	Feb. 02, 2013	Jan. 28, 2012	Oct. 31, 2010 Senior Secured Note	Feb. 02, 2013 Senior Secured Note	Feb. 02, 2013 ESL Investments, Inc.	Jan. 28, 2012 ESL Investments, Inc.	Jan. 26, 2012 ESL Investments, Inc.	Oct. 31, 2010 ESL Investments, Inc. Senior Secured Note	Feb. 02, 2013 ESL Investments, Inc. Senior Secured Note	Jan. 28, 2012 ESL Investments, Inc. Senior Secured Note	Feb. 02, 2013 ESL Investments, Inc. Unsecured Senior Notes	Jan. 28, 2012 ESL Investments, Inc. Unsecured Senior Notes	Feb. 02, 2013 Edward S. Lampert Unsecured Senior Notes	Jan. 28, 2012 Edward S. Lampert Unsecured Senior Notes	Feb. 02, 2013 Sears Hometown and Outlet Stores, Inc.	Feb. 02, 2013 SRAC Issued Day	Jan. 28, 2012 SRAC Issued Day	Feb. 02, 2013 SRAC Issued Maximum	Feb. 02, 2013 SRAC Issued ESL Investments, Inc.	Jan. 28, 2012 SRAC Issued ESL Investments, Inc.	Feb. 02, 2013 SRAC Issued Edward S. Lampert	Jan. 28, 2012 SRAC Issued Edward S. Lampert	Feb. 02, 2013 Sears Canada ESL Investments, Inc.
Related Party Transaction
Percentage of ownership in Sears outstanding common stock						63.00%														55.00%				28.00%
Weighted average of maturity period																	31.6	29.2
Interest rate per annum on unsecured commercial paper					6.625%												2.38%	1.51%
Unsecured commercial paper		$ 345	$ 337														$ 202	$ 230	$ 325	$ 285	$ 250	$ 169	$ 130
Interest Expense																				4
Aggregate principal amount of notes purchased				1,000	1,240					95	95	2	10	1	4
Senior secured note, interest rate	6.625%			6.625%					6.625%
Undivided participating interest in rights and obligations								80.00%
Participation interest in receivables						234	93
Related party receivables, repayment term																10 days
Due from affiliate, current																79
Proceeds from sale of inventory and shared corporate services to affiliate																513
Payments for commissions to affiliate																$ 60

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BORROWINGS (Letters of Credit Facility) (Details) In Millions, unless otherwise specified	1 Months Ended
	Jan. 20, 2011 Standby letters of credit USD ($)	Feb. 02, 2013 Standby letters of credit USD ($)	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility [Member] USD ($)	Jan. 28, 2012 Sears Canada Five Year Revolving Credit Facility [Member] USD ($)	Jan. 28, 2012 Sears Canada Five Year Revolving Credit Facility [Member] CAD	Sep. 30, 2010 Sears Canada Five Year Revolving Credit Facility [Member] USD ($)
Line of Credit Facility [Line Items]
Credit agreement	$ 500					$ 800
Percentage of collateral to face value of all issued and outstanding letters of credit	103.00%
Debt instrument maturity date	Jan. 20, 2014
Credit facility, amount outstanding		0	0	101	101
Cash collateral for borrowed securities			$ 19	$ 20

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INCOME TAXES Effective Tax Rate Reconciliation (Details)	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Income Tax Disclosure [Abstract]
Federal income tax rate (benefit rate)	(35.00%)	(35.00%)	35.00%
State and local tax (benefit) net of federal tax benefit	(3.00%)	(1.30%)	0.10%
Federal and state valuation allowance	23.50%	104.10%	0.00%
Tax on separation of Sears Hometown and Outlet Stores, Inc.	10.30%	0.00%	0.00%
Nondeductible goodwill impairment	10.20%	11.40%	0.00%
Tax on partial spin-off of Sears Canada	3.90%	0.00%	0.00%
Adjust foreign statutory rates	(3.20%)	0.00%	0.00%
Tax credits	(1.00%)	(1.50%)	(13.00%)
Long life land and intangibles	(0.80%)	0.00%	0.00%
Resolution of income tax matters	(0.50%)	0.70%	(9.20%)
Canadian repatriation cost on Sears Canada dividend received	0.50%	0.00%	5.30%
Canadian rate differential on noncontrolling interest	0.00%	0.00%	(0.10%)
Other	(0.50%)	(0.20%)	(1.80%)
Effective Income Tax Rate, Continuing Operations	4.40%	78.20%	16.30%

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Store Closing Cost Accruals (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012
Restructuring Reserve [Roll Forward]
Beginning Balance	$ 159	$ 72
Store closing costs	124	124
Payments/utilizations	(99)	(37)
Store closing capital lease obligations	9
Ending Balance	193	159
Severance Costs
Restructuring Reserve [Roll Forward]
Beginning Balance	59	2
Store closing costs	31	73
Payments/utilizations	(49)	(16)
Store closing capital lease obligations	0
Ending Balance	41	59
Lease Termination Costs
Restructuring Reserve [Roll Forward]
Beginning Balance	64	68
Store closing costs	86	5
Payments/utilizations	(21)	(9)
Store closing capital lease obligations	9
Ending Balance	138	64
Other Charges
Restructuring Reserve [Roll Forward]
Beginning Balance	36	2
Store closing costs	7	46
Payments/utilizations	(29)	(12)
Store closing capital lease obligations	0
Ending Balance	$ 14	$ 36

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GOODWILL AND INTANGIBLE ASSETS Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jan. 28, 2012	Feb. 02, 2013
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Gross Carrying Amount	$ 3,361	$ 3,288
Accumulated Amortization	424	407
Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Gross Carrying Amount	658	585
Accumulated Amortization	424	407
Favorable lease rights | Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Weighted Average Life	29 years
Gross Carrying Amount	360	293
Accumulated Amortization	194	148
Contractual arrangements and customer lists | Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Weighted Average Life	9 years
Gross Carrying Amount	224	218
Accumulated Amortization	170	188
Trade names | Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Weighted Average Life	7 years
Gross Carrying Amount	74	74
Accumulated Amortization	60	71
Trade names | Non Amortizable Intangible Assets
Schedule of Finite and Indefinite-Lived Assets [Line Items]
Gross Carrying Amount	$ 2,703	$ 2,703

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LEASES Rent Expense (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Leases [Abstract]
Minimum rentals	$ 824	$ 837	$ 844
Percentage rentals	17	19	21
Less-Sublease rentals	(47)	(30)	(52)
Total	$ 794	$ 826	$ 813

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INCOME TAXES Deferred Tax Assets and Liabilities (Details) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013	Jan. 28, 2012
Deferred tax assets
Federal benefit for state and foreign taxes	$ 151	$ 151
Accruals and other liabilities	179	188
Capital leases	114	125
NOL carryforwards	722	672
Postretirement benefit plans	78	134
Pension	1,208	818
Deferred revenue	202	236
Credit carryforwards	605	385
Other	163	216
Total deferred tax assets	3,422	2,925
Valuation allowance	(2,743)	(2,268)
Net deferred tax assets	679	657
Deferred tax liabilities
Trade names/Intangibles	1,071	1,097
Property and equipment	156	166
Inventory	453	378
Other	117	104
Total deferred tax liabilities	1,797	1,745
Net deferred tax liability	$ (1,118)	$ (1,088)

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EQUITY Stock-based Compensation (Detail) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense	$ 15	$ 14	$ 9
Compensation cost not yet recognized	10
Compensation cost not yet recognized, period for recognition	3 years
Aggregate Fair Value
Aggregate fair value of shares granted based on weighted average fair value at date of grant	9	23	15
Aggregate fair value of shares vesting during period	10	5	10
Aggregate fair value of shares forfeited during period	$ 4	$ 8	$ 2
Restricted Stock
Shares
Beginning of year balance (in shares)	496	313	279
Granted (in shares)	175	386	176
Vested (in shares)	(172)	(72)	(110)
Forfeited (in shares)	(75)	(131)	(32)
Ending of year balance (in shares)	424	496	313
Weighted- Average Fair Value on Date of Grant
Beginning of year balance (in dollars per share)	$ 65.02	$ 74.09	$ 80.73
Granted (in dollars per share)	$ 49.20	$ 59.60	$ 83.09
Vested (in dollars per share)	$ 60.89	$ 81.55	$ 103.19
Forfeited (in dollars per share)	$ 78.59	$ 61.62	$ 81.38
End of year balance (in dollars per share)	$ 57.72	$ 65.02	$ 74.09
Aggregate Fair Value
Expected to vest	205

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SUMMARY OF SEGMENT DATA

12 Months Ended

Feb. 02, 2013

Segment Reporting [Abstract]

SUMMARY OF SEGMENT DATA

SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart and Sears Canada formats each represent both an operating and reportable segment. The Sears Domestic reportable segment consists of the aggregation of several business formats. These formats are evaluated by our Chief Operating Decision Maker ("CODM") to make decisions about resource allocation and to assess performance.

On February 1, 2013, Mr. Lampert became Chief Executive Officer in addition to his role as Chairman of the Board. We will assess any potential impact on the business segment information used by our CODM to operate the Company on an ongoing basis.

Each of these segments derives its revenues from the sale of merchandise and related services to customers, primarily in the United States and Canada. The merchandise and service categories are as follows:

(i) Hardlines—consists of appliances, consumer electronics, lawn and garden, tools and hardware, automotive parts, household goods, toys, housewares and sporting goods;

(ii) Apparel and Soft Home—includes women’s, men’s, kids, footwear, jewelry, accessories and soft home;

(iii) Food and Drug—consists of grocery and household, pharmacy and drugstore; and

(iv) Service and Other—includes repair, installation and automotive service and extended contract revenue as well as revenues earned in connection with our agreements with SHO.

	2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,486		$	11,870		$	2,246		$	18,602
Apparel and Soft Home	4,588			5,434			1,856			11,878
Food and Drug	5,398			38			—			5,436
Service and Other	95			3,635			208			3,938
Total merchandise sales and services	14,567			20,977			4,310			39,854
Costs and expenses:
Cost of sales, buying and occupancy	11,158			15,107			3,075			29,340
Selling and administrative	3,284			6,184			1,192			10,660
Depreciation and amortization	147			578			105			830
Impairment charges	10			25			295			330
Gain on sales of assets	(37		)	(261		)	(170		)	(468		)
Total costs and expenses	14,562			21,633			4,497			40,692
Operating income (loss)	$	5		$	(656	)	$	(187	)	$	(838	)
Total assets	$	4,304		$	12,648		$	2,388		$	19,340
Capital expenditures	$	122		$	171		$	85		$	378

	2011
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,765		$	13,022		$	2,377		$	20,164
Apparel and Soft Home	4,723			5,471			2,011			12,205
Food and Drug	5,705			41			—			5,746
Service and Other	92			3,115			245			3,452
Total merchandise sales and services	15,285			21,649			4,633			41,567
Costs and expenses:
Cost of sales, buying and occupancy	11,818			15,849			3,299			30,966
Selling and administrative	3,371			6,042			1,251			10,664
Depreciation and amortization	149			601			103			853
Impairment charges	15			634			—			649
Gain on sales of assets	(34		)	(30		)	—			(64		)
Total costs and expenses	15,319			23,096			4,653			43,068
Operating loss	$	(34	)	$	(1,447	)	$	(20	)	$	(1,501	)
Total assets	$	4,548		$	13,913		$	2,920		$	21,381
Capital expenditures	$	118		$	225		$	89		$	432

	2010
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,879		$	13,692		$	2,440		$	21,011
Apparel and Soft Home	4,809			5,454			2,088			12,351
Food and Drug	5,810			38			—			5,848
Service and Other	95			3,091			268			3,454
Total merchandise sales and services	15,593			22,275			4,796			42,664
Costs and expenses:
Cost of sales, buying and occupancy	11,757			15,910			3,333			31,000
Selling and administrative	3,341			5,940			1,144			10,425
Depreciation and amortization	149			620			100			869
Gain on sales of assets	(7		)	(46		)	(14		)	(67		)
Total costs and expenses	15,240			22,424			4,563			42,227
Operating income (loss)	$	353		$	(149	)	$	233		$	437
Total assets	$	6,085		$	15,299		$	2,976		$	24,360
Capital expenditures	$	153		$	216		$	57		$	426

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BORROWINGS Total Borrowings (Detail) (USD $)	Feb. 02, 2013		Jan. 28, 2012		Jan. 29, 2011
Debt Instrument [Line Items]
Debt and capital lease obligations	$ 3,100,000,000		$ 3,500,000,000
Short-term borrowings:
Short-term borrowings (1)	1,094,000,000	[1]	1,175,000,000	[1]
Secured Debt, Current	749,000,000		838,000,000
Unsecured commercial paper	345,000,000		337,000,000
Short-term debt, weighted average interest rate	2.70%		2.30%
Long-term debt
Long-term debt	2,026,000,000		2,026,000,000		2,318,000,000
Capitalized lease obligations	433,000,000		433,000,000		455,000,000
Other notes and mortgages			18,000,000		24,000,000
Current maturities			(83,000,000)		(230,000,000)
Long-term debt and capitalized lease obligations			1,943,000,000		2,088,000,000
Weighted-average annual interest rate on long-term debt			6.70%		7.10%
Fair value of long-term debt	1,400,000,000		1,500,000,000
Long-term Debt, Fiscal Year Maturity [Abstract]
2013	83,000,000
2014	67,000,000
2015	61,000,000
2016	50,000,000
2017	89,000,000
Thereafter	1,676,000,000
6.625% Senior Secured Notes, due 2018
Long-term debt
Long-term debt			1,237,000,000		1,237,000,000
SRAC Issued | 6.50% to 7.50% Notes, due 2017 to 2043
Long-term debt
Long-term debt			327,000,000		398,000,000
SRAC Issued | 7.05% to 7.50% Medium-Term Notes, due 2013
Long-term debt
Long-term debt			11,000,000		80,000,000
Sears Dc Corp | 9.07% to 9.20% Medium-Term Notes
Long-term debt
Long-term debt			0		23,000,000
Sears Canada | Credit Facility, expires 2015
Long-term debt
Long-term debt			$ 0		$ 101,000,000

[1] Includes $285 million and $250 million at February 2, 2013 and January 28, 2012, respectively, of unsecured commercial paper held by ESL and its affiliates.

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LEASES (Tables)

12 Months Ended

Feb. 02, 2013

Leases [Abstract]

Schedule of Rent Expense

Rental expense for operating leases was as follows:

millions	2012			2011			2010
Minimum rentals	$	824		$	837		$	844
Percentage rentals	17			19			21
Less-Sublease rentals	(47		)	(30		)	(52		)
Total	$	794		$	826		$	813

Schedule of Future Minimum Obligations Under Operating And Capital Lease Commitments

Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases in effect at February 2, 2013, were as follows:

	Minimum Lease Commitments
millions	Capital			Operating
2013	$	113		$	720
2014	107			621
2015	94			527
2016	74			422
2017	51			317
Later years	204			1,928
Total minimum lease payments(1)	643			4,535
Less-minimum sublease income				(192		)
Net minimum lease payments				$	4,343
Less:
Estimated executory costs	(56		)
Interest at a weighted average rate of 7.2%	(154		)
Capital lease obligations	433
Less current portion of capital lease obligations	(69		)
Long-term capital lease obligations	$	364

_____________

⁽¹⁾  Sears Canada: Total operating minimum lease payments of $433 million.

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INCOME TAXES Income Tax (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Income (loss) before income taxes:
U.S.	$ (1,226)	$ (1,809)	$ (157)
Foreign	216	58	323
Income (loss) from continuing operations before income taxes	(1,010)	(1,751)	166
Current:
Federal	17	19	1
State and local	15	0	(7)
Foreign	27	2	110
Total current	59	21	104
Deferred:
Federal	8	1,357	(84)
State and local	(41)	(35)	7
Foreign	18	26	0
Total deferred	(15)	1,348	(77)
Income tax expense (benefit)	$ 44	$ 1,369	$ 27

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Condensed Consolidating Statement of Cash Flows (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities - continuing operations	$ (303)	$ (307)	$ 77
Net cash provided by operating activities - discontinued operations		32	46
Net cash provided by (used in) operating activities	(303)	(275)	123
Proceeds from sales of property and investments	532	72	35
Net increase in investments and restricted cash	37	8	0
Purchases of property and equipment	(378)	(432)	(426)
Net investing with Affiliates	0	0	0
Net cash provided by (used in) investing activities—continuing operations	191	(352)	(391)
Net cash used in investing activities - discontinued operations	0	43	(15)
Net cash provided by (used in) investing activities	191	(309)	(406)
Proceeds from debt issuances	5	104	1,353
Repayments of long-term debt	(335)	(611)	(358)
Increase (decrease) in short-term borrowings, primarily 90 days or less	(81)	815	35
Sears Hometown and Outlet Stores, Inc. pre-separation funding	100	0	0
Intercompany dividend	0
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347.0	0	0
Debt issuance costs	(3)	(35)	(28)
Purchase of Sears Canada shares	(10)	(43)	(603)
Sears Canada dividends paid to minority shareholders	(50)	0	(69)
Purchase of treasury stock	0	(183)	(394)
Net borrowing with Affiliates	0	0	0
Net cash provided by (used in) financing activities—continuing operations	(27)	47	(64)
Net cash provided by (used in) financing activities - discontinued operations	0	(75)	(31)
Net cash used in financing activities	(27)	(28)	(95)
Effect of exchange rate changes on cash and cash equivalents	1	0	57
NET DECREASE IN CASH AND CASH EQUIVALENTS	(138)	(612)	(321)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	747	1,359	1,680
CASH AND CASH EQUIVALENTS, END OF PERIOD	609	747	1,359
Parent
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities - continuing operations		0	0
Net cash provided by operating activities - discontinued operations		0	0
Net cash provided by (used in) operating activities	0	0	0
Proceeds from sales of property and investments	0	0	0
Net increase in investments and restricted cash	0	0	0
Purchases of property and equipment	0	0	0
Net investing with Affiliates	0	0	0
Net cash provided by (used in) investing activities—continuing operations		0	0
Net cash used in investing activities - discontinued operations		0	0
Net cash provided by (used in) investing activities	0	0	0
Proceeds from debt issuances	0	0	1,246
Repayments of long-term debt	0	0	0
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0	0
Sears Hometown and Outlet Stores, Inc. pre-separation funding	0
Intercompany dividend	100
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347.0
Debt issuance costs	0	0	0
Purchase of Sears Canada shares	0	0	0
Sears Canada dividends paid to minority shareholders	0		0
Purchase of treasury stock		0	0
Net borrowing with Affiliates	(447)	(140)	(1,106)
Net cash provided by (used in) financing activities—continuing operations		(140)	140
Net cash provided by (used in) financing activities - discontinued operations		0	0
Net cash used in financing activities	0	(140)	140
Effect of exchange rate changes on cash and cash equivalents	0		0
NET DECREASE IN CASH AND CASH EQUIVALENTS	0	(140)	140
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	0	140	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	0	0	140
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities - continuing operations		(1,506)	(1,115)
Net cash provided by operating activities - discontinued operations		0	0
Net cash provided by (used in) operating activities	(1,356)	(1,506)	(1,115)
Proceeds from sales of property and investments	353	72	16
Net increase in investments and restricted cash	0	0	3
Purchases of property and equipment	(293)	(342)	(369)
Net investing with Affiliates	0	0	0
Net cash provided by (used in) investing activities—continuing operations		(270)	(350)
Net cash used in investing activities - discontinued operations		0	0
Net cash provided by (used in) investing activities	60	(270)	(350)
Proceeds from debt issuances	0	0	0
Repayments of long-term debt	(214)	(481)	(51)
Increase (decrease) in short-term borrowings, primarily 90 days or less	(81)	815	35
Sears Hometown and Outlet Stores, Inc. pre-separation funding	100
Intercompany dividend	(100)
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	0
Debt issuance costs	(3)	(35)	(18)
Purchase of Sears Canada shares	0	0	(560)
Sears Canada dividends paid to minority shareholders	52		639
Purchase of treasury stock		(183)	(394)
Net borrowing with Affiliates	1,526	1,190	2,207
Net cash provided by (used in) financing activities—continuing operations		1,306	1,858
Net cash provided by (used in) financing activities - discontinued operations		28	15
Net cash used in financing activities	1,280	1,334	1,873
Effect of exchange rate changes on cash and cash equivalents	0		0
NET DECREASE IN CASH AND CASH EQUIVALENTS	(16)	(442)	408
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	336	778	370
CASH AND CASH EQUIVALENTS, END OF PERIOD	320	336	778
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities - continuing operations		1,199	1,192
Net cash provided by operating activities - discontinued operations		32	46
Net cash provided by (used in) operating activities	1,053	1,231	1,238
Proceeds from sales of property and investments	179	0	19
Net increase in investments and restricted cash	37	8	(3)
Purchases of property and equipment	(85)	(90)	(57)
Net investing with Affiliates	(236)	(275)	(288)
Net cash provided by (used in) investing activities—continuing operations		(357)	(329)
Net cash used in investing activities - discontinued operations		43	(15)
Net cash provided by (used in) investing activities	(105)	(314)	(344)
Proceeds from debt issuances	5	104	107
Repayments of long-term debt	(121)	(130)	(307)
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0	0
Sears Hometown and Outlet Stores, Inc. pre-separation funding	0
Intercompany dividend	0
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	0
Debt issuance costs	0	0	(10)
Purchase of Sears Canada shares	(10)	(43)	(43)
Sears Canada dividends paid to minority shareholders	(102)		(708)
Purchase of treasury stock		0	0
Net borrowing with Affiliates	(843)	(775)	(813)
Net cash provided by (used in) financing activities—continuing operations		(844)	(1,774)
Net cash provided by (used in) financing activities - discontinued operations		(103)	(46)
Net cash used in financing activities	(1,071)	(947)	(1,820)
Effect of exchange rate changes on cash and cash equivalents	1		57
NET DECREASE IN CASH AND CASH EQUIVALENTS	(122)	(30)	(869)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	411	441	1,310
CASH AND CASH EQUIVALENTS, END OF PERIOD	289	411	441
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net cash provided by (used in) operating activities - continuing operations		0	0
Net cash provided by operating activities - discontinued operations		0	0
Net cash provided by (used in) operating activities	0	0	0
Proceeds from sales of property and investments	0	0	0
Net increase in investments and restricted cash	0	0	0
Purchases of property and equipment	0	0	0
Net investing with Affiliates	236	275	288
Net cash provided by (used in) investing activities—continuing operations		275	288
Net cash used in investing activities - discontinued operations		0	0
Net cash provided by (used in) investing activities	236	275	288
Proceeds from debt issuances	0	0	0
Repayments of long-term debt	0	0	0
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0	0
Sears Hometown and Outlet Stores, Inc. pre-separation funding	0
Intercompany dividend	0
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	0
Debt issuance costs	0	0	0
Purchase of Sears Canada shares	0	0	0
Sears Canada dividends paid to minority shareholders	0
Purchase of treasury stock		0	0
Net borrowing with Affiliates	(236)	(275)	(288)
Net cash provided by (used in) financing activities—continuing operations		(275)	(288)
Net cash provided by (used in) financing activities - discontinued operations		0	0
Net cash used in financing activities	(236)	(275)	(288)
Effect of exchange rate changes on cash and cash equivalents	0		0
NET DECREASE IN CASH AND CASH EQUIVALENTS	0	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	0	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 0	$ 0	$ 0

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EARNINGS PER SHARE (Tables)

12 Months Ended

Feb. 02, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

millions, except earnings per share	2012			2011			2010
Basic weighted average shares	105.9			106.8			111.5
Dilutive effect of restricted stock and stock options	—			—			0.2
Diluted weighted average shares	105.9			106.8			111.7
Net income (loss) from continuing operations attributable to Holdings' shareholders	$	(930	)	$	(3,113	)	$	122
Earnings (loss) per share from continuing operations attributable to Holdings' shareholders:
Basic	$	(8.78	)	$	(29.15	)	$	1.09
Diluted	$	(8.78	)	$	(29.15	)	$	1.09

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BORROWINGS Debt Repurchase Authorization (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Jan. 28, 2012	Jan. 28, 2006
Debt Instrument [Line Items]
Debt repurchase authorized amount		$ 500
Extinguishment of debt	10
Gain on extinguishment of debt	2
Debt repurchase remaining capacity	275
SRAC Issued
Debt Instrument [Line Items]
Extinguishment of debt	$ 215

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BENEFIT PLANS Domestic Pension Plan Funding (Details) (USD $)	3 Months Ended	12 Months Ended			3 Months Ended
	Feb. 02, 2013	Feb. 02, 2013 participant	Feb. 02, 2013 SHC Domestic, Pension Plans	Jan. 28, 2012 SHC Domestic, Pension Plans	Oct. 27, 2012 Penion Plans	Jul. 28, 2012 Penion Plans
Defined Benefit Plan Disclosure [Line Items]
Company contributions			$ 516,000,000	$ 352,000,000	$ 203,000,000
2013 expected contributions			352,000,000
2014 expected contributions			510,000,000
Funded status			(2,090,000,000)	(2,058,000,000)		203,000,000
Funded percentage					80.00%	80.00%
Number of employees offered lump sum distributions		86,000
Qualified pension plan liabilities		2,000,000,000
Company contributions, Eeection of lump sum distribution offer		1,500,000,000
Expense from unrealized actuarial gain (loss)	$ 452,000,000

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INTEREST AND INVESTMENT INCOME (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Interest income on cash and cash equivalents	$ 7	$ 4	$ 4
Other investment income	87	37	32
Total	94	41	36
Income from equity method investments	47	27	17
Sears Canada
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Gain from sale of equity method investment	25
Sears Mexico
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income on dividend	$ 30	$ 4	$ 6

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Narrative (Detail) (USD $)	12 Months Ended								3 Months Ended			12 Months Ended		12 Months Ended		12 Months Ended
	Feb. 02, 2013 Segment Week	Jan. 28, 2012 Week	Jan. 29, 2011 Week	Dec. 31, 2011 Common Stock Orchard Supply Hardware Stores Corporation	Dec. 31, 2011 Preferred Stock Orchard Supply Hardware Stores Corporation	Feb. 02, 2013 United States Full Line Retail Stores Store	Feb. 02, 2013 United States Specialty Retail Stores Store	Feb. 02, 2013 Sears Canada Full Line And Specialty Retail Stores Store	Feb. 02, 2013 Sears Canada	Oct. 30, 2010 Sears Canada	Jul. 31, 2010 Sears Canada	Jan. 29, 2011 Sears Canada	Jan. 28, 2012 Sears Canada	Feb. 02, 2013 Sears Hometown and Outlet Stores, Inc.	Oct. 11, 2012 Sears Hometown and Outlet Stores, Inc.	Feb. 02, 2013 Building Minimum	Feb. 02, 2013 Building Maximum	Feb. 02, 2013 Furniture Fixtures And Equipment Minimum	Feb. 02, 2013 Furniture Fixtures And Equipment Maximum	Feb. 02, 2013 Computer Equipment Minimum	Feb. 02, 2013 Computer Equipment Maximum
Nature of Operations, Consolidation and Basis of Presentation
Number of stores						2,019	54	475
Percentage of ownership interest				80.00%	100.00%				51.00%				95.00%
Number of reportable segments	3
Separation of Sears Hometown and Outlet Businesses
Proceeds from sale of working Interest															$ 446,500,000
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347,000,000	0	0											346,500,000
Cash dividends paid									52,000,000	321,000,000	318,000,000	639,000,000		100,000,000
Credit agreement														250,000,000
Credit facility, amount outstanding														100,000,000
Spin-Off of Orchard Supply Hardware Stores Corporation
Percentage of ownership interest				80.00%	100.00%				51.00%				95.00%
Fiscal Year
Fiscal period (in weeks)	53	52	52
Cash and Cash Equivalents
Deposits in- transit	148,000,000	173,000,000
Bank checks outstanding	114,000,000	68,000,000
Allowance for Doubtful Accounts
Allowance for doubtful accounts	26,000,000	28,000,000
Merchandise Inventories
Percentage of LIFO inventory	45.00%
Excess of replacement or current costs over stated LIFO value	72,000,000	70,000,000
Property and Equipment
Property and equipment, useful life																20 years	50 years	3 years	10 years	3 years	5 years
Depreciation expense	778,000,000	798,000,000	809,000,000
Assets held-for-sale	57,000,000	55,000,000
Advertising Costs
Advertising expense	$ 1,600,000,000	$ 1,900,000,000	$ 2,000,000,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Feb. 02, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

Nature of Operations, Consolidation and Basis of Presentation

Sears Holdings Corporation (“Holdings”) is the parent company of Kmart Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings (together with its subsidiaries, “we,” “us,” “our,” or the “Company”) was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”), on March 24, 2005. We are an integrated retailer with 2,019 full-line and 54 specialty retail stores in the United States, operating through Kmart and Sears, and 475 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 51%-owned subsidiary. We have three reportable segments: Kmart, Sears Domestic and Sears Canada.

The consolidated financial statements include all majority-owned subsidiaries in which Holdings exercises control. Investments in companies in which Holdings exercises significant influence, but which we do not control (generally 20% to 50% ownership interest), are accounted for under the equity method of accounting. Investments in companies in which we have less than a 20% ownership interest and do not exercise significant influence are accounted for at cost. All intercompany transactions and balances have been eliminated.

Separation of Sears Hometown and Outlet Businesses

On October 11, 2012, we completed the separation of our Sears Hometown and Outlet businesses through a rights offering transaction. Holdings received gross proceeds of $446.5 million with respect to the transaction, consisting of $346.5 million for the sale of Sears Hometown and Outlet Stores, Inc. ("SHO") common shares and $100 million through a dividend from SHO prior to the separation. Prior to the separation, SHO entered into an asset-based senior secured revolving credit facility with a group of financial institutions to provide (subject to availability under a borrowing base) for aggregate maximum borrowings of $250 million. Borrowings of $100 million from this revolving credit facility were used to fund the dividend paid to Holdings. We accounted for this separation in accordance with accounting standards applicable to common control transactions as ESL Investments, Inc. (together with its affiliated fund, "ESL") is a majority shareholder of Holdings and became a majority shareholder of SHO as a result of exercising subscription rights pursuant to the rights offering. Accordingly, we classified the difference between the proceeds received and the carrying value of net assets contributed to SHO as a reduction of capital in excess of par value in the Consolidated Statement of Equity for the period ended February 2, 2013.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with SHO under the terms described in Note 15. Because of the various agreements with SHO, the Company has determined that it has significant continuing cash flows with SHO. Accordingly, the operating results for SHO through the date of the separation are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Consolidated Financial Statements. See Note 15 to the Consolidated Financial Statements for further information related to the agreements with SHO.

Spin-Off of Orchard Supply Hardware Stores Corporation

On December 30, 2011, we completed the spin-off to our shareholders of all the capital stock of Orchard Supply Hardware Stores Corporation (“Orchard”) that was owned by Holdings immediately prior to the spin-off, consisting of common stock that represented approximately 80% of the voting power of Orchard's outstanding capital stock and preferred stock that represented 100% of Orchard's outstanding nonvoting capital stock. In connection with the spin-off, Holdings and certain of its subsidiaries entered into various agreements with Orchard, including a distribution agreement, a transition services agreement, an appliance sale and consignment agreement and brand license agreements. In addition, certain tax matters between Holdings and Orchard are governed by a tax sharing agreement entered into in 2005.

Holdings has no significant continuing involvement in the operations of Orchard. Accordingly, the operating results for Orchard are presented as discontinued operations in the accompanying Consolidated Statements of Operations for the years ended January 28, 2012 and January 29, 2011. In addition, the cash flows from operating, investing and financing activities for Orchard have been separately stated as discontinued operations in the accompanying Consolidated Statement of Cash Flows for the years ended January 28, 2012 and January 29, 2011. The Notes to Consolidated Financial Statements exclude the impact of Orchard for all periods presented. Prior to completion of the spin-off, Orchard’s results of operations, financial position and cash flows were presented within the Sears Domestic segment.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31 each year. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The following fiscal periods are presented in this report.

Fiscal Year	Ended	Weeks
2012	February 2, 2013	53
2011	January 28, 2012	52
2010	January 29, 2011	52

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill, intangible and long-lived asset impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures, and calculating retirement benefits.

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. We also include deposits in-transit from banks for payments related to third-party credit card and debit card transactions within cash equivalents. The deposits in-transit balances included within cash equivalents were $148 million and $173 million at February 2, 2013 and January 28, 2012, respectively.

We classify cash balances which have been pledged as collateral, and for which we do not have the ability to substitute letters of credit, as restricted cash on our Consolidated Balance Sheet.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash and cash equivalents when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit included in other current liabilities were $114 million and $68 million at February 2, 2013 and January 28, 2012, respectively.

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on both historical experience and a specific identification basis. Allowances for doubtful accounts on accounts receivable balances were $26 million and $28 million at February 2, 2013 and January 28, 2012, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations.

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. For Kmart and Sears Domestic, cost is primarily determined using the retail inventory method (“RIM”). Kmart merchandise inventories are valued under the RIM using primarily a first-in, first-out (“FIFO”) cost flow assumption. Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out (“LIFO”) cost flow assumption. For Sears Canada, cost is determined using the average cost method based on individual items.

Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markons, markups, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost, as well as resulting gross margins. The methodologies utilized by us in our application of the RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the groupings of homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable). Management believes that the RIM provides an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Approximately 45% of consolidated merchandise inventories are valued using LIFO. To estimate the effects of inflation on inventories, we utilize external price indices determined by an outside source, the Bureau of Labor Statistics. If the FIFO method of inventory valuation had been used instead of the LIFO method, merchandise inventories would have been $72 million higher at February 2, 2013 and $70 million higher at January 28, 2012.

Vendor Rebates and Allowances

We receive rebates and allowances from certain vendors through a variety of programs and arrangements intended to offset our costs of promoting and selling certain vendor products. These vendor payments are recognized and recorded as a reduction to the cost of merchandise inventories when earned and, thereafter, as a reduction of cost of sales, buying and occupancy as the merchandise is sold. Upfront consideration received from vendors linked to purchases or other commitments is initially deferred and amortized ratably to cost of sales, buying and occupancy over the life of the contract or as performance of the activities specified by the vendor to earn the fee is completed.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred.

Depreciation expense, which includes depreciation on assets under capital leases, is recorded over the estimated useful lives of the respective assets using the straight-line method for financial statement purposes, and accelerated methods for tax purposes. The range of lives are generally 20 to 50 years for buildings, 3 to 10 years for furniture, fixtures and equipment, and 3 to 5 years for computer systems and computer equipment. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense included within depreciation and amortization expense reported on the Consolidated Statements of Operations was $778 million, $798 million, and $809 million for the years ended February 2, 2013, January 28, 2012 and January 29, 2011, respectively.

Primarily as a result of store closing actions, certain property and equipment are considered held for sale. The value of assets held for sale was $57 million and $55 million at February 2, 2013 and January 28, 2012, respectively. These assets were included in prepaid expenses and other current assets in the Consolidated Balance Sheets at February 2, 2013 and January 28, 2012 at the lower of their historical net book value or their estimated fair value, less estimated costs to sell. We expect to sell the properties within a year and we continually remarket them. Substantially all assets held for sale are held within the Sears Domestic segment.

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment and definite-lived intangible assets, is evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Factors that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the assets or significant changes in business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. See Note 13 for further information regarding long-lived asset impairment charges recorded during 2012.

We account for costs associated with location closings in accordance with accounting standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance, inventory markdowns and other liquidation fees when management makes the decision to exit a location. We record a liability for future lease costs (net of estimated sublease income) when we cease to use the location.

Goodwill, Trade Names, Other Intangible Assets and Related Impairments

Trade names acquired as part of the Merger account for the majority of our intangible assets recognized in the Consolidated Balance Sheet. The majority of these trade name assets, such as Kenmore, Craftsman and Lands' End, are expected to generate cash flows indefinitely, do not have estimable or finite useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain intangible assets, including favorable lease rights, contractual arrangements and customer lists, have estimable, finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are determined using a number of factors, including the demand for the asset, competition and the level of expenditure required to maintain the cash flows associated with the asset.

Our goodwill results from the Merger. We perform annual goodwill and indefinite-lived intangible asset impairment tests at the last day of our November accounting period each year and assess the need to update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within a reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill resides in multiple reporting units. The goodwill impairment test involves a two-step process. The first step is a comparison of each reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using both a market approach, as well as a discounted cash flow model, commonly referred to as the income approach. The market approach determines the value of a reporting unit by deriving market multiples for reporting units based on assumptions potential market participants would use in establishing a bid price for the unit. This approach therefore assumes strategic initiatives will result in improvements in operational performance in the event of purchase, and includes the application of a discount rate based on market participant assumptions with respect to capital structure and access to capital markets. The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate for the reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. Our final estimate of fair value of reporting units is developed by weighting the fair values determined through both the market and income approaches.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. See Note 12 for further information regarding goodwill and related impairment charges recorded during 2012 and 2011.

Intangible Asset Impairment Assessments

We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We utilize the income approach, specifically the relief from royalty method, for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets. The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets.

Financial Instruments and Hedging Activities

We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. As a result, we primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market. We primarily use foreign currency forward contracts to hedge the foreign currency exposure of our net investment in Sears Canada against adverse changes in exchange rates and foreign currency collar contracts to hedge against foreign currency exposure arising from Sears Canada's inventory purchase contracts denominated in U.S. dollars.

Hedges of Net Investment in Sears Canada

When applying hedge accounting treatment to our derivative transactions, we formally document our hedge relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge transaction. We also formally assess, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, we discontinue hedge accounting.

For derivatives that are designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivatives are recorded in the currency translation adjustments line in Accumulated Other Comprehensive Income (Loss) and remain there until such time that we substantially liquidate or sell our holdings in Sears Canada.

Sears Canada Hedges of Merchandise Purchases

Sears Canada mitigates the risk of currency fluctuations on offshore merchandise purchases denominated in U.S. currency by purchasing U.S. dollar denominated collar contracts for a portion of its expected requirements. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada's merchandise purchases, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk. Changes in the fair value of these contracts are recorded in the Consolidated Statements of Operations as a component of other income (loss) each period.

Hedges of Foreign Currency

The foreign currency forward contracts are recorded on the Consolidated Balance Sheet at fair value and, to the extent they have been designated and qualify for hedge accounting treatment, an offsetting amount is recorded as a component of other comprehensive income, net of income tax effects. Changes in the fair value of those forward contracts for which hedge accounting is not applied are recorded in the Consolidated Statements of Operations as a component of other income (loss). Certain of our currency forward contracts require collateral to be posted in the event our liability under such contracts reaches a predetermined threshold. Cash collateral posted under these contracts is recorded as part of our restricted cash balance.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with credit ratings of single-A or better at January 28, 2012. We had no derivative instruments at February 2, 2013.

Fair Value of Financial Instruments

We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. See Note 4 to the Consolidated Financial Statements for further information regarding our derivative positions.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments, accounts receivable and derivative financial instruments. We place our cash and cash equivalents in investment-grade, short-term instruments with high quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument. We use high credit quality counterparties to transact our derivative transactions.

Cash and cash equivalents, accounts receivable, merchandise payables, credit facility borrowings and accrued liabilities are reflected in the Consolidated Balance Sheet at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our debt is disclosed in Note 3 to the Consolidated Financial Statements.

Self-insurance Reserves

We are self-insured for certain costs related to workers' compensation, asbestos and environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain of these self-insured risks. A portion of these self-insured risks is managed through a wholly-owned insurance subsidiary. Our liability reflected on the Consolidated Balance Sheet, classified within other liabilities (current and long-term), represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. The liabilities for self-insured risks are discounted to their net present values using an interest rate which is based upon the expected duration of the liabilities. Expected payments as of February 2, 2013 were as follows:

millions
2013	$	266
2014	163
2015	120
2016	87
2017	66
Later years	371
Total undiscounted obligation	1,073
Less—discount	(95		)
Net obligation	$	978

Loss Contingencies

We account for contingent losses in accordance with accounting standards pertaining to loss contingencies. Under accounting standards, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known.

Revenue Recognition

Revenues include sales of merchandise, services and extended service contracts, net commissions earned from leased departments in retail stores, delivery and handling revenues related to merchandise sold, and fees earned from co-branded credit card programs. We recognize revenues from retail operations at the later of the point of sale or the delivery of goods to the customer. Direct to customer revenues are recognized when the merchandise is delivered to the customer. Revenues from product installation and repair services are recognized at the time the services are provided. Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while the associated service costs are expensed as incurred.

We earn revenues through arrangements with third-party financial institutions that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in the period earned, which is when our related performance obligations have been met. We sell gift cards to customers at our retail stores and through our direct to customer operations. The gift cards generally do not have expiration dates. Revenues from gift cards are recognized when (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) based on historical redemption patterns and we determine that we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions.

Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales and cost of sales. We defer the recognition of layaway sales and profit until the period in which the customer takes possession of the merchandise.

Cost of Sales, Buying and Occupancy Costs

Cost of sales, buying and occupancy are comprised principally of the costs of merchandise, buying, warehousing and distribution (including receiving and store delivery costs), retail store occupancy costs, product repair, and home service and installation costs, customer shipping and handling costs, vendor allowances, markdowns and physical inventory losses.

The Company has a SHOP YOUR WAY program in which customers earn points on purchases which may be redeemed to pay for future purchases. The expense for customer points earned is recognized as customers earn them and recorded in cost of sales.

Selling and Administrative Expenses

Selling and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, advertising, pre-opening costs and other administrative expenses.

Pre-Opening Costs

Pre-opening and start-up activity costs are expensed in the period in which they occur.

Advertising Costs

Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $1.6 billion, $1.9 billion and $2.0 billion for 2012, 2011 and 2010, respectively. These costs are included within selling and administrative expenses in the accompanying Consolidated Statements of Operations.

Income Taxes

We account for income taxes in accordance with accounting standards pertaining to such taxes. Accordingly, we provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by us are based on management's interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects our best estimates and assumptions regarding, among other things, the level of future taxable income, tax planning, and any valuation allowance. Future changes in tax laws, changes in projected levels of taxable income, tax planning, and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded by us. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past three years. These assumptions require significant judgment about the forecasts of future taxable income.

Stock-based Compensation

We account for stock-based compensation arrangements in accordance with accounting standards pertaining to share-based payment transactions, which requires us to both recognize as expense the fair value of all stock-based compensation awards (which includes stock options, although there were no options outstanding in 2012) and to classify excess tax benefits associated with share-based compensation deductions as cash from financing activities rather than cash from operating activities. We recognize compensation expense as awards vest on a straight-line basis over the requisite service period of the award.

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to Holdings' shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per common share also includes the dilutive effect of potential common shares, exercise of stock options and the effect of restricted stock when dilutive.

New Accounting Pronouncements

Disclosures about Reclassification Adjustments out of Accumulated Other Comprehensive Income

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update will be effective for us in the first quarter of 2013, but early adoption is permitted. The update will primarily impact our disclosures, but otherwise is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The update will be effective for us in the first quarter of 2013, but early adoption is permitted. The update may, under certain circumstances, reduce the complexity and costs of testing indefinite-lived intangible assets for impairment, but otherwise is not expected to have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Testing Goodwill for Impairment

In September 2011, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This update was effective and adopted by the Company in the first quarter of 2012 and did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Presentation of Comprehensive Income

In June 2011, the FASB issued an accounting standards update which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in existing guidance and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format previously used by us, and the second statement would include components of other comprehensive income (“OCI”). The update does not change the items that must be reported in OCI and must be applied retrospectively for all periods presented in the financial statements. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Company’s financial statement presentation, but otherwise did not impact the Company’s condensed consolidated financial position, results of operations or cash flows.

Disclosures about Fair Value Measurements

In May 2011, the FASB issued an accounting standards update which amends the definition of fair value measurement principles and disclosure requirements to eliminate differences between U.S. GAAP and International Financial Reporting Standards. The update requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as disclosures of transfers between Level 1 and Level 2 of the fair value hierarchy. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Company’s disclosures, but otherwise did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

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BENEFIT PLANS Expenses for Retirement Plans (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Compensation and Retirement Disclosure [Abstract]
Retirement/401(k) Savings Plans	$ 10	$ 11	$ 11
Pension plans	630	78	119
Postretirement benefits	24	24	27
Total	$ 664	$ 113	$ 157

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SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

12 Months Ended

Feb. 02, 2013

Supplemental Financial Information [Abstract]

Other Long-Term Liabilities

Other long-term liabilities at February 2, 2013 and January 28, 2012 consisted of the following:

millions	February 2, 2013		January 28, 2012
Unearned revenues	$	843	$	778
Self-insurance reserves	714		743
Other	569		665
Total	$	2,126	$	2,186

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Notes)

12 Months Ended

Feb. 02, 2013

Valuation and Qualifying Accounts [Abstract]

Schedule of Valuation and Qualifying Accounts

Sears Holdings Corporation

Schedule II-Valuation and Qualifying Accounts

Years 2012, 2011 and 2010

millions	Balance at beginning of period		Additions charged to costs and expenses		(Deductions)			Balance at end of period
Allowance for Doubtful Accounts(1):
2012	$	28	$	5	$	(5	)	$	28
2011	35		1		(8		)	28
2010	38		7		(10		)	35
Allowance for Deferred Tax Assets(2):
2012	2,268		531		(56		)	2,743
2011	153		2,118		(3		)	2,268
2010	131		27		(5		)	153

__________________

⁽¹⁾  Charges to the account are for the purposes for which the reserves were created.

⁽²⁾  At the end of 2011 we had a federal and state net operating loss (“NOL”) deferred tax asset of $672 million and a valuation allowance of $2,268 million. In 2012, there was a net increase to the federal and state NOL deferred tax asset of $50 million, bringing the ending balance to $722 million. The increase in NOLs resulted from federal utilization and state NOL expirations, netted against additional state losses incurred during 2012. The valuation allowance increased to $2,743 million at the end of 2012. Included in the 2012 increase was $213 million recorded to other accumulated comprehensive income for minimum pension adjustments. Additional valuation allowances for federal and state were created against expiring state NOLs and other deferred assets, and were netted against state valuation allowance reversals due to expiring state NOLs and federal utilization of NOLs.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

12 Months Ended

Feb. 02, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At February 2, 2013, the principal amount outstanding of the Company’s 65/8% senior secured notes due 2018 was $1.24 billion. These notes were issued in 2010 by Sears Holdings Corporation (“Parent”). The 65/8% Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by Sears Holdings Management Corporation and SRAC (the “guarantor subsidiaries”). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at February 2, 2013 and January 28, 2012, and the Condensed Consolidating Statements of Operations, the Consolidating Statements of Comprehensive Income (Loss) and the Condensed Consolidating Statements of Cash flows for 2012, 2011 and 2010 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

The following condensed consolidated financial statements had total assets and total liabilities of approximately $650 million and $115 million, respectively, at January 28, 2012 attributable to SHO. Merchandise sales and services included revenues of $1.7 billion, $2.3 billion and $2.3 billion from SHO for 2012, 2011 and 2010, respectively. Net income (loss) attributable to Holdings' shareholders included net income of approximately $51 million, $33 million and $50 million from SHO for 2012, 2011 and 2010, respectively. The financial information for SHO is reflected within the guarantor subsidiaries balances for these periods. The condensed consolidated financial information as of and for the periods ended February 2, 2013 reflect the effects of the separation of SHO.

The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions including transactions with our wholly-owned non-guarantor insurance subsidiary. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional. Additionally, the notes are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables of the guarantor subsidiaries, and consequently may not be available to satisfy the claims of the Company’s general creditors. Certain investments primarily held by non-guarantor subsidiaries are recorded by the issuers at historical cost and are recorded at fair value by the holder.

Condensed Consolidating Balance Sheet

February 2, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	320	$	289	$	—		$	609
Intercompany receivables	—		—		25,553		(25,553		)	—
Accounts receivable	—		506		129		—			635
Merchandise inventories	—		6,709		849		—			7,558
Prepaid expenses and other current assets	92		970		461		(1,060		)	463
Total current assets	92		8,505		27,281		(26,613		)	9,265
Total property and equipment, net	—		4,412		1,641		—			6,053
Goodwill and intangible assets	—		968		2,292		—			3,260
Other assets	17		223		3,147		(2,625		)	762
Investment in subsidiaries	16,413		24,988		—		(41,401		)	—
TOTAL ASSETS	$	16,522	$	39,096	$	34,361	$	(70,639	)	$	19,340
Current liabilities
Short-term borrowings	$	—	$	1,094	$	—	$	—		$	1,094
Current portion of long-term debt and capitalized lease obligations	—		66		17		—			83
Merchandise payables	—		2,392		369		—			2,761
Intercompany payables	12,594		12,959		—		(25,553		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,640		2,455		(1,027		)	4,094
Total current liabilities	12,623		19,563		2,841		(26,613		)	8,414
Long-term debt and capitalized lease obligations	1,237		3,081		135		(2,510		)	1,943
Pension and postretirement benefits	—		2,310		420		—			2,730
Long-term deferred tax liabilities	—		—		914		41			955
Other long-term liabilities	—		861		1,513		(248		)	2,126
Total Liabilities	13,860		25,815		5,823		(29,330		)	16,168
EQUITY
Shareholder’s equity	2,662		13,281		28,538		(41,726		)	2,755
Noncontrolling interest	—		—		—		417			417
Total Equity	2,662		13,281		28,538		(41,309		)	3,172
TOTAL LIABILITIES AND EQUITY	$	16,522	$	39,096	$	34,361	$	(70,639	)	$	19,340

Condensed Consolidating Balance Sheet

January 28, 2012

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	411	$	—		$	747
Intercompany receivables	—		—		25,129		(25,129		)	—
Accounts receivable	—		486		209		—			695
Merchandise inventories	—		7,590		817		—			8,407
Prepaid expenses and other current assets	42		760		458		(865		)	395
Total current assets	42		9,172		27,024		(25,994		)	10,244
Total property and equipment, net	—		4,837		1,740		—			6,577
Goodwill and intangible assets	—		1,178		2,600		—			3,778
Other assets	22		190		2,589		(2,019		)	782
Investment in subsidiaries	17,332		25,648		—		(42,980		)	—
TOTAL ASSETS	$	17,396	$	41,025	$	33,953	$	(70,993	)	$	21,381
Current liabilities
Short-term borrowings	$	—	$	1,175	$	—	$	—		$	1,175
Current portion of long-term debt and capitalized lease obligations	—		213		17		—			230
Merchandise payables	—		2,476		436		—			2,912
Intercompany payables	11,844		13,285		—		(25,129		)	—
Short-term deferred tax liabilities	5		541		—		(30		)	516
Other current liabilities	29		2,856		2,329		(835		)	4,379
Total current liabilities	11,878		20,546		2,782		(25,994		)	9,212
Long-term debt and capitalized lease obligations	1,237		2,396		240		(1,785		)	2,088
Pension and postretirement benefits	—		2,283		455		—			2,738
Long-term deferred tax liabilities	—		5		817		(6		)	816
Other long-term liabilities	—		900		1,514		(228		)	2,186
Total Liabilities	13,115		26,130		5,808		(28,013		)	17,040
EQUITY
Shareholder’s equity	4,281		14,895		28,145		(43,040		)	4,281
Noncontrolling interest	—		—		—		60			60
Total Equity	4,281		14,895		28,145		(42,980		)	4,341
TOTAL LIABILITIES AND EQUITY	$	17,396	$	41,025	$	33,953	$	(70,993	)	$	21,381

Condensed Consolidating Statement of Operations

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	35,417		$	8,032		$	(3,595	)	$	39,854
Cost of sales, buying and occupancy	—			26,531			4,619			(1,810		)	29,340
Selling and administrative	2			10,054			2,389			(1,785		)	10,660
Depreciation and amortization	—			634			196			—			830
Impairment charges	—			35			295			—			330
Gain on sales of assets	—			(298		)	(170		)	—			(468		)
Total costs and expenses	2			36,956			7,329			(3,595		)	40,692
Operating income (loss)	(2		)	(1,539		)	703			—			(838		)
Interest expense	(227		)	(391		)	(107		)	458			(267		)
Interest and investment income	—			43			509			(458		)	94
Other income	—			—			1			—			1
Income (loss) from continuing operations before income taxes	(229		)	(1,887		)	1,106			—			(1,010		)
Income tax (expense) benefit	89			527			(660		)	—			(44		)
Equity in earnings in subsidiaries	(914		)	65			—			849			—
Net income (loss)	(1,054		)	(1,295		)	446			849			(1,054		)
Loss attributable to noncontrolling interests	—			—			—			124			124
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(1,054	)	$	(1,295	)	$	446		$	973		$	(930	)

Condensed Consolidating Statement of Operations

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	36,714		$	8,354		$	(3,501	)	$	41,567
Cost of sales, buying and occupancy	—			27,850			4,862			(1,746		)	30,966
Selling and administrative	2			9,926			2,491			(1,755		)	10,664
Depreciation and amortization	—			680			173			—			853
Impairment charges	—			649			—			—			649
Gain on sales of assets	—			(63		)	(1		)	—			(64		)
Total costs and expenses	2			39,042			7,525			(3,501		)	43,068
Operating income (loss)	(2		)	(2,328		)	829			—			(1,501		)
Interest expense	(224		)	(388		)	(112		)	435			(289		)
Interest and investment income	—			41			435			(435		)	41
Other loss	—			—			(2		)	—			(2		)
Income (loss) from continuing operations before income taxes	(226		)	(2,675		)	1,150			—			(1,751		)
Income tax (expense) benefit	43			(785		)	(627		)	—			(1,369		)
Equity in earnings in subsidiaries	(2,964		)	151			—			2,813			—
Income (loss) from continuing operations	(3,147		)	(3,309		)	523			2,813			(3,120		)
Loss from discontinued operations, net of tax	—			—			(27		)	—			(27		)
Net income (loss)	(3,147		)	(3,309		)	496			2,813			(3,147		)
Loss attributable to noncontrolling interests	—			—			—			7			7
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(3,147	)	$	(3,309	)	$	496		$	2,820		$	(3,140	)

Condensed Consolidating Statement of Operations

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	37,587		$	8,573		$	(3,496	)	$	42,664
Cost of sales, buying and occupancy	—			27,877			4,830			(1,707		)	31,000
Selling and administrative	2			9,794			2,418			(1,789		)	10,425
Depreciation and amortization	—			694			175			—			869
Gain on sales of assets	—			(52		)	(15		)	—			(67		)
Total costs and expenses	2			38,313			7,408			(3,496		)	42,227
Operating income (loss)	(2		)	(726		)	1,165			—			437
Interest expense	(166		)	(429		)	(113		)	415			(293		)
Interest and investment income	—			38			413			(415		)	36
Other income (loss)	1			1			(16		)	—			(14		)
Income (loss) from continuing operations before income taxes	(167		)	(1,116		)	1,449			—			166
Income tax (expense) benefit	58			422			(507		)	—			(27		)
Equity in earnings in subsidiaries	259			567			—			(826		)	—
Income (loss) from continuing operations	150			(127		)	942			(826		)	139
Income from discontinued operations, net of tax	—			—			11			—			11
Net income (loss)	150			(127		)	953			(826		)	150
Income attributable to noncontrolling interests	—			—			—			(17		)	(17		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	150		$	(127	)	$	953		$	(843	)	$	133

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net income (loss)	$	(1,054	)	$	(1,295	)	$	446		$	849	$	(1,054	)
Other comprehensive income:
Pension and postretirement adjustments, net of tax	—			60			14			—		74
Deferred gain on derivatives, net of tax	5			—			—			—		5
Currency translation adjustments, net of tax	6			—			(1		)	—		5
Unrealized net gain (loss), net of tax	—			(270		)	177			93		—
Total other comprehensive income	11			(210		)	190			93		84
Comprehensive income (loss)	(1,043		)	(1,505		)	636			942		(970		)
Comprehensive income attributable to noncontrolling interest	—			—			—			124		124
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(1,043	)	$	(1,505	)	$	636		$	1,066	$	(846	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net income (loss)	$	(3,147	)	$	(3,309	)	$	496		$	2,813	$	(3,147	)
Other comprehensive loss:
Pension and postretirement adjustments, net of tax	—			(750		)	(39		)	—		(789		)
Deferred loss on derivatives, net of tax	(6		)	—			—			—		(6		)
Currency translation adjustments, net of tax	—			—			(38		)	—		(38		)
Unrealized net gain (loss), net of tax	—			320			(320		)	—		—
Total other comprehensive loss	(6		)	(430		)	(397		)	—		(833		)
Comprehensive income (loss)	(3,153		)	(3,739		)	99			2,813		(3,980		)
Comprehensive loss attributable to noncontrolling interest	—			—			—			12		12
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(3,153	)	$	(3,739	)	$	99		$	2,825	$	(3,968	)

Consolidating Statement of Comprehensive Income (Loss)

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	150		$	(127	)	$	953		$	(826	)	$	150
Other comprehensive income (loss):
Pension and postretirement adjustments, net of tax	—			38			(50		)	—			(12		)
Deferred loss on derivatives, net of tax	(9		)	—			—			—			(9		)
Currency translation adjustments, net of tax	(3		)	—			96			—			93
Unrealized net gain (loss), net of tax	—			62			(62		)	—			—
Total other comprehensive income (loss)	(12		)	100			(16		)	—			72
Comprehensive income (loss)	138			(27		)	937			(826		)	222
Comprehensive income attributable to noncontrolling interest	—			—			—			(71		)	(71		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	138		$	(27	)	$	937		$	(897	)	$	151

Condensed Consolidating Statement of Cash Flows

For the Year Ended February 2, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,356	)	$	1,053		$	—		$	(303	)
Proceeds from sales of property and investments	—			353			179			—			532
Net increase in investments and restricted cash	—			—			37			—			37
Purchases of property and equipment	—			(293		)	(85		)	—			(378		)
Net investing with Affiliates	—			—			(236		)	236			—
Net cash provided by (used in) investing activities	—			60			(105		)	236			191
Proceeds from debt issuances	—			—			5			—			5
Repayments of long-term debt	—			(214		)	(121		)	—			(335		)
Increase in short-term borrowings, primarily 90 days or less	—			(81		)	—			—			(81		)
Sears Hometown and Outlet Stores, Inc. pre-separation funding	—			100			—			—			100
Intercompany dividend	100			(100		)	—			—			—
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347			—			—			—			347
Debt issuance costs	—			(3		)	—			—			(3		)
Purchase of Sears Canada shares	—			—			(10		)	—			(10		)
Sears Canada dividend paid to minority shareholders	—			52			(102		)	—			(50		)
Net borrowing with Affiliates	(447		)	1,526			(843		)	(236		)	—
Net cash provided by (used in) financing activities	—			1,280			(1,071		)	(236		)	(27		)
Effect of exchange rate changes on cash and cash equivalents	—			—			1			—			1
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			(16		)	(122		)	—			(138		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			336			411			—			747
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	320		$	289		$	—		$	609

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities – continuing operations	$	—		$	(1,506	)	$	1,199		$	—		$	(307	)
Net cash provided by operating activities – discontinued operations	—			—			32			—			32
Net cash provided by (used in) operating activities	—			(1,506		)	1,231			—			(275		)
Proceeds from sales of property and investments	—			72			—			—			72
Net increase in investments and restricted cash	—			—			8			—			8
Purchases of property and equipment	—			(342		)	(90		)	—			(432		)
Net investing with Affiliates	—			—			(275		)	275			—
Net cash used in investing activities – continuing operations	—			(270		)	(357		)	275			(352		)
Net cash provided by investing activities – discontinued operations	—			—			43			—			43
Net cash used in investing activities	—			(270		)	(314		)	275			(309		)
Proceeds from debt issuances	—			—			104			—			104
Repayments of long-term debt	—			(481		)	(130		)	—			(611		)
Increase in short-term borrowings, primarily 90 days or less	—			815			—			—			815
Debt issuance costs	—			(35		)	—			—			(35		)
Purchase of Sears Canada shares	—			—			(43		)	—			(43		)
Purchase of treasury stock	—			(183		)	—			—			(183		)
Net borrowing with Affiliates	(140		)	1,190			(775		)	(275		)	—
Net cash provided by (used in) financing activities – continuing operations	(140		)	1,306			(844		)	(275		)	47
Net cash provided by (used in) financing activities – discontinued operations	—			28			(103		)	—			(75		)
Net cash provided by (used in) financing activities	(140		)	1,334			(947		)	(275		)	(28		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(140		)	(442		)	(30		)	—			(612		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	140			778			441			—			1,359
CASH AND CASH EQUIVALENTS, END OF YEAR	$	—		$	336		$	411		$	—		$	747

Condensed Consolidating Statement of Cash Flows

For the Year Ended January 29, 2011

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities – continuing operations	$	—		$	(1,115	)	$	1,192		$	—		$	77
Net cash provided by operating activities – discontinued operations	—			—			46			—			46
Net cash provided by (used in) operating activities	—			(1,115		)	1,238			—			123
Proceeds from sales of property and investments	—			16			19			—			35
Net (decrease) increase in investments and restricted cash	—			3			(3		)	—			—
Purchases of property and equipment	—			(369		)	(57		)	—			(426		)
Net investing with Affiliates	—			—			(288		)	288			—
Net cash used in investing activities – continuing operations	—			(350		)	(329		)	288			(391		)
Net cash used in investing activities – discontinued operations	—			—			(15		)	—			(15		)
Net cash used in investing activities	—			(350		)	(344		)	288			(406		)
Proceeds from debt issuances	1,246			—			107			—			1,353
Repayments of long-term debt	—			(51		)	(307		)	—			(358		)
Increase in short-term borrowings, primarily 90 days or less	—			35			—			—			35
Debt issuance costs	—			(18		)	(10		)	—			(28		)
Purchase of Sears Canada shares	—			(560		)	(43		)	—			(603		)
Sears Canada dividends paid to minority shareholders	—			639			(708		)				(69		)
Purchase of treasury stock	—			(394		)	—			—			(394		)
Net borrowing with Affiliates	(1,106		)	2,207			(813		)	(288		)	—
Net cash provided by (used in) financing activities – continuing operations	140			1,858			(1,774		)	(288		)	(64		)
Net cash provided by (used in) financing activities – discontinued operations	—			15			(46		)	—			(31		)
Net cash provided by (used in) financing activities	140			1,873			(1,820		)	(288		)	(95		)
Effect of exchange rate changes on cash and cash equivalents	—			—			57			—			57
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	140			408			(869		)	—			(321		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			370			1,310			—			1,680
CASH AND CASH EQUIVALENTS, END OF YEAR	$	140		$	778		$	441		$	—		$	1,359

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BORROWINGS (Sears Canada Credit Agreement) (Details) In Millions, unless otherwise specified	Sep. 30, 2010 Five Year Revolving Credit Facility	Feb. 02, 2013 Domestic Credit Agreement USD ($)	Jan. 28, 2012 Domestic Credit Agreement USD ($)	Apr. 30, 2011 Domestic Credit Agreement USD ($)	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility USD ($)	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility CAD	Jan. 28, 2012 Sears Canada Five Year Revolving Credit Facility USD ($)	Jan. 28, 2012 Sears Canada Five Year Revolving Credit Facility CAD	Sep. 30, 2010 Sears Canada Five Year Revolving Credit Facility USD ($)
Line of Credit Facility [Line Items]
Credit agreement term	5 years
Credit agreement				$ 3,275					$ 800
Credit facility, amount outstanding		749	838		0		101	101
Credit Agreement available amount		1,800	1,800		503	502	415	415
Reduction in borrowing capacity					300
Additional collateral					$ 150

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SUMMARY OF SEGMENT DATA (Tables)

12 Months Ended

Feb. 02, 2013

Segment Reporting [Abstract]

Summary of Segment Data

	2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,486		$	11,870		$	2,246		$	18,602
Apparel and Soft Home	4,588			5,434			1,856			11,878
Food and Drug	5,398			38			—			5,436
Service and Other	95			3,635			208			3,938
Total merchandise sales and services	14,567			20,977			4,310			39,854
Costs and expenses:
Cost of sales, buying and occupancy	11,158			15,107			3,075			29,340
Selling and administrative	3,284			6,184			1,192			10,660
Depreciation and amortization	147			578			105			830
Impairment charges	10			25			295			330
Gain on sales of assets	(37		)	(261		)	(170		)	(468		)
Total costs and expenses	14,562			21,633			4,497			40,692
Operating income (loss)	$	5		$	(656	)	$	(187	)	$	(838	)
Total assets	$	4,304		$	12,648		$	2,388		$	19,340
Capital expenditures	$	122		$	171		$	85		$	378

	2011
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,765		$	13,022		$	2,377		$	20,164
Apparel and Soft Home	4,723			5,471			2,011			12,205
Food and Drug	5,705			41			—			5,746
Service and Other	92			3,115			245			3,452
Total merchandise sales and services	15,285			21,649			4,633			41,567
Costs and expenses:
Cost of sales, buying and occupancy	11,818			15,849			3,299			30,966
Selling and administrative	3,371			6,042			1,251			10,664
Depreciation and amortization	149			601			103			853
Impairment charges	15			634			—			649
Gain on sales of assets	(34		)	(30		)	—			(64		)
Total costs and expenses	15,319			23,096			4,653			43,068
Operating loss	$	(34	)	$	(1,447	)	$	(20	)	$	(1,501	)
Total assets	$	4,548		$	13,913		$	2,920		$	21,381
Capital expenditures	$	118		$	225		$	89		$	432

	2010
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services:
Hardlines	$	4,879		$	13,692		$	2,440		$	21,011
Apparel and Soft Home	4,809			5,454			2,088			12,351
Food and Drug	5,810			38			—			5,848
Service and Other	95			3,091			268			3,454
Total merchandise sales and services	15,593			22,275			4,796			42,664
Costs and expenses:
Cost of sales, buying and occupancy	11,757			15,910			3,333			31,000
Selling and administrative	3,341			5,940			1,144			10,425
Depreciation and amortization	149			620			100			869
Gain on sales of assets	(7		)	(46		)	(14		)	(67		)
Total costs and expenses	15,240			22,424			4,563			42,227
Operating income (loss)	$	353		$	(149	)	$	233		$	437
Total assets	$	6,085		$	15,299		$	2,976		$	24,360
Capital expenditures	$	153		$	216		$	57		$	426

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Feb. 02, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations, Consolidation and Basis of Presentation

Nature of Operations, Consolidation and Basis of Presentation

Sears Holdings Corporation (“Holdings”) is the parent company of Kmart Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings (together with its subsidiaries, “we,” “us,” “our,” or the “Company”) was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”), on March 24, 2005. We are an integrated retailer with 2,019 full-line and 54 specialty retail stores in the United States, operating through Kmart and Sears, and 475 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 51%-owned subsidiary. We have three reportable segments: Kmart, Sears Domestic and Sears Canada.

The consolidated financial statements include all majority-owned subsidiaries in which Holdings exercises control. Investments in companies in which Holdings exercises significant influence, but which we do not control (generally 20% to 50% ownership interest), are accounted for under the equity method of accounting. Investments in companies in which we have less than a 20% ownership interest and do not exercise significant influence are accounted for at cost. All intercompany transactions and balances have been eliminated.

Separation of Sears Hometown and Outlet Businesses

On October 11, 2012, we completed the separation of our Sears Hometown and Outlet businesses through a rights offering transaction. Holdings received gross proceeds of $446.5 million with respect to the transaction, consisting of $346.5 million for the sale of Sears Hometown and Outlet Stores, Inc. ("SHO") common shares and $100 million through a dividend from SHO prior to the separation. Prior to the separation, SHO entered into an asset-based senior secured revolving credit facility with a group of financial institutions to provide (subject to availability under a borrowing base) for aggregate maximum borrowings of $250 million. Borrowings of $100 million from this revolving credit facility were used to fund the dividend paid to Holdings. We accounted for this separation in accordance with accounting standards applicable to common control transactions as ESL Investments, Inc. (together with its affiliated fund, "ESL") is a majority shareholder of Holdings and became a majority shareholder of SHO as a result of exercising subscription rights pursuant to the rights offering. Accordingly, we classified the difference between the proceeds received and the carrying value of net assets contributed to SHO as a reduction of capital in excess of par value in the Consolidated Statement of Equity for the period ended February 2, 2013.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with SHO under the terms described in Note 15. Because of the various agreements with SHO, the Company has determined that it has significant continuing cash flows with SHO. Accordingly, the operating results for SHO through the date of the separation are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Consolidated Financial Statements. See Note 15 to the Consolidated Financial Statements for further information related to the agreements with SHO.

Spin-Off of Orchard Supply Hardware Stores Corporation

On December 30, 2011, we completed the spin-off to our shareholders of all the capital stock of Orchard Supply Hardware Stores Corporation (“Orchard”) that was owned by Holdings immediately prior to the spin-off, consisting of common stock that represented approximately 80% of the voting power of Orchard's outstanding capital stock and preferred stock that represented 100% of Orchard's outstanding nonvoting capital stock. In connection with the spin-off, Holdings and certain of its subsidiaries entered into various agreements with Orchard, including a distribution agreement, a transition services agreement, an appliance sale and consignment agreement and brand license agreements. In addition, certain tax matters between Holdings and Orchard are governed by a tax sharing agreement entered into in 2005.

Holdings has no significant continuing involvement in the operations of Orchard. Accordingly, the operating results for Orchard are presented as discontinued operations in the accompanying Consolidated Statements of Operations for the years ended January 28, 2012 and January 29, 2011. In addition, the cash flows from operating, investing and financing activities for Orchard have been separately stated as discontinued operations in the accompanying Consolidated Statement of Cash Flows for the years ended January 28, 2012 and January 29, 2011. The Notes to Consolidated Financial Statements exclude the impact of Orchard for all periods presented. Prior to completion of the spin-off, Orchard’s results of operations, financial position and cash flows were presented within the Sears Domestic segment.

Fiscal Year

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31 each year. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. The following fiscal periods are presented in this report.

Fiscal Year	Ended	Weeks
2012	February 2, 2013	53
2011	January 28, 2012	52
2010	January 29, 2011	52

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events. The estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that management believes to be reasonable under the circumstances. Adjustments to estimates and assumptions are made when facts and circumstances dictate. As future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying consolidated financial statements. Significant estimates and assumptions are required as part of determining inventory and accounts receivable valuation, estimating depreciation, amortization and recoverability of long-lived assets, establishing self-insurance, warranty, legal and other reserves, performing goodwill, intangible and long-lived asset impairment analyses, and in establishing valuation allowances on deferred income tax assets and reserves for tax examination exposures, and calculating retirement ben

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents include all highly liquid investments with original maturities of three months or less at the date of purchase. We also include deposits in-transit from banks for payments related to third-party credit card and debit card transactions within cash equivalents. The deposits in-transit balances included within cash equivalents were $148 million and $173 million at February 2, 2013 and January 28, 2012, respectively.

We classify cash balances which have been pledged as collateral, and for which we do not have the ability to substitute letters of credit, as restricted cash on our Consolidated Balance Sheet.

We classify outstanding checks in excess of funds on deposit within other current liabilities and reduce cash and cash equivalents when these checks clear the bank on which they were drawn. Outstanding checks in excess of funds on deposit included in other current liabilities were $114 million and $68 million at February 2, 2013 and January 28, 2012, respectively.

Allowance For Doubtful Accounts

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts based on both historical experience and a specific identification basis. Allowances for doubtful accounts on accounts receivable balances were $26 million and $28 million at February 2, 2013 and January 28, 2012, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations.

Merchandise Inventories

Merchandise Inventories

Merchandise inventories are valued at the lower of cost or market. For Kmart and Sears Domestic, cost is primarily determined using the retail inventory method (“RIM”). Kmart merchandise inventories are valued under the RIM using primarily a first-in, first-out (“FIFO”) cost flow assumption. Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out (“LIFO”) cost flow assumption. For Sears Canada, cost is determined using the average cost method based on individual items.

Inherent in the RIM calculation are certain significant management judgments and estimates including, among others, merchandise markons, markups, markdowns and shrinkage, which significantly impact the ending inventory valuation at cost, as well as resulting gross margins. The methodologies utilized by us in our application of the RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the groupings of homogenous classes of merchandise, the development of shrinkage and obsolescence reserves, the accounting for price changes and the computations inherent in the LIFO adjustment (where applicable). Management believes that the RIM provides an inventory valuation that reasonably approximates cost and results in carrying inventory at the lower of cost or market.

Approximately 45% of consolidated merchandise inventories are valued using LIFO. To estimate the effects of inflation on inventories, we utilize external price indices determined by an outside source, the Bureau of Labor Statistics

Vendor Rebates and Allowances

Vendor Rebates and Allowances

We receive rebates and allowances from certain vendors through a variety of programs and arrangements intended to offset our costs of promoting and selling certain vendor products. These vendor payments are recognized and recorded as a reduction to the cost of merchandise inventories when earned and, thereafter, as a reduction of cost of sales, buying and occupancy as the merchandise is sold. Upfront consideration received from vendors linked to purchases or other commitments is initially deferred and amortized ratably to cost of sales, buying and occupancy over the life of the contract or as performance of the activities specified by the vendor to earn the fee is completed.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Additions and substantial improvements are capitalized and include expenditures that materially extend the useful lives of existing facilities and equipment. Maintenance and repairs that do not materially improve or extend the lives of the respective assets are expensed as incurred.

Depreciation expense, which includes depreciation on assets under capital leases, is recorded over the estimated useful lives of the respective assets using the straight-line method for financial statement purposes, and accelerated methods for tax purposes. The range of lives are generally 20 to 50 years for buildings, 3 to 10 years for furniture, fixtures and equipment, and 3 to 5 years for computer systems and computer equipment. Leasehold improvements are depreciated over the shorter of the associated lease term or the estimated useful life of the asset. Depreciation expense included within depreciation and amortization expense reported on the Consolidated Statements of Operations was $778 million, $798 million, and $809 million for the years ended February 2, 2013, January 28, 2012 and January 29, 2011, respectively.

Primarily as a result of store closing actions, certain property and equipment are considered held for sale. The value of assets held for sale was $57 million and $55 million at February 2, 2013 and January 28, 2012, respectively. These assets were included in prepaid expenses and other current assets in the Consolidated Balance Sheets at February 2, 2013 and January 28, 2012 at the lower of their historical net book value or their estimated fair value, less estimated costs to sell. We expect to sell the properties within a year and we continually remarket them. Substantially all assets held for sale are held within the Sears Domestic segment.

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

Impairment of Long-Lived Assets and Costs Associated with Exit Activities

In accordance with accounting standards governing the impairment or disposal of long-lived assets, the carrying value of long-lived assets, including property and equipment and definite-lived intangible assets, is evaluated whenever events or changes in circumstances indicate that a potential impairment has occurred relative to a given asset or assets. Factors that could result in an impairment review include, but are not limited to, a current period cash flow loss combined with a history of cash flow losses, current cash flows that may be insufficient to recover the investment in the property over the remaining useful life, or a projection that demonstrates continuing losses associated with the use of a long-lived asset, significant changes in the manner of use of the assets or significant changes in business strategies. An impairment loss is recognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value as determined based on quoted market prices or through the use of other valuation techniques. See Note 13 for further information regarding long-lived asset impairment charges recorded during 2012.

We account for costs associated with location closings in accordance with accounting standards pertaining to accounting for costs associated with exit or disposal activities. As such, we record a liability for costs associated with location closings, which includes employee severance, inventory markdowns and other liquidation fees when management makes the decision to exit a location. We record a liability for future lease costs (net of estimated sublease income) when we cease to use the location.

Goodwill, Trade Names, Other Intangible Assets and Related Impairments

Goodwill, Trade Names, Other Intangible Assets and Related Impairments

Trade names acquired as part of the Merger account for the majority of our intangible assets recognized in the Consolidated Balance Sheet. The majority of these trade name assets, such as Kenmore, Craftsman and Lands' End, are expected to generate cash flows indefinitely, do not have estimable or finite useful lives and, therefore, are accounted for as indefinite-lived assets not subject to amortization. Certain intangible assets, including favorable lease rights, contractual arrangements and customer lists, have estimable, finite useful lives, which are used as the basis for their amortization. The estimated useful lives of such assets are determined using a number of factors, including the demand for the asset, competition and the level of expenditure required to maintain the cash flows associated with the asset.

Our goodwill results from the Merger. We perform annual goodwill and indefinite-lived intangible asset impairment tests at the last day of our November accounting period each year and assess the need to update the tests between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows; a sustained, significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and the testing for recoverability of a significant asset group within a reporting unit. Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements.

Goodwill Impairment Assessments

Our goodwill resides in multiple reporting units. The goodwill impairment test involves a two-step process. The first step is a comparison of each reporting unit's fair value to its carrying value. We estimate fair value using the best information available, using both a market approach, as well as a discounted cash flow model, commonly referred to as the income approach. The market approach determines the value of a reporting unit by deriving market multiples for reporting units based on assumptions potential market participants would use in establishing a bid price for the unit. This approach therefore assumes strategic initiatives will result in improvements in operational performance in the event of purchase, and includes the application of a discount rate based on market participant assumptions with respect to capital structure and access to capital markets. The income approach uses a reporting unit's projection of estimated operating results and cash flows that is discounted using a weighted-average cost of capital that reflects current market conditions appropriate for the reporting unit. The projection uses management's best estimates of economic and market conditions over the projected period, including growth rates in sales, costs, estimates of future expected changes in operating margins and cash expenditures. Other significant estimates and assumptions include terminal value growth rates, future estimates of capital expenditures and changes in future working capital requirements. Our final estimate of fair value of reporting units is developed by weighting the fair values determined through both the market and income approaches.

If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss, if any. The amount of impairment is determined by comparing the implied fair value of reporting unit goodwill to the carrying value of the goodwill in the same manner as if the reporting unit was being acquired in a business combination. See Note 12 for further information regarding goodwill and related impairment charges recorded during 2012 and 2011.

Intangible Asset Impairment Assessments

We consider the income approach when testing intangible assets with indefinite lives for impairment on an annual basis. We utilize the income approach, specifically the relief from royalty method, for analyzing our indefinite-lived assets. This method is based on the assumption that, in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset class. The relief from royalty method involves two steps: (1) estimation of reasonable royalty rates for the assets and (2) the application of these royalty rates to a net sales stream and discounting the resulting cash flows to determine a value. We multiplied the selected royalty rate by the forecasted net sales stream to calculate the cost savings (relief from royalty payment) associated with the assets. The cash flows are then discounted to present value by the selected discount rate and compared to the carrying value of the assets.

Financial Instruments and Hedging Activities

Financial Instruments and Hedging Activities

We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. As a result, we primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market. We primarily use foreign currency forward contracts to hedge the foreign currency exposure of our net investment in Sears Canada against adverse changes in exchange rates and foreign currency collar contracts to hedge against foreign currency exposure arising from Sears Canada's inventory purchase contracts denominated in U.S. dollars.

Hedges of Net Investment in Sears Canada

When applying hedge accounting treatment to our derivative transactions, we formally document our hedge relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge transaction. We also formally assess, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, we discontinue hedge accounting.

For derivatives that are designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivatives are recorded in the currency translation adjustments line in Accumulated Other Comprehensive Income (Loss) and remain there until such time that we substantially liquidate or sell our holdings in Sears Canada.

Sears Canada Hedges of Merchandise Purchases

Sears Canada mitigates the risk of currency fluctuations on offshore merchandise purchases denominated in U.S. currency by purchasing U.S. dollar denominated collar contracts for a portion of its expected requirements. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada's merchandise purchases, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk. Changes in the fair value of these contracts are recorded in the Consolidated Statements of Operations as a component of other income (loss) each period.

Hedges of Foreign Currency

The foreign currency forward contracts are recorded on the Consolidated Balance Sheet at fair value and, to the extent they have been designated and qualify for hedge accounting treatment, an offsetting amount is recorded as a component of other comprehensive income, net of income tax effects. Changes in the fair value of those forward contracts for which hedge accounting is not applied are recorded in the Consolidated Statements of Operations as a component of other income (loss). Certain of our currency forward contracts require collateral to be posted in the event our liability under such contracts reaches a predetermined threshold. Cash collateral posted under these contracts is recorded as part of our restricted cash balance.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with credit ratings of single-A or better at January 28, 2012. We had no derivative instruments at February 2, 2013.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Under fair value measurement accounting standards, fair value is considered to be the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. We report the fair value of financial assets and liabilities based on the fair value hierarchy prescribed by accounting standards for fair value measurements, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. See Note 4 to the Consolidated Financial Statements for further information regarding our derivative positions.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments, accounts receivable and derivative financial instruments. We place our cash and cash equivalents in investment-grade, short-term instruments with high quality financial institutions and, by policy, limit the amount of credit exposure in any one financial instrument. We use high credit quality counterparties to transact our derivative transactions.

Cash and cash equivalents, accounts receivable, merchandise payables, credit facility borrowings and accrued liabilities are reflected in the Consolidated Balance Sheet at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our debt is disclosed in Note 3 to the Consolidated Financial Statements.

Self-insurance Reserves

Self-insurance Reserves

We are self-insured for certain costs related to workers' compensation, asbestos and environmental, automobile, warranty, product and general liability claims. We obtain third-party insurance coverage to limit our exposure to certain of these self-insured risks. A portion of these self-insured risks is managed through a wholly-owned insurance subsidiary. Our liability reflected on the Consolidated Balance Sheet, classified within other liabilities (current and long-term), represents an estimate of the ultimate cost of claims incurred at the balance sheet date. In estimating this liability, we utilize loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claims settlements and reported claims. The liabilities for self-insured risks are discounted to their net present values using an interest rate which is based upon the expected duration of the liabilities.

Loss Contingencies

Loss Contingencies

We account for contingent losses in accordance with accounting standards pertaining to loss contingencies. Under accounting standards, loss contingency provisions are recorded for probable losses at management's best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. These estimates are often initially developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, as additional information is known.

Revenue Recognition

Revenue Recognition

Revenues include sales of merchandise, services and extended service contracts, net commissions earned from leased departments in retail stores, delivery and handling revenues related to merchandise sold, and fees earned from co-branded credit card programs. We recognize revenues from retail operations at the later of the point of sale or the delivery of goods to the customer. Direct to customer revenues are recognized when the merchandise is delivered to the customer. Revenues from product installation and repair services are recognized at the time the services are provided. Revenues from the sale of service contracts and the related direct acquisition costs are deferred and amortized over the lives of the associated contracts, while the associated service costs are expensed as incurred.

We earn revenues through arrangements with third-party financial institutions that manage and directly extend credit relative to our co-branded credit card programs. The third-party financial institutions pay us for generating new accounts and sales activity on co-branded cards, as well as for selling other financial products to cardholders. We recognize these revenues in the period earned, which is when our related performance obligations have been met. We sell gift cards to customers at our retail stores and through our direct to customer operations. The gift cards generally do not have expiration dates. Revenues from gift cards are recognized when (i) the gift card is redeemed by the customer, or (ii) the likelihood of the gift card being redeemed by the customer is remote (gift card breakage) based on historical redemption patterns and we determine that we do not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions.

Revenues from merchandise sales and services are reported net of estimated returns and allowances and exclude sales taxes. The reserve for returns and allowances is calculated as a percentage of sales based on historical return percentages. Estimated returns are recorded as a reduction of sales and cost of sales. We defer the recognition of layaway sales and profit until the period in which the customer takes possession of the merchandise.

Cost of Sales, Buying and Occupancy Costs

Cost of Sales, Buying and Occupancy Costs

Cost of sales, buying and occupancy are comprised principally of the costs of merchandise, buying, warehousing and distribution (including receiving and store delivery costs), retail store occupancy costs, product repair, and home service and installation costs, customer shipping and handling costs, vendor allowances, markdowns and physical inventory losses.

The Company has a SHOP YOUR WAY program in which customers earn points on purchases which may be redeemed to pay for future purchases. The expense for customer points earned is recognized as customers earn them and recorded in cost of sales.

Selling and Administrative Expenses

Selling and Administrative Expenses

Selling and administrative expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate facilities, advertising, pre-opening costs and other administrative expenses.

Pre-Opening Costs

Pre-Opening Costs

Pre-opening and start-up activity costs are expensed in the period in which they occur.

Advertising Costs

Advertising Costs

Advertising costs are expensed as incurred, generally the first time the advertising occurs, and amounted to $1.6 billion, $1.9 billion and $2.0 billion for 2012, 2011 and 2010, respectively. These costs are included within selling and administrative expenses in the accompanying Consolidated Statements of Operations.

Income Taxes

Income Taxes

We account for income taxes in accordance with accounting standards pertaining to such taxes. Accordingly, we provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax basis of assets and liabilities based on currently enacted tax laws in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by us are based on management's interpretation of the tax laws of multiple jurisdictions. Income tax expense also reflects our best estimates and assumptions regarding, among other things, the level of future taxable income, tax planning, and any valuation allowance. Future changes in tax laws, changes in projected levels of taxable income, tax planning, and adoption and implementation of new accounting standards could impact the effective tax rate and tax balances recorded by us. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. In evaluating the objective evidence that historical results provide, we consider cumulative operating income (loss) over the past three years. These assumptions require significant judgment about the forecasts of future taxable income.

Stock-based Compensation

Stock-based Compensation

We account for stock-based compensation arrangements in accordance with accounting standards pertaining to share-based payment transactions, which requires us to both recognize as expense the fair value of all stock-based compensation awards (which includes stock options, although there were no options outstanding in 2012) and to classify excess tax benefits associated with share-based compensation deductions as cash from financing activities rather than cash from operating activities. We recognize compensation expense as awards vest on a straight-line basis over the requisite service period of the award.

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income attributable to Holdings' shareholders by the weighted average number of common shares outstanding for each period. Diluted earnings per common share also includes the dilutive effect of potential common shares, exercise of stock options and the effect of restricted stock when dilutive.

New Accounting Pronouncements

New Accounting Pronouncements

Disclosures about Reclassification Adjustments out of Accumulated Other Comprehensive Income

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update requires entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update will be effective for us in the first quarter of 2013, but early adoption is permitted. The update will primarily impact our disclosures, but otherwise is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. The update will be effective for us in the first quarter of 2013, but early adoption is permitted. The update may, under certain circumstances, reduce the complexity and costs of testing indefinite-lived intangible assets for impairment, but otherwise is not expected to have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Testing Goodwill for Impairment

In September 2011, the FASB issued an accounting standards update which provides, subject to certain conditions, the option to perform a qualitative, rather than quantitative, assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This update was effective and adopted by the Company in the first quarter of 2012 and did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Presentation of Comprehensive Income

In June 2011, the FASB issued an accounting standards update which revises the manner in which entities present comprehensive income in their financial statements. The new guidance removes the presentation options in existing guidance and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format previously used by us, and the second statement would include components of other comprehensive income (“OCI”). The update does not change the items that must be reported in OCI and must be applied retrospectively for all periods presented in the financial statements. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Company’s financial statement presentation, but otherwise did not impact the Company’s condensed consolidated financial position, results of operations or cash flows.

Disclosures about Fair Value Measurements

In May 2011, the FASB issued an accounting standards update which amends the definition of fair value measurement principles and disclosure requirements to eliminate differences between U.S. GAAP and International Financial Reporting Standards. The update requires new quantitative and qualitative disclosures about the sensitivity of recurring Level 3 measurement disclosures, as well as disclosures of transfers between Level 1 and Level 2 of the fair value hierarchy. This update was effective and adopted by the Company in the first quarter of 2012 and impacted the Company’s disclosures, but otherwise did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Feb. 02, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fiscal Year

The following fiscal periods are presented in this report.

Fiscal Year	Ended	Weeks
2012	February 2, 2013	53
2011	January 28, 2012	52
2010	January 29, 2011	52

Schedule of Self-Insurance Reserve

Expected payments as of February 2, 2013 were as follows:

millions
2013	$	266
2014	163
2015	120
2016	87
2017	66
Later years	371
Total undiscounted obligation	1,073
Less—discount	(95		)
Net obligation	$	978

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Consolidated Statements of Equity (Parenthetical) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013
Spin off of shares issued (shares)	45

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BORROWINGS (Tables)

12 Months Ended

Feb. 02, 2013

Debt Disclosure [Abstract]

Total Borrowings

Long-term debt was as follows:

ISSUE	February 2, 2013			January 28, 2012
millions
SEARS ROEBUCK ACCEPTANCE CORP.
6.50% to 7.50% Notes, due 2017 to 2043	$	327		$	398
7.05% to 7.50% Medium-Term Notes, due 2013	11			80
SEARS HOLDINGS CORP.
6.625% Senior Secured Notes, due 2018	1,237			1,237
SEARS DC CORP.
9.07% to 9.20% Medium-Term Notes	—			23
SEARS CANADA INC.
Credit Facility, expires 2015	—			101
CAPITALIZED LEASE OBLIGATIONS	433			455
OTHER NOTES AND MORTGAGES	18			24
Total long-term borrowings	2,026			2,318
Current maturities	(83		)	(230		)
Long-term debt and capitalized lease obligations	$	1,943		$	2,088
Weighted-average annual interest rate on long-term debt	6.7		%	7.1		%

Schedule of Maturities of Long-term Debt

At February 2, 2013, long-term debt maturities for the next five years and thereafter were as follows:

millions
2013	$	83
2014	67
2015	61
2016	50
2017	89
Thereafter	1,676
	$	2,026

Schedule of Interest Expense on Debt

Interest expense for years 2012, 2011 and 2010 was as follows:

millions	2012		2011		2010
COMPONENTS OF INTEREST EXPENSE
Interest expense	$	232	$	248	$	242
Accretion of lease obligations at net present value	17		20		21
Amortization of debt issuance costs	18		21		30
Interest expense	$	267	$	289	$	293

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GOODWILL AND INTANGIBLE ASSETS Goodwill (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Feb. 02, 2013 Sears Domestic	Jan. 28, 2012 Sears Domestic	Feb. 02, 2013 Sears Canada	Jan. 31, 2009 Sears Canada	Jan. 29, 2011 Sears Canada	Jan. 30, 2009 Sears Canada
Goodwill [Line Items]
Goodwill acquired during period	$ 1,700					$ 12
Percentage of voting interests acquired								3.00%
Goodwill [Roll Forward]
Goodwill	841	1,392	546	1,097	295		295
Separation of Sears Hometown and Outlet Stores, Inc.	(167)		(167)
Impairment charges	(295)	(551)	0	(551)	(295)
Goodwill	$ 379	$ 841	$ 379	$ 546	$ 0		$ 295

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GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Feb. 02, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

The following summarizes our intangible assets at February 2, 2013 and January 28, 2012, respectively, the amortization expenses recorded for the years then ended, as well as our estimated amortization expense for the next five years and thereafter.

		February 2, 2013				January 28, 2012
millions	Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Favorable lease rights	29	$	293	$	148	$	360	$	194
Contractual arrangements and customer lists	9	218		188		224		170
Trade names	7	74		71		74		60
		585		407		658		424
Non-amortizing intangible assets:
Trade names		2,703		—		2,703		—
Total		$	3,288	$	407	$	3,361	$	424

Schedule of Future Amortization Expense

Annual Amortization Expense
2012	$	56
2011	56
2010	60

Estimated Amortization
2013	$	29
2014	22
2015	10
2016	8
2017	7
Thereafter	102

Schedule of Goodwill

Changes in the carrying amount of goodwill by segment during years 2011 and 2012 were as follows:

millions	Sears Domestic			Sears Canada			Total
Balance, January 29, 2011:
Goodwill	$	1,097		$	295		$	1,392
2011 activity:
Impairment charges	(551		)	—			(551		)
Balance, January 28, 2012	546			295			841
2012 activity:
Separation of Sears Hometown and Outlet Stores, Inc.	(167		)	—			(167		)
Impairment charges	—			(295		)	(295		)
Balance, February 2, 2013	$	379		$	—		$	379

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BORROWINGS Unsecured Commercial Paper (Details) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013	Jan. 28, 2012
Debt Instrument [Line Items]
Unsecured commercial paper	$ 345	$ 337
SRAC Issued
Debt Instrument [Line Items]
Unsecured commercial paper	202	230
SRAC Issued | ESL Investments, Inc.
Debt Instrument [Line Items]
Unsecured commercial paper	285	250
SRAC Issued | Edward S. Lampert
Debt Instrument [Line Items]
Unsecured commercial paper	$ 169	$ 130

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EQUITY Common Share Repurchase Program (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	12 Months Ended			84 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011	Jan. 28, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock repurchase program, authorized amount				$ 6,500,000,000
Repurchase of common shares, shares	0	2.8	5.5
Repurchase of common shares, value		183,000,000	394,000,000
Average prices of common shares repurchased		$ 65.66	$ 71.76
Remaining authorization to repurchase common shares under share repurchase program, value	$ 504,000,000

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Consolidated Statements of Operations (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
REVENUES
Merchandise sales and services	$ 39,854	$ 41,567	$ 42,664
COSTS AND EXPENSES
Cost of sales, buying and occupancy	29,340	30,966	31,000
Selling and administrative	10,660	10,664	10,425
Depreciation and amortization	830	853	869
Impairment charges	330	649	0
Gain on sales of assets	(468)	(64)	(67)
Total costs and expenses	40,692	43,068	42,227
Operating income (loss)	(838)	(1,501)	437
Interest expense	(267)	(289)	(293)
Interest and investment income	94	41	36
Other income (loss)	1	(2)	(14)
Income (loss) from continuing operations before income taxes	(1,010)	(1,751)	166
Income tax expense	(44)	(1,369)	(27)
Income (loss) from continuing operations	(1,054)	(3,120)	139
Income (loss) from discontinued operations, net of tax	0	27	(11)
Net income (loss)	(1,054)	(3,147)	150
(Income) loss attributable to noncontrolling interests	124	7	(17)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(930)	(3,140)	133
Amounts attributable to Holdings’ shareholders:
Income (loss) from continuing operations, net of tax	(930)	(3,113)	122
Income (loss) from discontinued operations, net of tax	0	(27)	11
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$ (930)	$ (3,140)	$ 133
Basic:
Continuing operations (in dollars per share)	$ (8.78)	$ (29.15)	$ 1.09
Discontinued operations (in dollars per share)	$ 0	$ (0.25)	$ 0.10
Earnings per share basic (in dollars per share)	$ (8.78)	$ (29.40)	$ 1.19
Diluted:
Continuing operations (in dollars per share)	$ (8.78)	$ (29.15)	$ 1.09
Discontinued operations (in dollars per share)	$ 0	$ (0.25)	$ 0.10
Earnings per share diluted (in dollars per share)	$ (8.78)	$ (29.40)	$ 1.19
Basic weighted average common shares outstanding (in shares)	105.9	106.8	111.5
Diluted weighted average common shares outstanding (in shares)	105.9	106.8	111.7

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QUARTERLY FINANCIAL INFORMATION (Tables)

12 Months Ended

Feb. 02, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

	2012
millions, except per share data	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	9,270	$	9,467		$	8,857		$	12,260
Cost of sales, buying and occupancy	6,703		6,936			6,604			9,097
Selling and administrative	2,445		2,437			2,496			3,282
Net income (loss) from continuing operations attributable to Holdings' shareholders	189		(132		)	(498		)	(489		)
Basic net income (loss) per share from continuing operations attributable to Holdings' shareholders	1.78		(1.25		)	(4.70		)	(4.61		)
Diluted net income (loss) per share from continuing operations attributable to Holdings' shareholders	1.78		(1.25		)	(4.70		)	(4.61		)

	2011
millions, except per share data	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	9,540		$	10,138		$	9,405		$	12,484
Cost of sales, buying and occupancy	6,996			7,537			7,011			9,422
Selling and administrative	2,507			2,601			2,635			2,921
Net loss from continuing operations attributable to Holdings' shareholders	(165		)	(152		)	(410		)	(2,386		)
Basic net loss per share from continuing operations attributable to Holdings' shareholders	(1.53		)	(1.42		)	(3.85		)	(22.47		)
Diluted net loss per share from continuing operations attributable to Holdings' shareholders	(1.53		)	(1.42		)	(3.85		)	(22.47		)

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Condensed Consolidating Statement of Comprehensive Income (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	$ (1,054)	$ (3,147)	$ 150
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	74	(789)	(12)
Deferred gain on derivatives, net of tax	5	(6)	(9)
Currency translation adjustments, net of tax	5	(38)	93
Unrealized net gain (loss), net of tax	0	0	0
Total other comprehensive income (loss)	84	(833)	72
Comprehensive income (loss)	(970)	(3,980)	222
Comprehensive (income) loss attributable to noncontrolling interests	124	12	(71)
Comprehensive income (loss) attributable to Holdings’ shareholders	(846)	(3,968)	151
Parent
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(1,054)	(3,147)	150
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	0	0	0
Deferred gain on derivatives, net of tax	5	(6)	(9)
Currency translation adjustments, net of tax	6	0	(3)
Unrealized net gain (loss), net of tax	0	0	0
Total other comprehensive income (loss)	11	(6)	(12)
Comprehensive income (loss)	(1,043)	(3,153)	138
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	(1,043)	(3,153)	138
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(1,295)	(3,309)	(127)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	60	(750)	38
Deferred gain on derivatives, net of tax	0	0	0
Currency translation adjustments, net of tax	0	0	0
Unrealized net gain (loss), net of tax	(270)	320	62
Total other comprehensive income (loss)	(210)	(430)	100
Comprehensive income (loss)	(1,505)	(3,739)	(27)
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	(1,505)	(3,739)	(27)
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	446	496	953
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	14	(39)	(50)
Deferred gain on derivatives, net of tax	0	0	0
Currency translation adjustments, net of tax	(1)	(38)	96
Unrealized net gain (loss), net of tax	177	(320)	(62)
Total other comprehensive income (loss)	190	(397)	(16)
Comprehensive income (loss)	636	99	937
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	636	99	937
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	849	2,813	(826)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	0	0	0
Deferred gain on derivatives, net of tax	0	0	0
Currency translation adjustments, net of tax	0	0	0
Unrealized net gain (loss), net of tax	93	0	0
Total other comprehensive income (loss)	93	0	0
Comprehensive income (loss)	942	2,813	(826)
Comprehensive (income) loss attributable to noncontrolling interests	124	12	(71)
Comprehensive income (loss) attributable to Holdings’ shareholders	$ 1,066	$ 2,825	$ (897)

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Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (1,054)	$ (3,147)	$ 150
(Income) loss from discontinued operations, net of tax	0	27	(11)
Income (loss) from continuing operations	(1,054)	(3,120)	139
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred tax valuation allowance	237	1,798	0
Depreciation and amortization	830	853	869
Impairment charges	330	649	0
Gain on sales of assets	(468)	(64)	(67)
Gain on sales of investments	(28)	0	0
Pension and postretirement plan contributions	(593)	(390)	(316)
Pension and postretirement plan settlements	455	0	0
Settlement of Canadian dollar hedges	6	0	(3)
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	(206)	(533)	(15)
Merchandise inventories	427	545	(353)
Merchandise payables	(117)	(134)	(285)
Income and other taxes	(63)	(50)	(34)
Mark-to-market adjustments and settlements on Sears Canada U.S. dollar collar contracts	1	2	7
Other operating assets	(100)	67	(7)
Other operating liabilities	40	70	142
Net cash provided by (used in) operating activities—continuing operations	(303)	(307)	77
Net cash provided by operating activities—discontinued operations	0	32	46
Net cash provided by (used in) operating activities	(303)	(275)	123
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	532	72	35
Net decrease in investments and restricted cash	37	8	0
Purchases of property and equipment	(378)	(432)	(426)
Net cash provided by (used in) investing activities—continuing operations	191	(352)	(391)
Net cash provided by (used in) investing activities—discontinued operations	0	43	(15)
Net cash provided by (used in) investing activities	191	(309)	(406)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	5	104	1,353
Repayments of long-term debt	(335)	(611)	(358)
Increase (decrease) in short-term borrowings, primarily 90 days or less	(81)	815	35
Sears Hometown and Outlet Stores, Inc. pre-separation funding	100	0	0
Proceeds from the sale of Sears Hometown and Outlet Stores, Inc.	347	0	0
Debt issuance costs	(3)	(35)	(28)
Purchase of Sears Canada shares	(10)	(43)	(603)
Sears Canada dividends paid to minority shareholders	(50)	0	(69)
Purchase of treasury stock	0	(183)	(394)
Net cash provided by (used in) financing activities—continuing operations	(27)	47	(64)
Net cash used in financing activities—discontinued operations	0	(75)	(31)
Net cash used in financing activities	(27)	(28)	(95)
Effect of exchange rate changes on cash and cash equivalents	1	0	57
NET DECREASE IN CASH AND CASH EQUIVALENTS	(138)	(612)	(321)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	747	1,359	1,680
CASH AND CASH EQUIVALENTS, END OF PERIOD	609	747	1,359
SUPPLEMENTAL INFORMATION:
Capital lease obligation incurred	61	3	15
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	40	94	47
Cash interest paid	199	223	164
Unpaid liability to acquire equipment and software	30	52	56
Non-cash dividend in connection with Spin-Off transactions	$ (542)	$ (74)	$ 0

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Condensed Consolidating Balance Sheet (Detail) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013		Jan. 28, 2012		Jan. 29, 2011	Jan. 30, 2010	Jan. 30, 2009
Current assets
Cash and cash equivalents	$ 609		$ 747		$ 1,359	$ 1,680	$ 1,680
Intercompany receivables	0		0
Accounts receivable	635		695
Merchandise inventories	7,558		8,407
Prepaid expenses and other current assets	463		395
Total current assets	9,265		10,244
Total property and equipment, net	6,053		6,577
Goodwill and intangible assets	3,260		3,778
Other assets	762		782
Investment in subsidiaries	0		0
TOTAL ASSETS	19,340		21,381		24,360
Current liabilities
Short-term borrowings	1,094	[1]	1,175	[1]
Current portion of long-term debt and capitalized lease obligations	83		230
Merchandise payables	2,761		2,912
Intercompany payables	0		0
Short-term deferred tax liabilities	382		516
Other current liabilities	4,094		4,379
Total current liabilities	8,414		9,212
Long-term debt and capitalized lease obligations	1,943	[2]	2,088	[2]
Pension and postretirement benefits	2,730		2,738
Long-term deferred tax liabilities	955		816
Other long-term liabilities	2,126		2,186
Total Liabilities	16,168		17,040
EQUITY
Shareholder's equity	2,755		4,281
Noncontrolling interest	417		60
Total Equity	3,172		4,341		8,614	9,435
TOTAL LIABILITIES AND EQUITY	19,340		21,381
Parent
Current assets
Cash and cash equivalents	0		0		140	0
Intercompany receivables	0		0
Accounts receivable	0		0
Merchandise inventories	0		0
Prepaid expenses and other current assets	92		42
Total current assets	92		42
Total property and equipment, net	0		0
Goodwill and intangible assets	0		0
Other assets	17		22
Investment in subsidiaries	16,413		17,332
TOTAL ASSETS	16,522		17,396
Current liabilities
Short-term borrowings	0		0
Current portion of long-term debt and capitalized lease obligations	0		0
Merchandise payables	0		0
Intercompany payables	12,594		11,844
Short-term deferred tax liabilities	3		5
Other current liabilities	26		29
Total current liabilities	12,623		11,878
Long-term debt and capitalized lease obligations	1,237		1,237
Pension and postretirement benefits	0		0
Long-term deferred tax liabilities	0		0
Other long-term liabilities	0		0
Total Liabilities	13,860		13,115
EQUITY
Shareholder's equity	2,662		4,281
Noncontrolling interest	0		0
Total Equity	2,662		4,281
TOTAL LIABILITIES AND EQUITY	16,522		17,396
Guarantor Subsidiaries
Current assets
Cash and cash equivalents	320		336		778	370
Intercompany receivables	0		0
Accounts receivable	506		486
Merchandise inventories	6,709		7,590
Prepaid expenses and other current assets	970		760
Total current assets	8,505		9,172
Total property and equipment, net	4,412		4,837
Goodwill and intangible assets	968		1,178
Other assets	223		190
Investment in subsidiaries	24,988		25,648
TOTAL ASSETS	39,096		41,025
Current liabilities
Short-term borrowings	1,094		1,175
Current portion of long-term debt and capitalized lease obligations	66		213
Merchandise payables	2,392		2,476
Intercompany payables	12,959		13,285
Short-term deferred tax liabilities	412		541
Other current liabilities	2,640		2,856
Total current liabilities	19,563		20,546
Long-term debt and capitalized lease obligations	3,081		2,396
Pension and postretirement benefits	2,310		2,283
Long-term deferred tax liabilities	0		5
Other long-term liabilities	861		900
Total Liabilities	25,815		26,130
EQUITY
Shareholder's equity	13,281		14,895
Noncontrolling interest	0		0
Total Equity	13,281		14,895
TOTAL LIABILITIES AND EQUITY	39,096		41,025
Non-Guarantor Subsidiaries
Current assets
Cash and cash equivalents	289		411		441	1,310
Intercompany receivables	25,553		25,129
Accounts receivable	129		209
Merchandise inventories	849		817
Prepaid expenses and other current assets	461		458
Total current assets	27,281		27,024
Total property and equipment, net	1,641		1,740
Goodwill and intangible assets	2,292		2,600
Other assets	3,147		2,589
Investment in subsidiaries	0		0
TOTAL ASSETS	34,361		33,953
Current liabilities
Short-term borrowings	0		0
Current portion of long-term debt and capitalized lease obligations	17		17
Merchandise payables	369		436
Intercompany payables	0		0
Short-term deferred tax liabilities	0		0
Other current liabilities	2,455		2,329
Total current liabilities	2,841		2,782
Long-term debt and capitalized lease obligations	135		240
Pension and postretirement benefits	420		455
Long-term deferred tax liabilities	914		817
Other long-term liabilities	1,513		1,514
Total Liabilities	5,823		5,808
EQUITY
Shareholder's equity	28,538		28,145
Noncontrolling interest	0		0
Total Equity	28,538		28,145
TOTAL LIABILITIES AND EQUITY	34,361		33,953
Eliminations
Current assets
Cash and cash equivalents	0		0		0	0
Intercompany receivables	(25,553)		(25,129)
Accounts receivable	0		0
Merchandise inventories	0		0
Prepaid expenses and other current assets	(1,060)		(865)
Total current assets	(26,613)		(25,994)
Total property and equipment, net	0		0
Goodwill and intangible assets	0		0
Other assets	(2,625)		(2,019)
Investment in subsidiaries	(41,401)		(42,980)
TOTAL ASSETS	(70,639)		(70,993)
Current liabilities
Short-term borrowings	0		0
Current portion of long-term debt and capitalized lease obligations	0		0
Merchandise payables	0		0
Intercompany payables	(25,553)		(25,129)
Short-term deferred tax liabilities	(33)		(30)
Other current liabilities	(1,027)		(835)
Total current liabilities	(26,613)		(25,994)
Long-term debt and capitalized lease obligations	(2,510)		(1,785)
Pension and postretirement benefits	0		0
Long-term deferred tax liabilities	41		(6)
Other long-term liabilities	(248)		(228)
Total Liabilities	(29,330)		(28,013)
EQUITY
Shareholder's equity	(41,726)		(43,040)
Noncontrolling interest	417		60
Total Equity	(41,309)		(42,980)
TOTAL LIABILITIES AND EQUITY	$ (70,639)		$ (70,993)

[1] Includes $285 million and $250 million at February 2, 2013 and January 28, 2012, respectively, of unsecured commercial paper held by ESL and its affiliates.

[2] Includes $95 million at both February 2, 2013 and January 28, 2012 of senior secured notes held by ESL and its affiliates; and $3 million and $14 million at February 2, 2013 and January 28, 2012, respectively, of subsidiary notes held by ESL and its affiliates.

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DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL GUARANTEES (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012		Jan. 29, 2011
Derivative [Line Items]
Mark-to-market and settlement gain (losses)	$ 2	$ 1		$ 15
Aggregate fair value of forward contracts, liabilities		(6)	[1]
Foreign currency collar contracts
Derivative [Line Items]
Notional value of foreign currency derivatives	0	0
Mark-to-market and settlement gain (losses)	0	4		14
Embedded Derivative
Derivative [Line Items]
Mark-to-market and settlement gain (losses)	(2)	5		1
Asset related to foreign currency derivatives	0	1
Embedded Derivative | Foreign currency collar contracts
Derivative [Line Items]
Asset related to foreign currency derivatives	0	1
Foreign currency forward contracts
Derivative [Line Items]
Notional value of foreign currency derivatives	0	629
Foreign currency forward contracts outstanding, weighted-average remaining life (in years)		1 month 6 days
Aggregate fair value of forward contracts, liabilities	0	(6)
Increase (decrease) in fair value of forward contracts, net of tax		6
Settlement of foreign currency contracts, received (paid)	6.0	0.1		3.0
Cash collateral posted under currency forward contracts	0	5
Standby letters of credit
Derivative [Line Items]
Guarantor obligations	821
Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	141
Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	77
Bank Issued | Standby letters of credit
Derivative [Line Items]
Guarantor obligations	774
Bank Issued | Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	8
Bank Issued | Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	0
SRAC Issued | Standby letters of credit
Derivative [Line Items]
Guarantor obligations	47
SRAC Issued | Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	133
SRAC Issued | Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	0
Other | Standby letters of credit
Derivative [Line Items]
Guarantor obligations	0
Other | Commercial letters of credit
Derivative [Line Items]
Guarantor obligations	0
Other | Secondary lease obligations
Derivative [Line Items]
Guarantor obligations	$ 77

[1] Included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

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INTEREST AND INVESTMENT INCOME (Tables)

12 Months Ended

Feb. 02, 2013

Investment Income, Interest and Dividend [Abstract]

Schedule Investment Income

The following table sets forth the components of interest and investment income as reported in our Consolidated Statements of Operations:

millions	2012		2011		2010
Interest income on cash and cash equivalents	$	7	$	4	$	4
Other investment income	87		37		32
Total	$	94	$	41	$	36

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BENEFIT PLANS Investment Strategy (Details)	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012
Domestic Defined Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	100.00%	100.00%
Domestic Defined Benefit Plan | Equity Securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	31.00%	32.00%
Percentage of target plan asset allocations	35.00%
Domestic Defined Benefit Plan | Fixed Income Securities and Other Debt Securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	64.00%	67.00%
Domestic Defined Benefit Plan | Other
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	5.00%	1.00%
Domestic Defined Benefit Plan | Fixed Income Securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of target plan asset allocations	65.00%
Sears Canada Defined Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	100.00%	100.00%
Sears Canada Defined Benefit Plan | Equity Securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	26.00%	27.00%
Sears Canada Defined Benefit Plan | Equity Securities | Minimum
Defined Benefit Plan Disclosure [Line Items]
Percentage of target plan asset allocations	25.00%
Sears Canada Defined Benefit Plan | Equity Securities | Maximum
Defined Benefit Plan Disclosure [Line Items]
Percentage of target plan asset allocations	45.00%
Sears Canada Defined Benefit Plan | Fixed Income Securities and Other Debt Securities
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	74.00%	72.00%
Sears Canada Defined Benefit Plan | Other
Defined Benefit Plan Disclosure [Line Items]
Percentage of actual plan asset allocations	0.00%	1.00%
Sears Canada Defined Benefit Plan | Fixed Income Securities | Minimum
Defined Benefit Plan Disclosure [Line Items]
Percentage of target plan asset allocations	55.00%
Sears Canada Defined Benefit Plan | Fixed Income Securities | Maximum
Defined Benefit Plan Disclosure [Line Items]
Percentage of target plan asset allocations	75.00%

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LEASES (Notes)

12 Months Ended

Feb. 02, 2013

Leases [Abstract]

LEASES

LEASES

We lease certain stores, office facilities, warehouses, computers and transportation equipment.

Operating and capital lease obligations are based upon contractual minimum rents and, for certain stores, amounts in excess of these minimum rents are payable based upon specified percentages of sales. Contingent rent is accrued over the lease term, provided that the achievement of the specified sales level that triggers the contingent rental is probable. Certain leases include renewal or purchase options.

Rental expense for operating leases was as follows:

millions	2012			2011			2010
Minimum rentals	$	824		$	837		$	844
Percentage rentals	17			19			21
Less-Sublease rentals	(47		)	(30		)	(52		)
Total	$	794		$	826		$	813

Minimum lease obligations, excluding taxes, insurance and other expenses payable directly by us, for leases in effect at February 2, 2013, were as follows:

	Minimum Lease Commitments
millions	Capital			Operating
2013	$	113		$	720
2014	107			621
2015	94			527
2016	74			422
2017	51			317
Later years	204			1,928
Total minimum lease payments(1)	643			4,535
Less-minimum sublease income				(192		)
Net minimum lease payments				$	4,343
Less:
Estimated executory costs	(56		)
Interest at a weighted average rate of 7.2%	(154		)
Capital lease obligations	433
Less current portion of capital lease obligations	(69		)
Long-term capital lease obligations	$	364

_____________

⁽¹⁾  Sears Canada: Total operating minimum lease payments of $433 million.

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BENEFIT PLANS (Tables)

12 Months Ended

Feb. 02, 2013

Defined Benefit Plan Disclosure [Line Items]

Expenses for Retirement and Savings Related Benefit Plans

Expenses for retirement and savings-related benefit plans were as follows:

millions	2012		2011		2010
Retirement/401(k) Savings Plans	$	10	$	11	$	11
Pension plans	630		78		119
Postretirement benefits	24		24		27
Total	$	664	$	113	$	157

Weighted-Average Assumptions Used to Determine Net Cost

Weighted-average assumptions used to determine net cost were as follows:

	2012		2011		2010
	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada
Pension benefits:
Discount Rate	4.90%	4.70%	5.75%	5.40%	6.00%	6.00%
Return of plan assets	7.25%	6.50%	7.50%	6.50%	8.00%	6.50%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%
Postretirement benefits:
Discount Rate	4.20%	4.60%	5.00%	5.40%	6.00%	6.00%
Return of plan assets	N/A	3.75%	N/A	6.50%	N/A	6.50%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%

Weighted-average assumptions used to determine plan obligations were as follows:

	2012		2011		2010
	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada
Pension benefits:
Discount Rate	4.25%	4.20%	4.90%	4.70%	5.75%	5.40%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%
Postretirement benefits:
Discount Rate	3.55%	4.20%	4.20%	4.60%	5.00%	5.40%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%

Components of Net Periodic Benefit Cost

The components of net periodic benefit cost were as follows:

	2012									2011									2010
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Pension benefits:
Interest cost	$	291		$	65		$	356		$	314		$	74		$	388		$	320		$	76		$	396
Expected return on plan assets	(291		)	(76		)	(367		)	(302		)	(80		)	(382		)	(287		)	(77		)	(364		)
Cost of settlements	452			—			452			—			—			—			—			—			—
Recognized net loss	165			24			189			63			9			72			87			—			87
Net periodic benefit cost (benefit)	$	617		$	13		$	630		$	75		$	3		$	78		$	120		$	(1	)	$	119
Postretirement benefits:
Benefits earned during the period	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	1		$	1
Interest cost	10			14			24			13			16			29			16			16			32
Expected return on assets	—			(3		)	(3		)	—			(5		)	(5		)	—			(6		)	(6		)
Cost of settlements	—			3			3			—			—			—			—			—			—
Net periodic benefit cost	$	10		$	14		$	24		$	13		$	11		$	24		$	16		$	11		$	27

Effect of One-Percentage-Point Change in Assumed Discount Rate on Pension Liability

A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	30		$	(39	)
Effect on pension benefit obligation	$	(674	)	$	814

A one-percentage-point change in the assumed health care cost trend rate would have the following effects on the postretirement liability:

millions	1 percentage-point Increase		1 percentage-point Decrease
Effect on total service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation	$	31	$	(27	)

Expected Future Cash Flows for Benefit Plans

Information regarding expected future cash flows for our benefit plans is as follows:

millions	SHC Domestic		Sears Canada		Total
Pension benefits:
Employer contributions:
2013 (expected)	$	352	$	29	$	381
Expected benefit payments:
2013	$	335	$	93	$	428
2014	337		93		430
2015	340		92		432
2016	342		92		434
2017	344		91		435
2018-2022	1,725		450		2,175
Postretirement benefits:
Employer contributions:
2013 (expected)	$	28	$	1	$	29
Expected employer contribution for benefit payments:
2013	$	28	$	17	$	45
2014	26		17		43
2015	25		17		42
2016	24		18		42
2017	22		18		40
2018-2022	90		88		178

Plan Assets Using Fair Value Hierarchy

The following table presents our plan assets using the fair value hierarchy at February 2, 2013 and January 28, 2012:

	Investment Assets at Fair Value at
SHC Domestic	February 2, 2013
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	187		$	—	$	187	$	—
Equity securities:
U.S. companies	848			848		—		—
International companies	138			138		—		—
Registered investment companies	1			1		—		—
Fixed income securities:
Corporate bonds and notes	1,840			—		1,840		—
Sears Holdings Corporation senior secured notes	176			—		176		—
U.S. government and agencies	1			—		1		—
Mortgage-backed and asset-backed	6			—		6		—
Ventures and partnerships	12			—		—		12
Total investment assets at fair value	$	3,209		$	987	$	2,210	$	12
Accounts receivable	44
Accounts payable	(32		)
Net assets available for plan benefits	$	3,221

	Investment Assets at Fair Value at
SHC Domestic	January 28, 2012
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	216		$	—	$	216	$	—
Equity securities:
U.S. companies	1,102			1,102		—		—
International companies	120			120		—		—
Registered investment companies	1			1		—		—
Fixed income securities:
Corporate bonds and notes	2,186			—		2,184		2
Sears Holdings Corporation senior secured notes	203			—		203		—
U.S. government and agencies	39			—		39		—
Mortgage-backed and asset-backed	9			—		9		—
Municipal and foreign government	20			—		20		—
Ventures and partnerships	15			—		—		15
Total investment assets at fair value	$	3,911		$	1,223	$	2,671	$	17
Cash	111
Accounts receivable	54
Accounts payable	(25		)
Net assets available for plan benefits	$	4,051

	Investment Assets at Fair Value at
Sears Canada	February 2, 2013
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	67		$	—	$	67	$	—
Equity securities:
U.S. companies	177			177		—		—
International companies	5			5		—		—
Common collective trusts	277			—		277		—
Fixed income securities:
Corporate bonds and notes	613			—		612		1
U.S. government and agencies	1			—		1		—
Mortgage-backed and asset-backed	66			—		7		59
Municipal and foreign government	34			—		34		—
Hedge and pooled equity funds	3			—		—		3
Total investment assets at fair value	$	1,243		$	182	$	998	$	63
Cash	42
Refundable deposits	25
Accounts receivable	567
Accounts payable	(560		)
Net assets available for plan benefits	$	1,317

	Investment Assets at Fair Value at
Sears Canada	January 28, 2012
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	7		$	—	$	7	$	—
Equity securities:
U.S. companies	190			189		1		—
International companies	30			30		—		—
Common collective trusts	306			—		306		—
Fixed income securities:
Corporate bonds and notes	560			—		560		—
U.S. government and agencies	2			—		2		—
Mortgage-backed and asset-backed	73			—		9		64
Municipal and foreign government	57			—		57		—
Hedge and pooled equity funds	16			—		—		16
Total investment assets at fair value	$	1,241		$	219	$	942	$	80
Cash	26
Refundable deposits	25
Accounts receivable	484
Accounts payable	(480		)
Net assets available for plan benefits	$	1,296

Rollforward of Level 3 Assets

A rollforward of our Level 3 assets each year is as follows:

SHC Domestic	January 28, 2012 Balance		Net Realized and Unrealized Gains/(Losses)			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		February 2, 2013 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	2	$	(2	)	$	—	$	—		$	—	$	—
Mortgage-backed and asset-backed	—		—			—		—			—		—
Venture and partnerships	15		1			—		(4		)	—		12
Total Level 3 investments	$	17	$	(1	)	$	—	$	(4	)	$	—	$	12

SHC Domestic	January 29, 2011 Balance		Net Realized and Unrealized Losses			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		January 28, 2012 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	—	$	—		$	2	$	—		$	—	$	2
Mortgage-backed and asset-backed	1		—			—		(1		)	—		—
Venture and partnerships	20		(3		)	—		(2		)	—		15
Total Level 3 investments	$	21	$	(3	)	$	2	$	(3	)	$	—	$	17

Sears Canada	January 28, 2012 Balance		Net Realized and Unrealized Gains		Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		February 2, 2013 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	—	$	—	$	1	$	—		$	—	$	1
Mortgage-backed and asset-backed	64		5		—		(10		)	—		59
Hedge and pooled equity funds	16		—		—		(13		)	—		3
Total Level 3 investments	$	80	$	5	$	1	$	(23	)	$	—	$	63

Sears Canada	January 29, 2011 Balance		Net Realized and Unrealized Gains/(Losses)			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3			January 28, 2012 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	2	$	—		$	—	$	—		$	(2	)	$	—
Mortgage backed-and asset-backed	69		5			—		(10		)	—			64
Hedge and pooled equity funds	113		(3		)	—		(94		)	—			16
Total Level 3 investments	$	184	$	2		$	—	$	(104	)	$	(2	)	$	80

Penion Plans

Defined Benefit Plan Disclosure [Line Items]

Pension Plans and Postretirement Obligations

	2012									2011
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Change in projected benefit obligation:
Beginning balance	$	6,109		$	1,426		$	7,535		$	5,623		$	1,401		$	7,024
Interest cost	291			65			356			314			74			388
Actuarial loss	639			64			703			531			70			601
Benefits paid	(323		)	(122		)	(445		)	(359		)	(120		)	(479		)
Settlements	(1,405		)	—			(1,405		)	—			—			—
Foreign currency exchange impact	—			5			5			—			1			1
Balance at the measurement date	$	5,311		$	1,438		$	6,749		$	6,109		$	1,426		$	7,535
Change in assets at fair value:
Beginning balance	$	4,051		$	1,227		$	5,278		$	4,054		$	1,288		$	5,342
Actual return on plan assets	382			130			512			4			51			55
Company contributions	516			33			549			352			6			358
Benefits paid	(323		)	(122		)	(445		)	(359		)	(120		)	(479		)
Settlements	(1,405		)	—			(1,405		)	—			—			—
Foreign currency exchange impact	—			4			4			—			2			2
Balance at the measurement date	$	3,221		$	1,272		$	4,493		$	4,051		$	1,227		$	5,278
Net amount recognized	$	(2,090	)	$	(166	)	$	(2,256	)	$	(2,058	)	$	(199	)	$	(2,257	)

Postretirement Plans

Defined Benefit Plan Disclosure [Line Items]

Pension Plans and Postretirement Obligations

	2012									2011
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Change in accumulated postretirement benefit obligation:
Beginning balance	$	253		$	321		$	574		$	286		$	303		$	589
Interest cost	10			14			24			13			16			29
Plan participants' contributions	42			—			42			43			—			43
Actuarial (gain) loss	9			16			25			(15		)	19			4
Settlement gain	—			(22		)	(22		)	—			—			—
Benefits paid	(67		)	(17		)	(84		)	(74		)	(17		)	(91		)
Benefits paid - settlements	—			(18		)	(18		)	—			—			—
Foreign currency exchange rate impact and other	—			1			1			—			—			—
Balance at the measurement date	$	247		$	295		$	542		$	253		$	321		$	574
Change in plan assets at fair value:
Beginning of year balance	$	—		$	69		$	69		$	—		$	90		$	90
Actual return on plan assets	—			—			—			—			3			3
Company contributions	25			19			44			31			1			32
Plan participants' contributions	42			—			42			43			—			43
Benefits paid	(67		)	(17		)	(84		)	(74		)	(17		)	(91		)
Benefits paid - settlements	—			(18		)	(18		)	—			—			—
Foreign currency exchange rate impact and other	—			(8		)	(8		)	—			(8		)	(8		)
Balance at the measurement date	$	—		$	45		$	45		$	—		$	69		$	69
Funded status	$	(247	)	$	(250	)	$	(497	)	$	(253	)	$	(252	)	$	(505	)

Sears Domestic

Defined Benefit Plan Disclosure [Line Items]

Classes of Securities in Plan Assets Investment

Domestic plan assets were invested in the following classes of securities:

	Plan Assets at
	February 2, 2013		January 28, 2012
Equity securities	31	%	32	%
Fixed income and other debt securities	64		67
Other	5		1
Total	100	%	100	%

Sears Canada

Defined Benefit Plan Disclosure [Line Items]

Classes of Securities in Plan Assets Investment

Sears Canada plan assets were invested in the following classes of securities (none of which were securities of the Company):

	Plan Assets at
	February 2, 2013		January 28, 2012
Equity securities	26	%	27	%
Fixed income and other debt securities	74		72
Alternative investment securities	—		1
Total	100	%	100	%

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013		Jan. 28, 2012		Jan. 29, 2011		Jan. 30, 2009
Movement in Valuation Allowances and Reserves [Roll Forward]
NOL carryforwards	$ 722		$ 672
Valuation allowance change in amount			2,100
State and Local Jurisdiction
Movement in Valuation Allowances and Reserves [Roll Forward]
NOL carryforwards	722		672
Operating loss carryforwards, valuation allowance	2,743		2,268
Net increase (decrease)	50
Allowance for Doubtful Accounts
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	28	[1]	35	[1]			38	[1]
Additions charged to costs and expenses	5	[1]	1	[1]	7	[1]
(Deductions)	(5)	[1]	(8)	[1]	(10)	[1]
Balance at end of period	28	[1]	28	[1]	35	[1]	38	[1]
Allowance of Deferred Tax Assets
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at beginning of period	2,268	[2]	153	[2]			131	[2]
Additions charged to costs and expenses	531	[2]	2,118	[2]	27	[2]
(Deductions)	(56)	[2]	(3)	[2]	(5)	[2]
Balance at end of period	2,743	[2]	2,268	[2]	153	[2]	131	[2]
Accumulated Minimum Pension Liability Adjustment
Movement in Valuation Allowances and Reserves [Roll Forward]
Net increase (decrease)	213		317
Accumulated Minimum Pension Liability Adjustment | State and Local Jurisdiction
Movement in Valuation Allowances and Reserves [Roll Forward]
Net increase (decrease)	$ 213

[1] Charges to the account are for the purposes for which the reserves were created.

[2] At the end of 2011 we had a federal and state net operating loss (“NOL”) deferred tax asset of $672 million and a valuation allowance of $2,268 million. In 2012, there was a net increase to the federal and state NOL deferred tax asset of $50 million, bringing the ending balance to $722 million. The increase in NOLs resulted from federal utilization and state NOL expirations, netted against additional state losses incurred during 2012. The valuation allowance increased to $2,743 million at the end of 2012. Included in the 2012 increase was $213 million recorded to other accumulated comprehensive income for minimum pension adjustments. Additional valuation allowances for federal and state were created against expiring state NOLs and other deferred assets, and were netted against state valuation allowance reversals due to expiring state NOLs and federal utilization of NOLs.

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SUPPLEMENTAL FINANCIAL INFORMATION

12 Months Ended

Feb. 02, 2013

Supplemental Financial Information [Abstract]

SUPPLEMENTAL FINANCIAL INFORMATION

SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at February 2, 2013 and January 28, 2012 consisted of the following:

millions	February 2, 2013		January 28, 2012
Unearned revenues	$	843	$	778
Self-insurance reserves	714		743
Other	569		665
Total	$	2,126	$	2,186

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BENEFIT PLANS Fair Value of Pension and Postretirement Benefit Plan Assets (Details) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value		$ 0	$ 0
Sears Canada Defined Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,317	1,296
Sears Canada Defined Benefit Plan | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	63	80	184
Sears Canada Defined Benefit Plan | Cash equivalents and short-term investments
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	67	7
Sears Canada Defined Benefit Plan | Cash equivalents and short-term investments | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	67	7
Sears Canada Defined Benefit Plan | U.S. companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	177	190
Sears Canada Defined Benefit Plan | U.S. companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	177	189
Sears Canada Defined Benefit Plan | U.S. companies | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	1
Sears Canada Defined Benefit Plan | International companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	5	30
Sears Canada Defined Benefit Plan | International companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	5	30
Sears Canada Defined Benefit Plan | Common collective trusts
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	277	306
Sears Canada Defined Benefit Plan | Common collective trusts | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	277	306
Sears Canada Defined Benefit Plan | Corporate bonds and notes
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	613	560
Sears Canada Defined Benefit Plan | Corporate bonds and notes | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	612	560
Sears Canada Defined Benefit Plan | Corporate bonds and notes | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	0	2
Sears Canada Defined Benefit Plan | U.S. government and agencies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	2
Sears Canada Defined Benefit Plan | U.S. government and agencies | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	2
Sears Canada Defined Benefit Plan | Mortgage-backed and asset-backed
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	66	73
Sears Canada Defined Benefit Plan | Mortgage-backed and asset-backed | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	7	9
Sears Canada Defined Benefit Plan | Mortgage-backed and asset-backed | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	59	64	69
Sears Canada Defined Benefit Plan | Ventures and partnerships
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	34	57
Sears Canada Defined Benefit Plan | Ventures and partnerships | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	34	57
Sears Canada Defined Benefit Plan | Hedge and pooled equity funds
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	3	16
Sears Canada Defined Benefit Plan | Hedge and pooled equity funds | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	3	16	113
Sears Canada Defined Benefit Plan | Total investment assets at fair value
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,243	1,241
Sears Canada Defined Benefit Plan | Total investment assets at fair value | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	182	219
Sears Canada Defined Benefit Plan | Total investment assets at fair value | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	998	942
Sears Canada Defined Benefit Plan | Total investment assets at fair value | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	63	80
Sears Canada Defined Benefit Plan | Cash
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	42	26
Sears Canada Defined Benefit Plan | Refundable deposits
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	25	25
Sears Canada Defined Benefit Plan | Accounts receivable
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	567	484
Sears Canada Defined Benefit Plan | Accounts payable
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	(560)	(480)
Domestic Defined Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	3,221	4,051
Domestic Defined Benefit Plan | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	12	17	21
Domestic Defined Benefit Plan | Cash equivalents and short-term investments
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	187	216
Domestic Defined Benefit Plan | Cash equivalents and short-term investments | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	187	216
Domestic Defined Benefit Plan | U.S. companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	848	1,102
Domestic Defined Benefit Plan | U.S. companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	848	1,102
Domestic Defined Benefit Plan | International companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	138	120
Domestic Defined Benefit Plan | International companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	138	120
Domestic Defined Benefit Plan | Registered investment companies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	1
Domestic Defined Benefit Plan | Registered investment companies | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	1
Domestic Defined Benefit Plan | Corporate bonds and notes
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,840	2,186
Domestic Defined Benefit Plan | Corporate bonds and notes | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1,840	2,184
Domestic Defined Benefit Plan | Corporate bonds and notes | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	2	0
Domestic Defined Benefit Plan | Sears Holdings Corporation senior secured notes
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	176	203
Domestic Defined Benefit Plan | Sears Holdings Corporation senior secured notes | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	176	203
Domestic Defined Benefit Plan | U.S. government and agencies
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	39
Domestic Defined Benefit Plan | U.S. government and agencies | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	1	39
Domestic Defined Benefit Plan | Mortgage-backed and asset-backed
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	6	9
Domestic Defined Benefit Plan | Mortgage-backed and asset-backed | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	6	9
Domestic Defined Benefit Plan | Mortgage-backed and asset-backed | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	0	1
Domestic Defined Benefit Plan | Ventures and partnerships
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	12	20
Domestic Defined Benefit Plan | Ventures and partnerships | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	0	20
Domestic Defined Benefit Plan | Ventures and partnerships | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	12
Domestic Defined Benefit Plan | Total investment assets at fair value
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	3,209	3,911
Domestic Defined Benefit Plan | Total investment assets at fair value | Level 1
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	987	1,223
Domestic Defined Benefit Plan | Total investment assets at fair value | Level 2
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	2,210	2,671
Domestic Defined Benefit Plan | Total investment assets at fair value | Level 3
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	12	17
Domestic Defined Benefit Plan | Cash
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value		111
Domestic Defined Benefit Plan | Accounts receivable
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	44	54
Domestic Defined Benefit Plan | Accounts payable
Defined Benefit Plan Disclosure [Line Items]
Investment assets at fair value	$ (32)	$ (25)

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Consolidated Statements of Equity (USD $) In Millions, unless otherwise specified	Total	Common Stock	Treasury Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
Beginning Balance at Jan. 30, 2010	$ 9,435	$ 1	$ (5,446)	$ 10,465	$ 4,797	$ (721)	$ 339
Beginning Balance (in shares) at Jan. 30, 2010		115
Comprehensive income (loss)
Net income (loss)	150				133		17
Pension and postretirement adjustments, net of tax	(12)					(41)	29
Deferred gain (loss) on derivatives, net of tax	(9)					(9)
Currency translation adjustments, net of tax	93					68	25
Comprehensive income (loss)	222
Stock awards	(1)		10	(11)
Purchase of Sears Canada shares	(581)			(269)		(76)	(236)
Sears Canada dividend paid to minority shareholders	(69)						(69)
Shares repurchased (Shares)		(6)
Shares repurchased	(394)		(394)
Associate stock purchase	4		4
Other	(2)						(2)
Ending Balance at Jan. 29, 2011	8,614	1	(5,826)	10,185	4,930	(779)	103
Ending Balance (in shares) at Jan. 29, 2011		109
Comprehensive income (loss)
Net income (loss)	(3,147)				(3,140)		(7)
Pension and postretirement adjustments, net of tax	(789)					(789)
Deferred gain (loss) on derivatives, net of tax	(6)					(6)
Currency translation adjustments, net of tax	(38)					(33)	(5)
Comprehensive income (loss)	(3,980)
Stock awards	4		23	(19)
Purchase of Sears Canada shares	(43)			(24)		(2)	(17)
Shares repurchased (Shares)		(3)
Shares repurchased	(183)		(183)
Associate stock purchase	5		5
Other	(2)						(2)
Non-cash dividend issued in connection with Spin-Off	(74)			(137)	75		(12)
Ending Balance at Jan. 28, 2012	4,341	1	(5,981)	10,005	1,865	(1,609)	60
Ending Balance (in shares) at Jan. 28, 2012		106
Comprehensive income (loss)
Net income (loss)	(1,054)				(930)		(124)
Pension and postretirement adjustments, net of tax	74					74
Deferred gain (loss) on derivatives, net of tax	5					5
Currency translation adjustments, net of tax	5					5
Comprehensive income (loss)	(970)
Stock awards	6		7	(1)
Purchase of Sears Canada shares	(10)			(3)		(1)	(6)
Sears Canada dividend paid to minority shareholders	(50)				(50)
Associate stock purchase	4		4
Separation of Sears Hometown and Outlet Stores, Inc.	(149)			(149)
Non-cash dividend issued in connection with Spin-Off	0			(554)		67	487
Ending Balance at Feb. 02, 2013	$ 3,172	$ 1	$ (5,970)	$ 9,298	$ 885	$ (1,459)	$ 417
Ending Balance (in shares) at Feb. 02, 2013		106

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Net income (loss)	$ (1,054)	$ (3,147)	$ 150
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	74	(789)	(12)
Deferred gain (loss) on derivatives, net of tax	5	(6)	(9)
Currency translation adjustments, net of tax	5	(38)	93
Total other comprehensive income (loss)	84	(833)	72
Comprehensive income (loss)	(970)	(3,980)	222
Comprehensive (income) loss attributable to noncontrolling interests	124	12	(71)
Comprehensive income (loss) attributable to Holdings’ shareholders	$ (846)	$ (3,968)	$ 151

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EQUITY

12 Months Ended

Feb. 02, 2013

Stockholders' Equity Note [Abstract]

EQUITY

EQUITY

Stock-based Compensation

We account for stock-based compensation using the fair value method in accordance with accounting standards regarding share-based payment transactions. We recorded $15 million, $14 million and $9 million in total compensation expense relative to stock-based compensation arrangements during 2012, 2011, and 2010, respectively. At February 2, 2013, we had $10 million in total compensation cost related to nonvested awards, which is expected to be recognized over approximately the next three years.

We do not currently have an employee stock option plan and at February 2, 2013, there are no outstanding options.

We granted restricted stock awards to certain associates. These restricted stock awards typically vest in one to three years from the date of grant, provided the grantee remains employed by us at the vesting date. The fair value of these awards is equal to the market price of our common stock on the date of grant. We do not currently have a broad-based program that provides for restricted stock awards on an annual basis. Changes in restricted stock awards for 2012, 2011, and 2010 were as follows:

	2012				2011				2010
(Shares in thousands)	Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant
Beginning of year balance	496		$	65.02	313		$	74.09	279		$	80.73
Granted	175		49.20		386		59.60		176		83.09
Vested	(172	)	60.89		(72	)	81.55		(110	)	103.19
Forfeited	(75	)	78.59		(131	)	61.62		(32	)	81.38
End of year balance	424		$	57.72	496		$	65.02	313		$	74.09

millions	2012		2011		2010
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$	9	$	23	$	15
Aggregate fair value of shares vesting during period	10		5		10
Aggregate fair value of shares forfeited during period	4		8		2

Approximately 205,000 shares of the 424,000 shares of unvested restricted stock outstanding at February 2, 2013 are scheduled to vest during 2013, subject to satisfaction of applicable vesting conditions.

Common Share Repurchase Program

From time to time, we repurchase shares of our common stock under a common share repurchase program authorized by our Board of Directors. The common share repurchase program was initially announced in 2005 with a total authorization since inception of the program of $6.5 billion. During 2012, we repurchased no shares of our common stock under our common share repurchase program. During 2011, we repurchased approximately 2.8 million of our common shares at a total cost of approximately $183 million, or an average price $65.66 per share. During 2010, we repurchased approximately 5.5 million of our common shares at a total cost of approximately $394 million, or an average price of $71.76 per share. At February 2, 2013, we had approximately $504 million of remaining authorization under our common share repurchase program.

The share repurchase program has no stated expiration date and 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.

Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	February 2, 2013			January 28, 2012			January 29, 2011
Pension and postretirement adjustments (net of tax of $(443), $(492) and $(480), respectively)	$	(1,408	)	$	(1,575	)	$	(783	)
Cumulative unrealized derivative gain (loss) (net of tax of $0, $0 and $0, respectively)	—			(5		)	1
Currency translation adjustments (net of tax of $(39), $(26) and $(7), respectively)	(51		)	(29		)	3
Accumulated other comprehensive loss	$	(1,459	)	$	(1,609	)	$	(779	)

Pension and postretirement adjustments relate to the net actuarial loss on our pension and postretirement plans recognized as a component of accumulated other comprehensive loss.

Accumulated other comprehensive loss attributable to noncontrolling interests at February 2, 2013, January 28, 2012, and January 29, 2011 was $(64) million, $(9) million and $(4) million, respectively.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income (loss) was as follows:

	2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain (loss)	$	(564	)	$	1		$	(563	)
Less: cost of settlements	454			—			454
Less: amortization of prior service cost included in net period pension cost	189			(6		)	183
Pension and postretirement adjustments, net of tax	79			(5		)	74
Deferred gain on derivatives	5			—			5
Currency translation adjustments	(8		)	13			5
Total other comprehensive income	$	76		$	8		$	84

	2011
millions	Before Tax Amount			Tax Benefit			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments
Experience gain (loss)	$	(872	)	$	14		$	(858	)
Less: amortization of prior service cost included in net period pension cost	72			(3		)	69
Pension and postretirement adjustments, net of tax	(800		)	11			(789		)
Deferred loss on derivatives	(6		)	—			(6		)
Currency translation adjustments	(57		)	19			(38		)
Total other comprehensive income (loss)	$	(863	)	$	30		$	(833	)

	2010
millions	Before Tax Amount			Tax (Expense) or Benefit			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain (loss)	$	(116	)	$	51		$	(65	)
Less: amortization of prior service cost included in net period pension cost	87			(34		)	53
Pension and postretirement adjustments, net of tax	(29		)	17			(12		)
Deferred gain (loss) on derivatives	(15		)	6			(9		)
Currency translation adjustments	115			(22		)	93
Total other comprehensive income	$	71		$	1		$	72

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION Narrative (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended								12 Months Ended
	Feb. 02, 2013	Oct. 27, 2012	Jul. 28, 2012	Apr. 28, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 30, 2011	Apr. 30, 2011	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011	Feb. 02, 2013 Guarantor Subsidiaries	Jan. 28, 2012 Guarantor Subsidiaries	Jan. 29, 2011 Guarantor Subsidiaries	Feb. 02, 2013 Senior Secured Note	Oct. 31, 2010 Senior Secured Note	Feb. 02, 2013 Sears Hometown and Outlet Stores, Inc.	Jan. 28, 2012 Sears Hometown and Outlet Stores, Inc.	Jan. 29, 2011 Sears Hometown and Outlet Stores, Inc.
Condensed Financial Statements, Captions [Line Items]
Debt instrument maturity year	2018								2018
Senior secured notes, interest rate															6.625%
Senior secured notes, principal amount outstanding															$ 1,240	$ 1,000
Percentage of collateralized ownership of domestic subsidiaries												100.00%
Assets	19,340				21,381				19,340	21,381	24,360	39,096	41,025					650
Liabilities	16,168				17,040				16,168	17,040		25,815	26,130					115
Merchandise sales and services	12,260	8,857	9,467	9,270	12,484	9,405	10,138	9,540	39,854	41,567	42,664	35,417	36,714	37,587			1,700	2,300	2,300
Net income (loss) attributable Holdings' shareholders									$ (930)	$ (3,140)	$ 133	$ (1,295)	$ (3,309)	$ (127)			$ 51	$ 33	$ 50

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SUMMARY OF SEGMENT DATA Summary of Segment Data (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 02, 2013	Oct. 27, 2012	Jul. 28, 2012	Apr. 28, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 30, 2011	Apr. 30, 2011	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Segment Reporting Information [Line Items]
Merchandise sales and services	$ 12,260	$ 8,857	$ 9,467	$ 9,270	$ 12,484	$ 9,405	$ 10,138	$ 9,540	$ 39,854	$ 41,567	$ 42,664
COSTS AND EXPENSES
Cost of sales, buying and occupancy	9,097	6,604	6,936	6,703	9,422	7,011	7,537	6,996	29,340	30,966	31,000
Selling and administrative	3,282	2,496	2,437	2,445	2,921	2,635	2,601	2,507	10,660	10,664	10,425
Depreciation and amortization									830	853	869
Impairment charges									330	649	0
Gain on sales of assets									(468)	(64)	(67)
Total costs and expenses									40,692	43,068	42,227
Operating income (loss)									(838)	(1,501)	437
Total assets	19,340				21,381				19,340	21,381	24,360
Capital expenditures									378	432	426
Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services									18,602	20,164	21,011
Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services									11,878	12,205	12,351
Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services									5,436	5,746	5,848
Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services									3,938	3,452	3,454
Kmart
Segment Reporting Information [Line Items]
Merchandise sales and services									14,567	15,285	15,593
COSTS AND EXPENSES
Cost of sales, buying and occupancy									11,158	11,818	11,757
Selling and administrative									3,284	3,371	3,341
Depreciation and amortization									147	149	149
Impairment charges									10	15
Gain on sales of assets									(37)	(34)	(7)
Total costs and expenses									14,562	15,319	15,240
Operating income (loss)									5	(34)	353
Total assets	4,304				4,548				4,304	4,548	6,085
Capital expenditures									122	118	153
Kmart | Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services									4,486	4,765	4,879
Kmart | Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services									4,588	4,723	4,809
Kmart | Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services									5,398	5,705	5,810
Kmart | Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services									95	92	95
Sears Domestic
Segment Reporting Information [Line Items]
Merchandise sales and services									20,977	21,649	22,275
COSTS AND EXPENSES
Cost of sales, buying and occupancy									15,107	15,849	15,910
Selling and administrative									6,184	6,042	5,940
Depreciation and amortization									578	601	620
Impairment charges									25	634
Gain on sales of assets									(261)	(30)	(46)
Total costs and expenses									21,633	23,096	22,424
Operating income (loss)									(656)	(1,447)	(149)
Total assets	12,648				13,913				12,648	13,913	15,299
Capital expenditures									171	225	216
Sears Domestic | Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services									11,870	13,022	13,692
Sears Domestic | Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services									5,434	5,471	5,454
Sears Domestic | Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services									38	41	38
Sears Domestic | Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services									3,635	3,115	3,091
Sears Canada
Segment Reporting Information [Line Items]
Merchandise sales and services									4,310	4,633	4,796
COSTS AND EXPENSES
Cost of sales, buying and occupancy									3,075	3,299	3,333
Selling and administrative									1,192	1,251	1,144
Depreciation and amortization									105	103	100
Impairment charges									295	0
Gain on sales of assets									(170)	0	(14)
Total costs and expenses									4,497	4,653	4,563
Operating income (loss)									(187)	(20)	233
Total assets	2,388				2,920				2,388	2,920	2,976
Capital expenditures									85	89	57
Sears Canada | Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services									2,246	2,377	2,440
Sears Canada | Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services									1,856	2,011	2,088
Sears Canada | Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services									0	0	0
Sears Canada | Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services									$ 208	$ 245	$ 268

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Document and Entity Information (USD $)	12 Months Ended
	Feb. 02, 2013	Mar. 02, 2013	Jul. 28, 2012
Entity Registrant Name	SEARS HOLDINGS CORP
Entity Central Index Key	0001310067
Current Fiscal Year End Date	--02-02
Entity Filer Category	Large Accelerated Filer
Document Type	10-K
Document Period End Date	Feb. 02, 2013
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Amendment Flag	false
Trading Symbol	SHLD
Entity Common Stock, Shares Outstanding		106,386,171
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 1,100,000,000

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INCOME TAXES

12 Months Ended

Feb. 02, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

millions	2012			2011			2010
Income (loss) before income taxes:
U.S.	$	(1,226	)	$	(1,809	)	$	(157	)
Foreign	216			58			323
Total	$	(1,010	)	$	(1,751	)	$	166
Income tax expense (benefit):
Current:
Federal	$	17		$	19		$	1
State and local	15			—			(7		)
Foreign	27			2			110
Total current	59			21			104
Deferred:
Federal	8			1,357			(84		)
State and local	(41		)	(35		)	7
Foreign	18			26			—
Total deferred	(15		)	1,348			(77		)
Total	$	44		$	1,369		$	27

	2012		2011		2010
Effective tax rate reconciliation:
Federal income tax rate (benefit rate)	(35.0	)%	(35.0	)%	35.0	%
State and local tax (benefit) net of federal tax benefit	(3.0	)	(1.3	)	0.1
Federal and state valuation allowance	23.5		104.1		—
Tax on separation of Sears Hometown and Outlet Stores, Inc.	10.3		—		—
Nondeductible goodwill impairment	10.2		11.4		—
Tax on partial spin-off of Sears Canada	3.9		—		—
Adjust foreign statutory rates	(3.2	)	—		—
Tax credits	(1.0	)	(1.5	)	(13.0	)
Long life land and intangibles	(0.8	)	—		—
Resolution of income tax matters	(0.5	)	0.7		(9.2	)
Canadian repatriation cost on Sears Canada dividend received	0.5		—		5.3
Canadian rate differential on noncontrolling interest	—		—		(0.1	)
Other	(0.5	)	(0.2	)	(1.8	)
	4.4	%	78.2	%	16.3	%

millions	February 2, 2013			January 28, 2012
Deferred tax assets and liabilities:
Deferred tax assets:
Federal benefit for state and foreign taxes	$	151		$	151
Accruals and other liabilities	179			188
Capital leases	114			125
NOL carryforwards	722			672
Postretirement benefit plans	78			134
Pension	1,208			818
Deferred revenue	202			236
Credit carryforwards	605			385
Other	163			216
Total deferred tax assets	3,422			2,925
Valuation allowance	(2,743		)	(2,268		)
Net deferred tax assets	679			657
Deferred tax liabilities:
Trade names/Intangibles	1,071			1,097
Property and equipment	156			166
Inventory	453			378
Other	117			104
Total deferred tax liabilities	1,797			1,745
Net deferred tax liability	$	(1,118	)	$	(1,088	)

We account for income taxes in accordance with accounting standards for such taxes, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the financial reporting and tax bases of recorded assets and liabilities. Accounting standards also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of or all of the deferred tax asset will not be realized.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year periods ended February 2, 2013 and January 28, 2012. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

On the basis of this analysis and the significant negative objective evidence, for the year ended January 28, 2012, a valuation allowance of $2.1 billion was added to record only the portion of the deferred tax asset that more likely than not will be realized. Of the total valuation allowance recorded, $317 million was recorded through other comprehensive income. For the year ended February 2, 2013, $213 million of the valuation allowance increase was recorded through other comprehensive income.

At February 2, 2013 and January 28, 2012, we had a valuation allowance of $2.7 billion and $2.3 billion, respectively, to record only the portion of the deferred tax asset that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted in the future if estimates of future taxable income during the carryforward period are reduced or increased, or if the objective negative evidence is in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth. We will continue to evaluate our valuation allowance in future years for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset.

At the end of 2012 and 2011, we had a federal and state net operating loss (“NOL”) deferred tax asset of $722 million and $672 million, respectively, which will expire predominately between 2019 and 2033. We have credit carryforwards of $605 million, which will expire between 2015 and 2033.

In connection with the separation of SHO, the Company incurred a taxable gain of $266 million. The gain primarily related to the determination that the fair value of the consideration received exceeded the tax basis of the net assets of SHO at the date of the separation. The amount of taxes otherwise payable resulting from the gain was reduced by utilization of $105 million of deferred tax assets, primarily NOL carryforwards. As the Company had previously recorded a valuation allowance against these NOL carryforwards, $105 million of the related valuation allowance was released upon their utilization.

In connection with the taxable spin of approximately 45 percent of the Company's common shares in Sears Canada Inc., the Company incurred a taxable gain of $367 million. The gain primarily relates to the determination that the fair market value of the common shares distributed to the public shareholders exceeded the tax basis of the shares distributed. The amount of taxes otherwise payable resulting from the gain was reduced by utilization of $40 million of net deferred tax assets, primarily NOL carryforwards. As the Company had previously recorded a valuation allowance against these NOL carryforwards, $40 million of the related valuation allowance was released upon their utilization.

Accounting for Uncertainties in Income Taxes

We account for uncertainties in income taxes according to accounting standards for uncertain tax positions. We are present in a large number of taxable jurisdictions, and at any point in time, can have audits underway at various stages of completion in any of these jurisdictions. We evaluate our tax positions and establish liabilities for uncertain tax positions that may be challenged by federal, foreign and/or local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the tax provision as appropriate. We are generally not able to reliably estimate the ultimate settlement amounts until the close of the audit. While we do not expect material changes, it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions will significantly increase or decrease within the next 12 months related to the audits described above. At this time, we are not able to make a reasonable estimate of the range of impact on the balance of unrecognized tax benefits or the impact on the effective tax rate related to these items. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:

	Federal, State, and Foreign Tax
millions	February 2, 2013			January 28, 2012			January 29, 2011
Gross UTB Balance at Beginning of Period	$	192		$	192		$	310
Tax positions related to the current period:
Gross increases	21			22			25
Gross decreases	(8		)	(8		)	(10		)
Tax positions related to prior periods:
Gross increases	—			20			51
Gross decreases	(33		)	(19		)	(161		)
Settlements	(1		)	(4		)	(13		)
Lapse of statute of limitations	(10		)	(10		)	(10		)
Exchange rate fluctuations	—			(1		)	—
Gross UTB Balance at End of Period	$	161		$	192		$	192

At the end of 2012, we had gross unrecognized tax benefits of $161 million. Of this amount, $94 million would, if recognized, impact our effective tax rate, with the remaining amount being comprised of unrecognized tax benefits related to gross temporary differences or any other indirect benefits. We expect that our unrecognized tax benefits could decrease up to $30 million over the next 12 months for tax audit settlements and the expiration of the statute of limitations for certain jurisdictions.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. At February 2, 2013, the total amount of interest and penalties recognized within the related tax liability in our Consolidated Balance Sheet was $57 million ($39 million net of federal benefit). The total amount of net interest expense recognized in our Consolidated Statement of Operations for 2012 was $2 million.

We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal Revenue Service (“IRS”) has completed its examination of Holdings' 2006 through 2009 federal income tax returns, and we are currently working with the IRS appeals division to resolve a single issue arising from these exams. We have resolved all matters arising from prior IRS exams. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2010, and Kmart is under examination by such jurisdictions for the years 2003 through 2010.

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REAL ESTATE TRANSACTIONS (Details) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended					3 Months Ended		12 Months Ended		3 Months Ended		12 Months Ended		3 Months Ended
	Apr. 28, 2012 USD ($)	Feb. 02, 2013 USD ($) Property	Jan. 28, 2012 USD ($) Property	Jan. 29, 2011 USD ($)	Feb. 02, 2013 Leaseholds and Leasehold Improvements USD ($)	Jan. 28, 2012 Leaseholds and Leasehold Improvements USD ($)	Apr. 28, 2012 Sears Canada USD ($) Property	Apr. 28, 2012 Sears Canada CAD	Feb. 02, 2013 The Great Indoors USD ($)	Jan. 28, 2012 The Great Indoors Store	Apr. 28, 2012 Sears Canada Full Line And Specialty Retail Stores USD ($) Property	Feb. 02, 2013 Sears Canada Full Line And Specialty Retail Stores Store	Jan. 28, 2012 Kmart Store	Feb. 02, 2013 Kmart Store	Apr. 28, 2012 Properties Owned Sears Canada Full Line And Specialty Retail Stores Property	Apr. 28, 2012 Properties Leased Sears Canada Full Line And Specialty Retail Stores Property	Apr. 28, 2012 Minimum Sears Canada	Apr. 28, 2012 Maximum Sears Canada
Long Lived Assets Held-for-sale
Gain on sales of assets		$ 468	$ 64	$ 67
Gain from sale of real estate	386		33	35					33		223
Number of properties sold										2	11		1		6	5
Proceed from sale of real estate											270
Gain from surrender and early termination of leases on properties							163
Number of terminated leases							3	3
Proceed from surrender and early termination of leases on properties								170
Lease expiration period																	6 months	23 months
Number of stores												1		1
Number Of properties acquired		1	5
Payments to acquire property		$ 378	$ 432	$ 426	$ 6	$ 17

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SUPPLEMENTAL FINANCIAL INFORMATION Other Long-Term Liabilities (Detail) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013	Jan. 28, 2012
Supplemental Financial Information [Abstract]
Unearned revenues	$ 843	$ 778
Self-insurance reserves	714	743
Other	569	665
Total	$ 2,126	$ 2,186

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Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Feb. 02, 2013		Jan. 28, 2012
Current assets
Cash and cash equivalents	$ 609		$ 747
Restricted cash	9		7
Accounts receivable	635		695
Merchandise inventories	7,558		8,407
Prepaid expenses and other current assets	454		388
Total current assets	9,265		10,244
Property and equipment
Land	1,875		1,924
Buildings and improvements	6,072		6,186
Furniture, fixtures and equipment	2,950		2,786
Capital leases	347		314
Gross property and equipment	11,244		11,210
Less accumulated depreciation and amortization	(5,191)		(4,633)
Total property and equipment, net	6,053		6,577
Goodwill	379		841
Trade names and other intangible assets	2,881		2,937
Other assets	762		782
TOTAL ASSETS	19,340		21,381
Current liabilities
Short-term borrowings (1)	1,094	[1]	1,175	[1]
Current portion of long-term debt and capitalized lease obligations	83		230
Merchandise payables	2,761		2,912
Other current liabilities	2,683		2,892
Unearned revenues	931		964
Other taxes	480		523
Short-term deferred tax liabilities	382		516
Total current liabilities	8,414		9,212
Long-term debt and capitalized lease obligations (2)	1,943	[2]	2,088	[2]
Pension and postretirement benefits	2,730		2,738
Other long-term liabilities	2,126		2,186
Long-term deferred tax liabilities	955		816
Total Liabilities	16,168		17,040
Commitments and contingencies
EQUITY
Preferred stock, 20 shares authorized; no shares outstanding	0		0
Common stock $0.01 par value; 500 shares authorized; 106 and 106 shares outstanding, respectively	(1)		(1)
Treasury stock—at cost	(5,970)		(5,981)
Capital in excess of par value	9,298		10,005
Retained earnings	885		1,865
Accumulated other comprehensive loss	(1,459)		(1,609)
Total Sears Holdings Corporation equity	2,755		4,281
Noncontrolling interest	417		60
Total Equity	3,172		4,341
TOTAL LIABILITIES AND EQUITY	$ 19,340		$ 21,381

[1] Includes $285 million and $250 million at February 2, 2013 and January 28, 2012, respectively, of unsecured commercial paper held by ESL and its affiliates.

[2] Includes $95 million at both February 2, 2013 and January 28, 2012 of senior secured notes held by ESL and its affiliates; and $3 million and $14 million at February 2, 2013 and January 28, 2012, respectively, of subsidiary notes held by ESL and its affiliates.

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DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL GUARANTEES

12 Months Ended

Feb. 02, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL GUARANTEES

DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL GUARANTEES

We primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market. We are exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars.

Earnings Effects of Derivatives on the Statements of Operations

For derivatives that were designated as hedges of our net investment in Sears Canada, we assess effectiveness based on changes in forward currency exchange rates. Changes in forward rates on the derivatives are recorded in the currency translation adjustments line in accumulated other comprehensive loss and will remain there until we substantially liquidate or sell our holdings in Sears Canada.

Changes in the fair value of any derivatives that are not designated as hedges are recorded in earnings each period. Sears Canada mitigates the risk of currency fluctuations on offshore merchandise purchases denominated in U.S. currency by purchasing U.S. dollar denominated collar contracts for a portion of its expected requirements. Since the Company's functional currency is the U.S. dollar, we are not directly exposed to the risk of exchange rate changes due to Sears Canada’s merchandise purchases, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk.

Sears Canada Hedges of Merchandise Purchases

Sears Canada had no outstanding foreign currency collar contracts at February 2, 2013 or January 28, 2012. As discussed previously, these collar contracts were used to hedge Sears Canada’s purchase of inventory under U.S. dollar denominated contracts. We record mark-to-market adjustments based on the total notional value of these outstanding collar contracts at the end of each period.

We record the earnings impact of mark-to-market and settlement adjustments for foreign currency collar contracts in other income (loss) at the end of each period. We recorded no mark-to-market and settlement gains on these contracts for the year ended February 2, 2013. We recorded mark-to-market and settlement gains on these contracts of $4 million in other loss for the year ended January 28, 2012, and mark-to-market and settlement losses on these contracts of $14 million in other loss for the year ended January 29, 2011.

Sears Canada’s above noted foreign currency collar contracts were entered into as a hedge of merchandise purchase contracts denominated in U.S. currency. We also record mark-to-market adjustments for the value of the merchandise purchase contracts (considered embedded derivatives under relevant accounting rules) at the end of each period. We recorded no assets at February 2, 2013, and assets of $1 million at January 28, 2012 related to the fair value of these embedded derivatives.

We record the earnings impact of mark-to-market and settlement adjustments related to the embedded derivative in the merchandise purchase contracts in other income (loss) at the end of each period. We recorded mark-to-market and settlement gains of $2 million for the year ended February 2, 2013. We recorded mark-to-market and settlement losses of $5 million and $1 million for the years ended January 28, 2012 and January 29, 2011, respectively.

We recorded total mark-to-market gains and settlements of $2 million in other loss for the year ended February 2, 2013. We recorded total mark-to-market losses and settlements of $1 million and $15 million in other loss for the years ended January 28, 2012 and January 29, 2011, respectively. At February 2, 2013, we had no derivative mark-to-market assets related to the embedded derivatives, and at January 28, 2012, we had total derivative mark-to-market assets related to the collar contracts and embedded derivatives of $1 million. See Note 5 for further information regarding fair value of these collar and merchandise purchase contracts and the respective balance sheet classifications.

Hedges of Net Investment in Sears Canada

We had no foreign currency forward contracts outstanding at February 2, 2013. At January 28, 2012, we had a foreign currency forward contract outstanding with a total Canadian notional value of $629 million, and with a weighted-average remaining life of 0.1 years. This contract was designated and qualified as a hedge of the foreign currency exposure of our net investment in Sears Canada. Accordingly, we recorded no liability related to the forward contracts at February 2, 2013, and the aggregate fair value of the forward contract outstanding at January 28, 2012 of approximately $(6) million was recorded as a liability on our Consolidated Balance Sheet. The change in fair value of approximately $6 million related to these forward contracts, net of tax, was recorded as a component of other comprehensive loss for the year ended February 2, 2013.

We settled foreign currency forward contracts during 2012 and 2011 and received net amounts of $6 million and $0.1 million, respectively, relative to these contract settlements. We settled foreign currency forward contracts during 2010 and paid net amounts of $3 million relative to these contract settlements. As hedge accounting was applied to these contracts, an offsetting amount was recorded as a component of other comprehensive loss.

Our currency forward contracts require collateral be posted in the event our liability under such contracts reaches a predetermined threshold. Cash collateral posted under these contracts is recorded as part of our accounts receivable balance. We had no cash collateral posted under these contracts at February 2, 2013 and $5 million at January 28, 2012.

Counterparty Credit Risk

We actively manage the risk of nonpayment by our derivative counterparties by limiting our exposure to individual counterparties based on credit ratings, value at risk and maturities. The counterparties to these instruments are major financial institutions with credit ratings of single-A or better at January 28, 2012. We had no derivative instruments at February 2, 2013.

Financial Guarantees

We issue various types of guarantees in the normal course of business. We had the following guarantees outstanding at February 2, 2013:

millions	Bank Issued		SRAC Issued		Other		Total
Standby letters of credit	$	774	$	47	$	—	$	821
Commercial letters of credit	8		133		—		141
Secondary lease obligations	—		—		77		77

The secondary lease obligations related to certain store leases of previously divested Sears businesses. We remain secondarily liable if the primary obligor defaults.

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BORROWINGS

12 Months Ended

Feb. 02, 2013

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

Total borrowings outstanding at February 2, 2013 and January 28, 2012 were $3.1 billion and $3.5 billion, respectively. At February 2, 2013, total short-term borrowings were $1.1 billion, consisting of $749 million secured borrowings and $345 million of unsecured commercial paper. At January 28, 2012, total short-term borrowings were $1.2 billion, consisting of $838 million secured borrowings and $337 million of unsecured commercial paper. The weighted-average annual interest rate paid on short-term debt was 2.7% in 2012 and 2.3% in 2011.

Long-term debt was as follows:

ISSUE	February 2, 2013			January 28, 2012
millions
SEARS ROEBUCK ACCEPTANCE CORP.
6.50% to 7.50% Notes, due 2017 to 2043	$	327		$	398
7.05% to 7.50% Medium-Term Notes, due 2013	11			80
SEARS HOLDINGS CORP.
6.625% Senior Secured Notes, due 2018	1,237			1,237
SEARS DC CORP.
9.07% to 9.20% Medium-Term Notes	—			23
SEARS CANADA INC.
Credit Facility, expires 2015	—			101
CAPITALIZED LEASE OBLIGATIONS	433			455
OTHER NOTES AND MORTGAGES	18			24
Total long-term borrowings	2,026			2,318
Current maturities	(83		)	(230		)
Long-term debt and capitalized lease obligations	$	1,943		$	2,088
Weighted-average annual interest rate on long-term debt	6.7		%	7.1		%

The fair value of long-term debt, excluding capitalized lease obligations, was $1.4 billion at February 2, 2013 and $1.5 billion at January 28, 2012. The fair value of our debt was estimated based on quoted market prices for the same or similar issues or on current rates offered to us for debt of the same remaining maturities. Our long-term debt instruments are valued using Level 2 measurements as defined in Note 5.

At February 2, 2013, long-term debt maturities for the next five years and thereafter were as follows:

millions
2013	$	83
2014	67
2015	61
2016	50
2017	89
Thereafter	1,676
	$	2,026

Interest

Interest expense for years 2012, 2011 and 2010 was as follows:

millions	2012		2011		2010
COMPONENTS OF INTEREST EXPENSE
Interest expense	$	232	$	248	$	242
Accretion of lease obligations at net present value	17		20		21
Amortization of debt issuance costs	18		21		30
Interest expense	$	267	$	289	$	293

Debt Repurchase Authorization

In 2005, our Finance Committee of the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $500 million of our outstanding indebtedness in open market or privately negotiated transactions. Our wholly owned finance subsidiary, Sears Roebuck Acceptance Corp. (“SRAC”), has repurchased $215 million of its outstanding notes. In 2011, Sears Holdings repurchased $10 million of senior secured notes, recognizing a gain of $2 million. The unused balance of this authorization is $275 million.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At February 2, 2013 and January 28, 2012, we had outstanding commercial paper borrowings of $345 million and $337 million, respectively. ESL held $285 million and $250 million, respectively, of our commercial paper at February 2, 2013 and January 28, 2012, including $169 million and $130 million, respectively, held by Edward S. Lampert. See Note 15 for further discussion of these borrowings.

Domestic Credit Agreement

During the first quarter of 2011, we entered into a $3.275 billion credit agreement (the “Domestic Credit Agreement”) which expires in April 2016. We view this credit facility as our most cost efficient funding mechanism and therefore use it as a primary source of funding.

Advances under the Domestic Credit Agreement bear interest at a rate equal to, at the election of the Borrowers, either the London Interbank Offered Rate (“LIBOR”) or a base rate, in either case plus an applicable margin. The Domestic Credit Agreement’s interest rates for LIBOR-based borrowings vary based on leverage in the range of LIBOR plus 2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus 1.0% to 1.5%. Commitment fees are in a range of 0.375% to 0.625% based on usage.

The Domestic Credit Agreement includes a $1.5 billion letter of credit sub-limit and an uncommitted accordion feature that provides us the flexibility, subject to certain terms and conditions, to use the existing collateral under the credit facility to obtain an aggregate amount of up to $1.0 billion in additional borrowing capacity. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to $2.0 billion, of which $1.2 billion in second lien notes were outstanding at February 2, 2013, providing the Company the capacity to issue up to an additional $760 million in second lien indebtedness. The Domestic Credit Agreement is in place as a funding source for general corporate purposes and is an asset based revolving credit facility under which Sears Roebuck Acceptance Corp. (“SRAC”) and Kmart Corporation are the borrowers. The Domestic Credit Agreement is secured by a first lien on most of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability.

The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, under certain circumstances, including if availability under the credit facility, as defined, is less than 15%. It also imposes various other requirements, which take effect if availability falls below designated thresholds, including a cash dominion requirement and a requirement that the fixed charge ratio at the last day of any quarter be not less than 1.0 to 1.0.     

At February 2, 2013 and January 28, 2012, we had $749 million and $838 million, respectively, of borrowings and $754 million and $626 million, respectively, of letters of credit outstanding under the Domestic Credit Agreement. As a result, our availability under the agreement was $1.8 billion at both February 2, 2013 and January 28, 2012. The majority of the letters of credit outstanding are used to provide collateral for our insurance programs.

Senior Secured Notes

In October 2010, we sold $1 billion aggregate principal amount of senior secured notes (the “Notes”), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold $250 million aggregate principal amount of Notes to the Company’s domestic pension plan in a private placement. The Notes are guaranteed by certain subsidiaries of the Company and are secured by a security interest in certain assets consisting primarily of domestic inventory and credit card receivables (the “Collateral”). The lien that secures the Notes is junior in priority to the lien on such assets that secures obligations under the Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Notes were issued contains restrictive covenants that, among other things, (1) limit the ability of the Company and certain of its domestic subsidiaries to create liens and enter into sale and leaseback transactions and (2) limit the ability of the Company to consolidate with or merge into, or sell other than for cash or lease all or substantially all of its assets to, another person. The indenture also provides for certain events of default, which, if any were to occur, would permit or require the principal and accrued and unpaid interest on all the then outstanding notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Notes at a purchase price equal to 101% of the principal amount if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the notes plus any other indebtedness for borrowed money that is secured by liens on the Collateral for two consecutive quarters or upon the occurrence of certain change of control triggering events. The Company may call the Notes at a premium based on the “Treasury Rate” as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended.

Sears Canada Credit Agreement

In September 2010, Sears Canada entered into a five-year, $800 million Canadian senior secured revolving credit facility (the “Sears Canada Facility”). The Sears Canada Facility is available for Sears Canada’s general corporate purposes and is secured by a first lien on inventory and credit card receivables. Availability under the Sears Canada Facility is determined pursuant to a borrowing base formula based on inventory and credit card receivables, subject to certain limitations. At February 2, 2013 we had no borrowings outstanding under the Sears Canada Facility. At January 28, 2012, we had approximately $101 million ($101 million Canadian) of borrowings outstanding under the Sears Canada Facility. Availability under this agreement was approximately $503 million ($502 million Canadian) and $415 million ($415 million Canadian), respectively, at February 2, 2013 and January 28, 2012. The current availability may be reduced by reserves currently estimated by the Company to be approximately $300 million, which may be applied by the lenders at their discretion pursuant to the Credit Facility agreement. As a result of judicial developments relating to the priorities of pension liability relative to certain secured obligations, Sears Canada has executed an amendment to the Sears Canada Credit Facility which would provide additional security to lenders, with respect to the Company's unfunded pension liability by pledging certain real estate assets as collateral thereby partially reducing the potential reserve amounts by up to $150 million the lenders could apply. The potential additional reserve amount may increase or decrease in the future based on estimated net pension liabilities.

Letters of Credit Facility

Effective March 15, 2013, we agreed to terminate our $500 million uncommitted letter of credit facility dated January 20, 2011 with Wells Fargo Bank, National Association ("Wells Fargo") in advance of the scheduled termination date of January 20, 2014, as no letters of credit have been issued and outstanding under the facility since May 2011. The facility was secured by a first priority lien on cash placed on deposit at Wells Fargo in an amount equal to 103% of the face value of all issued and outstanding letters of credit.

Cash Collateral

We post cash collateral for certain self-insurance programs. We continue to classify the cash collateral posted for self-insurance programs as cash and cash equivalents due to our ability to substitute letters of credit for the cash at any time at our discretion. At February 2, 2013 and January 28, 2012, $19 million and $20 million of cash, respectively, was posted as collateral for self-insurance programs.

Wholly owned Insurance Subsidiary and Intercompany Securities

We have numerous types of insurable risks, including workers’ compensation, product and general liability, automobile, warranty, asbestos and environmental claims and the extended service contracts we sell to our customers. In addition, we provide credit insurance to third party creditors of the Company to mitigate their credit risk with the Company. The associated risks are managed through Holdings’ wholly owned insurance subsidiary, Sears Reinsurance Company Ltd. (“Sears Re”), a Bermuda Class 3 insurer.

In accordance with applicable insurance regulations, Sears Re holds marketable securities to support the insurance coverage it provides. Sears utilizes two securitization structures to issue specific securities in which Sears Re invests its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit, or REMIC. The real estate associated with 125 Full-line stores was contributed to indirect wholly owned subsidiaries of Sears, and then leased back to Sears. The contributed stores were mortgaged and the REMIC issued securities that are secured by the mortgages and collateral assignments of the store leases. Sears Re and two other indirect wholly owned subsidiaries of Holdings own $1.3 billion (par value) of these mortgage-backed securities. Payments to Sears Re on these securities are funded by the lease payments. In May 2006, a subsidiary of Holdings contributed the rights to use the Kenmore, Craftsman and DieHard trademarks in the U.S. and its possessions and territories to KCD IP, LLC, an indirect wholly owned subsidiary of Holdings. KCD IP, LLC has licensed the use of the trademarks to subsidiaries of Holdings, including Sears and Kmart. Asset-backed securities with a par value of $1.8 billion were issued by KCD IP, LLC and subsequently purchased by Sears Re, the collateral for which includes the trademark rights and royalty income. Payments to Sears Re on these asset-backed securities are funded by the royalty payments. The issuers of these mortgage-backed and asset-backed securities and the owners of these real estate and trademark assets are bankruptcy remote, special purpose entities that are indirect wholly owned subsidiaries of Holdings. Cash flows received from rental streams and licensing fee streams paid by Sears, Kmart, other affiliates and third parties, are used for the payment of fees and interest on these securities. Since the inception of the REMIC and KCD IP, LLC, these mortgage-backed and asset-backed securities have been entirely held by our wholly owned consolidated subsidiaries in support of our insurance activities. At February 2, 2013 and January 28, 2012, the net book value of the securitized trademark rights was approximately $1.0 billion. The net book value of the securitized real estate assets was approximately $0.8 billion at February 2, 2013 and January 28, 2012.

Trade Creditor Matters

We have ongoing discussions concerning our liquidity and financial position with the vendor community and third parties that offer various credit protection services to our vendors. The topics discussed have included such areas as pricing, payment terms and ongoing business arrangements. As of the date of this report, we have not experienced any significant disruption in our access to merchandise or our operations.

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RELATED PARTY DISCLOSURE

12 Months Ended

Feb. 02, 2013

Related Party Transactions [Abstract]

RELATED PARTY DISCLOSURE

RELATED PARTY DISCLOSURE

Investment of Surplus Cash

Our Board has delegated authority to direct investment of our surplus cash to Edward S. Lampert, subject to various limitations that have been or may be from time to time adopted by the Board of Directors and/or the Finance Committee of the Board of Directors. Mr. Lampert is Chairman of our Board of Directors and its Finance Committee and is the Chairman and Chief Executive Officer of ESL. Additionally, on February 1, 2013, Mr. Lampert became our Chief Executive Officer, in addition to his role as Chairman of the Board. Neither Mr. Lampert nor ESL will receive compensation for any such investment activities undertaken on our behalf, other than Mr. Lampert's compensation as our Chief Executive Officer. ESL beneficially owned approximately 55% of our outstanding common stock at March 11, 2013.

Further, to clarify the expectations that the Board of Directors has with respect to the investment of our surplus cash, the Board has renounced, in accordance with Delaware law, any interest or expectancy of the Company associated with any investment opportunities in securities that may come to the attention of Mr. Lampert or any employee, officer, director or advisor to ESL and its affiliated investment entities (each, a “Covered Party”) who also serves as an officer or director of the Company other than (a) investment opportunities that come to such Covered Party’s attention directly and exclusively in such Covered Party’s capacity as a director, officer or employee of the Company, (b) control investments in companies in the mass merchandising, retailing, commercial appliance distribution, product protection agreements, residential and commercial product installation and repair services and automotive repair and maintenance industries and (c) investment opportunities in companies or assets with a significant role in our retailing business, including investment in real estate currently leased by the Company or in suppliers for which the Company is a substantial customer representing over 10% of such companies’ revenues, but excluding investments of ESL that were existing as of May 23, 2005.

Unsecured Commercial Paper

During 2012 and 2011, ESL and its affiliates purchased unsecured commercial paper issued by Sears Roebuck Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 31.6 days, 2.38% and $202 million and 29.2 days, 1.51% and $230 million, respectively, in 2012 and 2011. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2012 was $325 million and the aggregate amount of interest paid by SRAC to ESL during 2012 was $4 million. ESL held $285 million, and $250 million, respectively, in principal amount of commercial paper at February 2, 2013, and January 28, 2012, which included $169 million, and $130 million, respectively, held by Mr. Lampert. The commercial paper purchases were made in the ordinary course of business on substantially the same terms, including interest rates, as terms prevailing for comparable transactions with other persons, and did not present features unfavorable to the Company.

Senior Secured Notes

In 2011, Mr. Lampert and ESL purchased an aggregate of $95 million of principal amount of the Company’s 6 5/8% Senior Secured Notes due 2018 (the "65/8% Notes") and $10 million of principal amount of unsecured notes issued by SRAC and another indirect wholly owned subsidiary of Sears Holdings, Sears DC Corp. (the “Subsidiary Notes”). At February 2, 2013, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 65/8% Notes and $1 million and $2 million, respectively, of principal amount of Subsidiary Notes. At January 28, 2012, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 65/8% Notes and $4 million and $10 million, respectively, of principal amount of Subsidiary Notes.

Trade Receivable Put Agreements

On January 26, 2012, ESL entered into an agreement with a financial institution to acquire from the financial institution an undivided participating interest in a certain percentage of its rights and obligations under trade receivable put agreements that were entered into with certain vendors of the Company. These agreements generally provide that, in the event of a bankruptcy filing by the Company, the financial institution will purchase such vendors’ accounts receivable arising from the sale of goods or services to the Company. ESL may from time to time choose to purchase an 80% undivided participating interest in the rights and obligations primarily arising under future trade receivable put agreements that the financial institution enters into with our vendors during the term of its agreement. The Company is neither a party nor will it become a party to any of these agreements. At February 2, 2013 and January 28, 2012, ESL held a participation interest totaling $234 million and $93 million, respectively, in the financial institution’s agreements relating to the Company.

Sears Canada

ESL owns approximately 28% of the outstanding common shares of Sears Canada.

SHO

Holdings, and certain of its subsidiaries, engage in transactions with SHO pursuant to various agreements with SHO which, among other things, (1) govern the principal transactions relating to the rights offering and certain aspects of our relationship with SHO following the separation, (2) establish terms under which Holdings and certain of its subsidiaries will provide SHO with services, and (3) establish terms pursuant to which Holdings and certain of its subsidiaries will obtain merchandise for SHO. ESL owns approximately 63% of the outstanding common stock of SHO (based on publicly available information as of October 11, 2012).

These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the separation. The Company believes that the methods by which costs are allocated are reasonable and are based on prorated estimates of costs expected to be incurred by the Company. A summary of the nature of related party transactions involving SHO is as follows:

• SHO obtains a significant amount of its merchandise from the Company. We have also entered into certain agreements with SHO to provide logistics, handling, warehouse and transportation services. SHO also pays a royalty related to the sale of Kenmore, Craftsman and DieHard products and fees for participation in the SHOP YOUR WAY program.

• SHO receives commissions from the Company for the sale of merchandise made through www.sears.com, extended service agreements, delivery and handling services and credit revenues.

• The Company provides SHO with shared corporate services. These services include accounting and finance, legal, human resources, information technology and real estate.

Amounts due to or from SHO are non-interest bearing, settled on a net basis, and have payment terms of 10 days after the invoice date. The Company invoices SHO on a weekly basis. At February 2, 2013, Holdings reported a net amount receivable from SHO of $79 million in the Accounts receivable line of the Consolidated Balance Sheet. Amounts related to the sale of inventory and related services, royalties, and corporate shared services was $513 million, and the net amounts SHO earned related to commissions was $60 million during the period following the separation of SHO from October 12, 2012 through February 2, 2013. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 4 for further information related to these guarantees.

Also in connection with the separation, the Company entered into an agreement with SHO and the agent under SHO's secured credit facility, whereby the Company committed to continue to provide services to SHO in connection with a realization on the lender's collateral after default under the secured credit facility, notwithstanding SHO's default under the underlying agreement with us, and to provide certain notices and services to the agent, for so long as any obligations remain outstanding under the secured credit facility.

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REAL ESTATE TRANSACTIONS (Notes)

12 Months Ended

Feb. 02, 2013

Real Estate [Abstract]

REAL ESTATE TRANSACTIONS

REAL ESTATE TRANSACTIONS

Gain on Sales of Assets

We recognized $468 million, $64 million, and $67 million in gains on sales of assets during 2012, 2011, and 2010, respectively. These gains were primarily a function of several large real estate transactions. During 2012, the gain on sales of assets included gains of $386 million recognized in connection with real estate transactions which included a gain of $223 million recognized on the sale of eleven (6 owned and 5 leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds, and a gain of $163 million recognized on the surrender and early termination of the leases on three properties operated by Sears Canada, under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds. In connection with these transactions, we surrendered substantially all of our rights and obligations under our preexisting lease agreements and agreed to surrender each of the premises in periods ranging from 6 to 23 months from the date of closing. The gain on sales of assets recorded during 2012 also included a gain of $33 million related to the sale of a store operated under The Great Indoors format, one Sears Full-line store, and one Kmart store.

During 2011, the gain on sales of assets included a gain of $33 million recognized on the sale of two stores operated under The Great Indoors format and one Kmart store.

During 2010, the gain on sales of assets included a gain recognized on a Sears Auto Center we sold in October 2006, at which time we leased back the property for a period of time. Given the terms of the contract, for accounting purposes, the excess of proceeds received over the carrying value of the associated property was deferred. We closed our operations at this location during the first quarter of 2010 and, as a result, recognized a gain of $35 million on this sale at that time.

Property Acquisitions

During 2012, we purchased one previously leased operating property for $6 million. During 2011, we purchased five previously leased operating properties for $17 million. During 2010, we did not purchase any previously leased operating properties. In the normal course of business, we consider opportunities to purchase leased operating properties, as well as offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually or in the aggregate, result in material proceeds or outlays of cash. In addition, we review leases that will expire in the short-term in order to determine the appropriate action to take with respect to them.

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Narrative (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		12 Months Ended
	Feb. 02, 2013 Store	Oct. 29, 2011 Store	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011 Store
Restructuring Cost and Reserve [Line Items]
Number of stores converted				22
Impairment charges			$ 35	$ 16
Sears Domestic
Restructuring Cost and Reserve [Line Items]
Number of stores closing	12	173			15
Impairment charges			25	6
Kmart
Restructuring Cost and Reserve [Line Items]
Number of stores closing	48	74			11
Impairment charges			$ 10	$ 10

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BENEFIT PLANS

12 Months Ended

Feb. 02, 2013

Compensation and Retirement Disclosure [Abstract]

BENEFIT PLANS

BENEFIT PLANS

We sponsor a number of pension and postretirement benefit plans. Expenses for retirement and savings-related benefit plans were as follows:

millions	2012		2011		2010
Retirement/401(k) Savings Plans	$	10	$	11	$	11
Pension plans	630		78		119
Postretirement benefits	24		24		27
Total	$	664	$	113	$	157

Retirement Savings Plans

We sponsor Sears and Kmart 401(k) retirement savings plans for employees meeting service eligibility requirements. The Company does not match employee contributions.

Other Benefit Plans

Certain domestic full-time and part-time employees of Sears are eligible to participate in noncontributory defined benefit plans after meeting age and service requirements. Effective January 1, 2006, the Sears domestic pension plan was frozen and domestic associates no longer earn additional benefits under the plan.

Substantially all full-time Canadian employees, as well as some part-time employees, are eligible to participate in contributory defined benefit plans. Effective July 1, 2008, the Sears Canada defined pension plan was amended and a defined contribution component was added. The defined benefit service accrual ceased and all plan members earn pensionable service under the defined contribution component of the Sears Canada Inc. Registered Retirement Plan.

Pension benefits are based on length of service, compensation and, in certain plans, social security or other benefits. Funding for the various plans is determined using various actuarial cost methods.

In addition to providing pension benefits, Sears provides domestic and Canadian employees and retirees certain medical benefits. These benefits provide access to medical plans, with Company subsidies for certain eligible retirees. Certain domestic Sears retirees are also provided life insurance benefits. To the extent we share the cost of the retiree medical benefits with retirees, such cost sharing is based on years of service and year of retirement. Sears' postretirement benefit plans are not funded. We have the right to modify or terminate these plans.

Pension Plans

	2012									2011
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Change in projected benefit obligation:
Beginning balance	$	6,109		$	1,426		$	7,535		$	5,623		$	1,401		$	7,024
Interest cost	291			65			356			314			74			388
Actuarial loss	639			64			703			531			70			601
Benefits paid	(323		)	(122		)	(445		)	(359		)	(120		)	(479		)
Settlements	(1,405		)	—			(1,405		)	—			—			—
Foreign currency exchange impact	—			5			5			—			1			1
Balance at the measurement date	$	5,311		$	1,438		$	6,749		$	6,109		$	1,426		$	7,535
Change in assets at fair value:
Beginning balance	$	4,051		$	1,227		$	5,278		$	4,054		$	1,288		$	5,342
Actual return on plan assets	382			130			512			4			51			55
Company contributions	516			33			549			352			6			358
Benefits paid	(323		)	(122		)	(445		)	(359		)	(120		)	(479		)
Settlements	(1,405		)	—			(1,405		)	—			—			—
Foreign currency exchange impact	—			4			4			—			2			2
Balance at the measurement date	$	3,221		$	1,272		$	4,493		$	4,051		$	1,227		$	5,278
Net amount recognized	$	(2,090	)	$	(166	)	$	(2,256	)	$	(2,058	)	$	(199	)	$	(2,257	)

The accumulated benefit obligation for the SHC Domestic pension plan was $5.3 billion at February 2, 2013 and $6.1 billion at January 28, 2012. The accumulated benefit obligation for the Sears Canada pension plan was $1.4 billion at both February 2, 2013 and January 28, 2012.

Postretirement Obligations

	2012									2011
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Change in accumulated postretirement benefit obligation:
Beginning balance	$	253		$	321		$	574		$	286		$	303		$	589
Interest cost	10			14			24			13			16			29
Plan participants' contributions	42			—			42			43			—			43
Actuarial (gain) loss	9			16			25			(15		)	19			4
Settlement gain	—			(22		)	(22		)	—			—			—
Benefits paid	(67		)	(17		)	(84		)	(74		)	(17		)	(91		)
Benefits paid - settlements	—			(18		)	(18		)	—			—			—
Foreign currency exchange rate impact and other	—			1			1			—			—			—
Balance at the measurement date	$	247		$	295		$	542		$	253		$	321		$	574
Change in plan assets at fair value:
Beginning of year balance	$	—		$	69		$	69		$	—		$	90		$	90
Actual return on plan assets	—			—			—			—			3			3
Company contributions	25			19			44			31			1			32
Plan participants' contributions	42			—			42			43			—			43
Benefits paid	(67		)	(17		)	(84		)	(74		)	(17		)	(91		)
Benefits paid - settlements	—			(18		)	(18		)	—			—			—
Foreign currency exchange rate impact and other	—			(8		)	(8		)	—			(8		)	(8		)
Balance at the measurement date	$	—		$	45		$	45		$	—		$	69		$	69
Funded status	$	(247	)	$	(250	)	$	(497	)	$	(253	)	$	(252	)	$	(505	)

The current portion of our liability for postretirement obligations is $27 million, which we expect to pay during fiscal 2013.

Weighted-average assumptions used to determine plan obligations were as follows:

	2012		2011		2010
	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada
Pension benefits:
Discount Rate	4.25%	4.20%	4.90%	4.70%	5.75%	5.40%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%
Postretirement benefits:
Discount Rate	3.55%	4.20%	4.20%	4.60%	5.00%	5.40%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%

Net Periodic Benefit Cost

The components of net periodic benefit cost were as follows:

	2012									2011									2010
millions	SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total			SHC Domestic			Sears Canada			Total
Pension benefits:
Interest cost	$	291		$	65		$	356		$	314		$	74		$	388		$	320		$	76		$	396
Expected return on plan assets	(291		)	(76		)	(367		)	(302		)	(80		)	(382		)	(287		)	(77		)	(364		)
Cost of settlements	452			—			452			—			—			—			—			—			—
Recognized net loss	165			24			189			63			9			72			87			—			87
Net periodic benefit cost (benefit)	$	617		$	13		$	630		$	75		$	3		$	78		$	120		$	(1	)	$	119
Postretirement benefits:
Benefits earned during the period	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	1		$	1
Interest cost	10			14			24			13			16			29			16			16			32
Expected return on assets	—			(3		)	(3		)	—			(5		)	(5		)	—			(6		)	(6		)
Cost of settlements	—			3			3			—			—			—			—			—			—
Net periodic benefit cost	$	10		$	14		$	24		$	13		$	11		$	24		$	16		$	11		$	27

Weighted-average assumptions used to determine net cost were as follows:

	2012		2011		2010
	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada	SHC Domestic	Sears Canada
Pension benefits:
Discount Rate	4.90%	4.70%	5.75%	5.40%	6.00%	6.00%
Return of plan assets	7.25%	6.50%	7.50%	6.50%	8.00%	6.50%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%
Postretirement benefits:
Discount Rate	4.20%	4.60%	5.00%	5.40%	6.00%	6.00%
Return of plan assets	N/A	3.75%	N/A	6.50%	N/A	6.50%
Rate of compensation increases	N/A	3.50%	N/A	3.50%	N/A	3.50%

For purposes of determining the periodic expense of our defined benefit plans, we use the fair value of plan assets as the market related value. A one-percentage-point change in the assumed discount rate would have the following effects on the pension liability:

millions	1 percentage-point Increase			1 percentage-point Decrease
Effect on interest cost component	$	30		$	(39	)
Effect on pension benefit obligation	$	(674	)	$	814

For 2013 and beyond, the domestic weighted-average health care cost trend rates used in measuring the postretirement benefit expense are an 8.5% trend rate in 2013 to an ultimate trend rate of 6.5% in 2017. A one-percentage-point change in the assumed health care cost trend rate would have the following effects on the postretirement liability:

millions	1 percentage-point Increase		1 percentage-point Decrease
Effect on total service and interest cost components	$	1	$	(1	)
Effect on postretirement benefit obligation	$	31	$	(27	)

$195 million of the unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost during 2013.

Investment Strategy

The Investment Committee, made up of select members of senior management, has appointed a non-affiliated third party professional to advise the Committee with respect to the SHC domestic pension plan assets. The plan's overall investment objective is to provide a long-term return that, along with Company contributions, is expected to meet future benefit payment requirements. A long-term horizon has been adopted in establishing investment policy such that the likelihood and duration of investment losses are carefully weighed against the long-term potential for appreciation of assets. The plan's investment policy requires investments to be diversified across individual securities, industries, market capitalization and valuation characteristics. In addition, various techniques are utilized to monitor, measure and manage risk.

Domestic plan assets were invested in the following classes of securities:

	Plan Assets at
	February 2, 2013		January 28, 2012
Equity securities	31	%	32	%
Fixed income and other debt securities	64		67
Other	5		1
Total	100	%	100	%

The domestic plan's target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 2, 2013, the plan's target asset allocation was 35% equity and 65% fixed income. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

Sears Canada plan assets were invested in the following classes of securities (none of which were securities of the Company):

	Plan Assets at
	February 2, 2013		January 28, 2012
Equity securities	26	%	27	%
Fixed income and other debt securities	74		72
Alternative investment securities	—		1
Total	100	%	100	%

The Sears Canada plans' target allocation is determined by taking into consideration the amounts and timing of projected liabilities, our funding policies and expected returns on various asset classes. At February 2, 2013, the plan's target asset allocation was 55% to 75% fixed income and 25% to 45% equity. To develop the expected long-term rate of return on assets assumption, we considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio.

Future Cash Flows of Benefit Plans

Information regarding expected future cash flows for our benefit plans is as follows:

millions	SHC Domestic		Sears Canada		Total
Pension benefits:
Employer contributions:
2013 (expected)	$	352	$	29	$	381
Expected benefit payments:
2013	$	335	$	93	$	428
2014	337		93		430
2015	340		92		432
2016	342		92		434
2017	344		91		435
2018-2022	1,725		450		2,175
Postretirement benefits:
Employer contributions:
2013 (expected)	$	28	$	1	$	29
Expected employer contribution for benefit payments:
2013	$	28	$	17	$	45
2014	26		17		43
2015	25		17		42
2016	24		18		42
2017	22		18		40
2018-2022	90		88		178

Domestic Pension Plan Funding

Contributions to our pension plans remain a significant use of our cash on an annual basis. While the Company's pension plan is frozen, and thus associates do not currently earn pension benefits, the Company has a legacy pension obligation for past service performed by Kmart and Sears associates. During 2012, we contributed $516 million to our domestic pension plans. We estimate that the domestic pension contribution will be $352 million in 2013 and approximately $510 million in 2014, though the ultimate amount of pension contributions could be affected by changes in the applicable regulations as well as financial market and investment performance.

As previously reported, on July 6, 2012, federal legislation signed into law allows pension plan sponsors to use higher interest rate assumptions in valuing plan liabilities and determining funding obligations. As a result of this legislation, the Company's domestic pension plan was within $203 million of being 80% funded under applicable law. In order to reduce the risks of gross pension obligations, the Company elected to contribute an additional $203 million to its domestic pension plan on September 14, 2012, after which its domestic pension plan was 80% funded under applicable law.

Effective September 17, 2012, the Company amended its domestic pension plan, primarily related to lump sum benefit eligibility, and began notifying certain former employees of the Company of its offer to pay those employees' pension benefit in a lump sum. These amendments did not have a significant impact on our plan. Former employees eligible for the voluntary lump sum payment option are generally those who are vested traditional formula participants of the Plan who terminated employment prior to January 1, 2012 and who have not yet started receiving monthly payments of their pension benefits.

The Company offered the one-time voluntary lump sum window in an effort to reduce its long-term pension obligations and ongoing annual pension expense. This voluntary offer was made to approximately 86,000 eligible terminated vested participants, representing approximately $2.0 billion of the Company's total qualified pension plan liabilities. Eligible participants had until November 19, 2012 to make their election. The Company made payments of approximately $1.5 billion to employees who made the election in December 2012 and funded the payments from existing pension plan assets. In connection with this transaction, the Company incurred a non-cash charge to operations of approximately $452 million pre-tax in the fourth quarter of 2012 as a result of the requirement to expense the unrealized actuarial losses. The charge had no effect on equity because the unrealized actuarial losses are already recognized in accumulated other comprehensive income/(loss). Accordingly, the effect on retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.

Fair Value of Pension and Postretirement Benefit Plan Assets

The following table presents our plan assets using the fair value hierarchy at February 2, 2013 and January 28, 2012:

	Investment Assets at Fair Value at
SHC Domestic	February 2, 2013
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	187		$	—	$	187	$	—
Equity securities:
U.S. companies	848			848		—		—
International companies	138			138		—		—
Registered investment companies	1			1		—		—
Fixed income securities:
Corporate bonds and notes	1,840			—		1,840		—
Sears Holdings Corporation senior secured notes	176			—		176		—
U.S. government and agencies	1			—		1		—
Mortgage-backed and asset-backed	6			—		6		—
Ventures and partnerships	12			—		—		12
Total investment assets at fair value	$	3,209		$	987	$	2,210	$	12
Accounts receivable	44
Accounts payable	(32		)
Net assets available for plan benefits	$	3,221

	Investment Assets at Fair Value at
SHC Domestic	January 28, 2012
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	216		$	—	$	216	$	—
Equity securities:
U.S. companies	1,102			1,102		—		—
International companies	120			120		—		—
Registered investment companies	1			1		—		—
Fixed income securities:
Corporate bonds and notes	2,186			—		2,184		2
Sears Holdings Corporation senior secured notes	203			—		203		—
U.S. government and agencies	39			—		39		—
Mortgage-backed and asset-backed	9			—		9		—
Municipal and foreign government	20			—		20		—
Ventures and partnerships	15			—		—		15
Total investment assets at fair value	$	3,911		$	1,223	$	2,671	$	17
Cash	111
Accounts receivable	54
Accounts payable	(25		)
Net assets available for plan benefits	$	4,051

	Investment Assets at Fair Value at
Sears Canada	February 2, 2013
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	67		$	—	$	67	$	—
Equity securities:
U.S. companies	177			177		—		—
International companies	5			5		—		—
Common collective trusts	277			—		277		—
Fixed income securities:
Corporate bonds and notes	613			—		612		1
U.S. government and agencies	1			—		1		—
Mortgage-backed and asset-backed	66			—		7		59
Municipal and foreign government	34			—		34		—
Hedge and pooled equity funds	3			—		—		3
Total investment assets at fair value	$	1,243		$	182	$	998	$	63
Cash	42
Refundable deposits	25
Accounts receivable	567
Accounts payable	(560		)
Net assets available for plan benefits	$	1,317

	Investment Assets at Fair Value at
Sears Canada	January 28, 2012
millions	Total			Level 1		Level 2		Level 3
Cash equivalents and short-term investments	$	7		$	—	$	7	$	—
Equity securities:
U.S. companies	190			189		1		—
International companies	30			30		—		—
Common collective trusts	306			—		306		—
Fixed income securities:
Corporate bonds and notes	560			—		560		—
U.S. government and agencies	2			—		2		—
Mortgage-backed and asset-backed	73			—		9		64
Municipal and foreign government	57			—		57		—
Hedge and pooled equity funds	16			—		—		16
Total investment assets at fair value	$	1,241		$	219	$	942	$	80
Cash	26
Refundable deposits	25
Accounts receivable	484
Accounts payable	(480		)
Net assets available for plan benefits	$	1,296

Equity securities, which include common and preferred stocks and registered investment companies (mutual funds), are actively traded and valued at the closing price reported in the active market in which the security is traded and are assigned to Level 1.

Common collective trusts are portfolios of underlying investments held by investment managers and are valued at the unit value reported by the investment managers as of the end of each period presented. Collective short-term investment funds are stated at net asset value (NAV) as determined by the investment managers. Investment managers value the underlying investments of the funds at amortized cost, which approximates fair value, and have assigned a Level 2 to the valuation of those investments. Fixed income securities are assigned to Level 2 as they are primarily valued by institutional bid evaluation, which determines the estimated price a dealer would pay for a security and which is developed using proprietary models established by the pricing vendors for this purpose.

Certain corporate and mortgage-backed debt securities are assigned to Level 3 based on the relatively low position in the preferred hierarchy of the pricing source. Valuation of the Plan's non-public limited partnerships requires significant judgment by the general partners due to the absence of quoted market value, inherent lack of liquidity, and the long-term nature of the assets, and may result in fair value measurements that are not indicative of ultimate realizable value. Hedge funds consist of fund-of-funds investments and direct hedge funds and are assigned to Level 3. The fund-of-funds investments are primarily valued using a market approach based on the NAVs calculated by the fund and are not publicly available. Direct hedge funds are primarily valued by each fund's third party administrator based on the valuation of the underlying type of security held and are not publicly available. All hedge fund investments are in the process of being redeemed.

A rollforward of our Level 3 assets each year is as follows:

SHC Domestic	January 28, 2012 Balance		Net Realized and Unrealized Gains/(Losses)			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		February 2, 2013 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	2	$	(2	)	$	—	$	—		$	—	$	—
Mortgage-backed and asset-backed	—		—			—		—			—		—
Venture and partnerships	15		1			—		(4		)	—		12
Total Level 3 investments	$	17	$	(1	)	$	—	$	(4	)	$	—	$	12

SHC Domestic	January 29, 2011 Balance		Net Realized and Unrealized Losses			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		January 28, 2012 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	—	$	—		$	2	$	—		$	—	$	2
Mortgage-backed and asset-backed	1		—			—		(1		)	—		—
Venture and partnerships	20		(3		)	—		(2		)	—		15
Total Level 3 investments	$	21	$	(3	)	$	2	$	(3	)	$	—	$	17

Sears Canada	January 28, 2012 Balance		Net Realized and Unrealized Gains		Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3		February 2, 2013 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	—	$	—	$	1	$	—		$	—	$	1
Mortgage-backed and asset-backed	64		5		—		(10		)	—		59
Hedge and pooled equity funds	16		—		—		(13		)	—		3
Total Level 3 investments	$	80	$	5	$	1	$	(23	)	$	—	$	63

Sears Canada	January 29, 2011 Balance		Net Realized and Unrealized Gains/(Losses)			Purchases		Sales and Settlements			Net Transfers Into/(Out of) Level 3			January 28, 2012 Balance
millions
Fixed income securities:
Corporate bonds and notes	$	2	$	—		$	—	$	—		$	(2	)	$	—
Mortgage backed-and asset-backed	69		5			—		(10		)	—			64
Hedge and pooled equity funds	113		(3		)	—		(94		)	—			16
Total Level 3 investments	$	184	$	2		$	—	$	(104	)	$	(2	)	$	80

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Detail) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013		Jan. 28, 2012
Fair Value Measurements [Line Items]
Cash equivalents	$ 181	[1]	$ 341	[1]
Restricted cash	9	[2]	7	[2]
Foreign currency derivative assets			1	[3]
Foreign currency derivative liabilities			(6)	[4]
Total	190		343
Level 1
Fair Value Measurements [Line Items]
Cash equivalents	181	[1]	341	[1]
Restricted cash	9	[2]	7	[2]
Foreign currency derivative assets			0	[3]
Foreign currency derivative liabilities			0	[4]
Total	190		348
Level 2
Fair Value Measurements [Line Items]
Cash equivalents	0	[1]	0	[1]
Restricted cash	0	[2]	0	[2]
Foreign currency derivative assets			1	[3]
Foreign currency derivative liabilities			(6)	[4]
Total	0		(5)
Level 3
Fair Value Measurements [Line Items]
Cash equivalents	0	[1]	0	[1]
Restricted cash	0	[2]	0	[2]
Foreign currency derivative assets			0	[3]
Foreign currency derivative liabilities			0	[4]
Total	$ 0		$ 0

[1] Included within Cash and cash equivalents on the Consolidated Balance Sheets.

[2] Included within Restricted cash on the Consolidated Balance Sheets.

[3] Included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

[4] Included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

12 Months Ended

Feb. 02, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

We determine fair value of financial assets and liabilities based on the following fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels:

Level 1 inputs – unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. An active market for the asset or liability is one in which transactions for the asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.

Level 2 inputs – inputs other than quoted market prices included in Level 1 that are observable, either directly or indirectly, for the asset or liability. Level 2 inputs include, but are not limited to, quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities, credit risk and default rates.

Level 3 inputs – unobservable inputs for the asset or liability.

Accounts receivable, merchandise payables, short-term borrowings, accrued liabilities and domestic cash and cash equivalents are reflected in the Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The fair value of our debt is disclosed in Note 3 to the Consolidated Financial Statements. The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Consolidated Balance Sheets at fair value at February 2, 2013 and January 28, 2012:

	Total Fair Value Amounts at
millions	February 2, 2013		Level 1		Level 2		Level 3
Cash equivalents(1)	$	181	$	181	$	—	$	—
Restricted cash(2)	9		9		—		—
Total	$	190	$	190	$	—	$	—

	Total Fair Value Amounts at
millions	January 28, 2012			Level 1		Level 2			Level 3
Cash equivalents(1)	$	341		$	341	$	—		$	—
Restricted cash(2)	7			7		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(6		)	—		(6		)	—
Total	$	343		$	348	$	(5	)	$	—

__________________

⁽¹⁾  Included within Cash and cash equivalents on the Consolidated Balance Sheets.

⁽²⁾  Included within Restricted cash on the Consolidated Balance Sheets.

⁽³⁾  Included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

⁽⁴⁾  Included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple inputs including interest rates, prices and indices to generate pricing and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. Our derivative instruments are valued using Level 2 measurements.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value as discussed in Note 1. With the exception of the goodwill and fixed asset impairments described in Note 12 and Note 13, respectively, we had no significant remeasurements of such assets or liabilities to fair value during 2012 and 2011.

All of the fair value remeasurements were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived based on discussions with real estate brokers, review of comparable properties, if available, and internal expertise related to the current marketplace conditions. Inputs for the goodwill included discounted cash flow analyses, comparable marketplace fair value data, as well as management's assumptions in valuing significant tangible and intangible assets, as described in Note 1, Summary of Significant Accounting Policies.

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INTEREST AND INVESTMENT INCOME (Notes)

12 Months Ended

Feb. 02, 2013

Investment Income, Interest and Dividend [Abstract]

INTEREST AND INVESTMENT INCOME

INTEREST AND INVESTMENT INCOME

The following table sets forth the components of interest and investment income as reported in our Consolidated Statements of Operations:

millions	2012		2011		2010
Interest income on cash and cash equivalents	$	7	$	4	$	4
Other investment income	87		37		32
Total	$	94	$	41	$	36

Interest Income on Cash and Cash Equivalents

We recorded interest income of $7 million in 2012, $4 million in 2011, and $4 million in 2010, primarily related to interest earned on cash and cash equivalents. These cash and cash equivalents consist of highly liquid investments with original maturities of three months or less at the date of purchase. Our invested cash may include, from time to time, investments in, but not limited to, commercial paper, federal, state and municipal government securities, floating-rate notes, repurchase agreements and money market funds. All invested cash amounts are readily available to us.

Other Investment Income

Other investment income primarily includes income generated by (and sales of investments in) certain real estate joint ventures and other equity investments in which we do not have a controlling interest. Investment income from equity investments was $47 million, $27 million and $17 million in 2012, 2011 and 2010, respectively. During 2012, the investment income from equity investments included a gain of $25 million related to the sale of a real estate joint venture held by Sears Canada. Other investment income also included a $30 million, $4 million and $6 million dividend received on our cost method investment in Sears Mexico for 2012, 2011 and 2010, respectively.

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EARNINGS PER SHARE (Notes)

12 Months Ended

Feb. 02, 2013

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

The following tables set forth the components used to calculate basic and diluted earnings (loss) per share from continuing operations attributable to Holdings' shareholders. Restricted stock awards for 2012 and 2011 were not included in the computation of diluted loss per share from continuing operations attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive.

millions, except earnings per share	2012			2011			2010
Basic weighted average shares	105.9			106.8			111.5
Dilutive effect of restricted stock and stock options	—			—			0.2
Diluted weighted average shares	105.9			106.8			111.7
Net income (loss) from continuing operations attributable to Holdings' shareholders	$	(930	)	$	(3,113	)	$	122
Earnings (loss) per share from continuing operations attributable to Holdings' shareholders:
Basic	$	(8.78	)	$	(29.15	)	$	1.09
Diluted	$	(8.78	)	$	(29.15	)	$	1.09

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BENEFIT PLANS Net Periodic Benefit Cost, One Percent Increase (Decrease) and Health Care Rate (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Effect of One Percentage Point Increase/Decrease
Effect on interest cost component, increase	$ 30
Effect on interest cost component, decrease	(39)
Effect on pension benefit obligation, increase	(674)
Effect on pension benefit obligation, decrease	814
Unrecognized net losses in accumulated other comprehensive income are expected to be amortized as a component of net periodic benefit cost	195
SHC Domestic, Pension Plans
Components of Net Periodic Benefit Cost
Interest cost	291	314	320
Expected return on plan assets	(291)	(302)	(287)
Cost of settlements	452	0	0
Recognized net loss	165	63	87
Net periodic cost (expense)	617	75	120
Weighted Average Assumptions Used in Calculating Net Cost
Discount rate	4.90%	5.75%	6.00%
Return on plan assets	7.25%	7.50%	8.00%
Sears Canada, Pension Plans
Components of Net Periodic Benefit Cost
Interest cost	65	74	76
Expected return on plan assets	(76)	(80)	(77)
Cost of settlements	0	0	0
Recognized net loss	24	9	0
Net periodic cost (expense)	13	3	(1)
Weighted Average Assumptions Used in Calculating Net Cost
Discount rate	4.70%	5.40%	6.00%
Return on plan assets	6.50%	6.50%	6.50%
Rate of compensation increases	3.50%	3.50%	3.50%
Pension Plans
Components of Net Periodic Benefit Cost
Interest cost	356	388	396
Expected return on plan assets	(367)	(382)	(364)
Cost of settlements	452	0	0
Recognized net loss	189	72	87
Net periodic cost (expense)	630	78	119
Sears Canada, Postretirement Benefit Plans
Components of Net Periodic Benefit Cost
Interest cost	14	16	16
Expected return on plan assets	(3)	(5)	(6)
Cost of settlements	3	0	0
Benefits earned during the period	0	0	1
Net periodic cost (expense)	14	11	11
Weighted Average Assumptions Used in Calculating Net Cost
Discount rate	4.60%	5.40%	6.00%
Return on plan assets	3.75%	6.50%	6.50%
Rate of compensation increases	3.50%	3.50%	3.50%
Postretirement Benefit Plans
Components of Net Periodic Benefit Cost
Interest cost	24	29	32
Expected return on plan assets	(3)	(5)	(6)
Cost of settlements	3	0	0
Benefits earned during the period	0	0	1
Net periodic cost (expense)	24	24	27
Effect of One Percentage Point Increase/Decrease
Effect on total service and interest cost components, increase	1
Effect on total service and interest cost components, decrease	(1)
Effect on postretirement benefit obligation, increase	31
Effect on postretirement benefit obligation, decrease	(27)
Health care cost trend rate assumed for next fiscal year	8.50%
Ultimate health care cost trend rate	6.50%
SHC Domestic, Postretirement Benefit Plans
Components of Net Periodic Benefit Cost
Interest cost	10	13	16
Expected return on plan assets	0	0	0
Cost of settlements	0	0	0
Benefits earned during the period	0	0	0
Net periodic cost (expense)	$ 10	$ 13	$ 16
Weighted Average Assumptions Used in Calculating Net Cost
Discount rate	4.20%	5.00%	6.00%

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS Store Closing Costs Recorded (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013		Jan. 28, 2012		Jan. 29, 2011
Restructuring Cost and Reserve [Line Items]
Stores closing costs	$ 162		$ 344		$ 36
Impairment charges	35		16
Depreciation expense	778		798		809
Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	85		81		13
Impairment charges	10		10
Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	57		245		23
Impairment charges	25		6
Sears Canada
Restructuring Cost and Reserve [Line Items]
Stores closing costs	20		18
Markdowns
Restructuring Cost and Reserve [Line Items]
Stores closing costs	35	[1]	130	[1]	12	[1]
Markdowns | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	21	[1]	46	[1]	6	[1]
Markdowns | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	14	[1]	84	[1]	6	[1]
Markdowns | Sears Canada
Restructuring Cost and Reserve [Line Items]
Stores closing costs	0	[1]	0	[1]
Severance Costs
Restructuring Cost and Reserve [Line Items]
Stores closing costs	31	[2]	73	[2]	3	[2]
Severance Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	13	[2]	14	[2]	1	[2]
Severance Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	2	[2]	41	[2]	2	[2]
Severance Costs | Sears Canada
Restructuring Cost and Reserve [Line Items]
Stores closing costs	16	[2]	18	[2]
Lease Termination Costs
Restructuring Cost and Reserve [Line Items]
Stores closing costs	67	[2]	5	[2]	6	[2]
Lease Termination Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	34	[2]	1	[2]	4	[2]
Lease Termination Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	34	[2]	4	[2]	2	[2]
Lease Termination Costs | Sears Canada
Restructuring Cost and Reserve [Line Items]
Stores closing costs	(1)	[2]	0	[2]
Other Charges
Restructuring Cost and Reserve [Line Items]
Stores closing costs	7	[2]	46	[2]	5	[2]
Other Charges | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	8	[2]	15	[2]	2	[2]
Other Charges | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	(6)	[2]	31	[2]	3	[2]
Other Charges | Sears Canada
Restructuring Cost and Reserve [Line Items]
Stores closing costs	5	[2]	0	[2]
Impairment and Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Stores closing costs	22	[3]	90	[3]	10	[3]
Impairment charges			82
Depreciation expense			8
Impairment and Accelerated Depreciation | Kmart
Restructuring Cost and Reserve [Line Items]
Stores closing costs	9	[3]	5	[3]	0	[3]
Impairment and Accelerated Depreciation | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Stores closing costs	13	[3]	85	[3]	10	[3]
Impairment and Accelerated Depreciation | Sears Canada
Restructuring Cost and Reserve [Line Items]
Stores closing costs	$ 0	[3]	$ 0	[3]

[1] Recorded within Cost of sales, buying and occupancy on the Consolidated Statements of Operations.

[2] Recorded within Selling and administrative on the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

[3] 2011 costs include $82 million recorded within impairment charges and $8 million recorded within Depreciation and amortization on the Consolidated Statements of Operations. 2012 and 2010 costs are recorded within Depreciation and amortization on the Consolidated Statements of Operations.

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BENEFIT PLANS Future Cash Flows of Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013
SHC Domestic, Pension Plans
Employer contributions:
2013 (expected)	$ 352
Expected Payments
2013	335
2014	337
2015	340
2016	342
2017	344
2018-2022	1,725
Sears Canada, Pension Plans
Employer contributions:
2013 (expected)	29
Expected Payments
2013	93
2014	93
2015	92
2016	92
2017	91
2018-2022	450
Pension Plans
Employer contributions:
2013 (expected)	381
Expected Payments
2013	428
2014	430
2015	432
2016	434
2017	435
2018-2022	2,175
SHC Domestic, Postretirement Benefit Plans
Employer contributions:
2013 (expected)	28
Expected Payments
2013	28
2014	26
2015	25
2016	24
2017	22
2018-2022	90
Sears Canada, Postretirement Benefit Plans
Employer contributions:
2013 (expected)	1
Expected Payments
2013	17
2014	17
2015	17
2016	18
2017	18
2018-2022	88
Postretirement Benefit Plans
Employer contributions:
2013 (expected)	29
Expected Payments
2013	45
2014	43
2015	42
2016	42
2017	40
2018-2022	$ 178

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BENEFIT PLANS Pension and Postretirement Obligations (Details) (USD $)	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Change in Plan Assets at Fair Value
Beginning of year balance			$ 0
Balance at measurement date		0	0
Current liabilities for postretirement obligations	27,000,000
SHC Domestic, Pension Plans
Change in Benefit Obligation
Beginning Balance	6,109,000,000	5,623,000,000
Interest cost	291,000,000	314,000,000
Actuarial (gain) loss	639,000,000	531,000,000
Benefits paid	(323,000,000)	(359,000,000)
Settlements	(1,405,000,000)	0
Foreign currency exchange rate impact and other	0	0
Balance at measurment date	5,311,000,000	6,109,000,000
Change in Plan Assets at Fair Value
Beginning of year balance	4,051,000,000	4,054,000,000
Actual return on plan assets	382,000,000	4,000,000
Company contributions	516,000,000	352,000,000
Settlements	(1,405,000,000)	0
Foreign currency exchange impact	0	0
Balance at measurement date	3,221,000,000	4,051,000,000
Funded Status	(2,090,000,000)	(2,058,000,000)
Accumulated benefit obligation	5,300,000,000	6,100,000,000
Weighted Average Assumptions Used in Calculating Plan Obligations
Discount rate	4.25%	4.90%	5.75%
SHC Domestic, Postretirement Benefit Plans
Change in Benefit Obligation
Beginning Balance	253,000,000	286,000,000
Interest cost	10,000,000	13,000,000
Plan participants' contributions	42,000,000	43,000,000
Actuarial (gain) loss	9,000,000	(15,000,000)
Settlement gain	0	0
Benefits paid	(67,000,000)	(74,000,000)
Settlements	0	0
Foreign currency exchange rate impact and other	0	0
Balance at measurment date	247,000,000	253,000,000
Change in Plan Assets at Fair Value
Beginning of year balance	0
Actual return on plan assets	0	0
Company contributions	25,000,000	31,000,000
Settlements	0	0
Foreign currency exchange rate impact and other	0	0
Balance at measurement date	0	0
Funded Status	(247,000,000)	(253,000,000)
Weighted Average Assumptions Used in Calculating Plan Obligations
Discount rate	3.55%	4.20%	5.00%
Sears Canada, Pension Plans
Change in Benefit Obligation
Beginning Balance	1,426,000,000	1,401,000,000
Interest cost	65,000,000	74,000,000
Actuarial (gain) loss	64,000,000	70,000,000
Benefits paid	(122,000,000)	(120,000,000)
Settlements	0	0
Foreign currency exchange rate impact and other	5,000,000	1,000,000
Balance at measurment date	1,438,000,000	1,426,000,000
Change in Plan Assets at Fair Value
Beginning of year balance	1,227,000,000	1,288,000,000
Actual return on plan assets	130,000,000	51,000,000
Company contributions	33,000,000	6,000,000
Settlements	0	0
Foreign currency exchange impact	4,000,000	2,000,000
Balance at measurement date	1,272,000,000	1,227,000,000
Funded Status	(166,000,000)	(199,000,000)
Accumulated benefit obligation		1,400,000,000
Weighted Average Assumptions Used in Calculating Plan Obligations
Discount rate	4.20%	4.70%	5.40%
Rate of compensation increases	3.50%	3.50%	3.50%
Sears Canada, Postretirement Benefit Plans
Change in Benefit Obligation
Beginning Balance	321,000,000	303,000,000
Interest cost	14,000,000	16,000,000
Plan participants' contributions	0	0
Actuarial (gain) loss	16,000,000	19,000,000
Settlement gain	(22,000,000)	0
Benefits paid	(17,000,000)	(17,000,000)
Settlements	(18,000,000)	0
Foreign currency exchange rate impact and other	1,000,000	0
Balance at measurment date	295,000,000	321,000,000
Change in Plan Assets at Fair Value
Beginning of year balance	69,000,000	90,000,000
Actual return on plan assets	0	3,000,000
Company contributions	19,000,000	1,000,000
Settlements	(18,000,000)	0
Foreign currency exchange rate impact and other	(8,000,000)	(8,000,000)
Balance at measurement date	45,000,000	69,000,000
Funded Status	(250,000,000)	(252,000,000)
Weighted Average Assumptions Used in Calculating Plan Obligations
Discount rate	4.20%	4.60%	5.40%
Rate of compensation increases	3.50%	3.50%	3.50%
Pension Plans
Change in Benefit Obligation
Beginning Balance	7,535,000,000	7,024,000,000
Interest cost	356,000,000	388,000,000
Actuarial (gain) loss	703,000,000	601,000,000
Benefits paid	(445,000,000)	(479,000,000)
Settlements	(1,405,000,000)	0
Foreign currency exchange rate impact and other	5,000,000	1,000,000
Balance at measurment date	6,749,000,000	7,535,000,000
Change in Plan Assets at Fair Value
Beginning of year balance	5,278,000,000	5,342,000,000
Actual return on plan assets	512,000,000	55,000,000
Company contributions	549,000,000	358,000,000
Settlements	(1,405,000,000)	0
Foreign currency exchange impact	4,000,000	2,000,000
Balance at measurement date	4,493,000,000	5,278,000,000
Funded Status	(2,256,000,000)	(2,257,000,000)
Postretirement Benefit Plans
Change in Benefit Obligation
Beginning Balance	574,000,000	589,000,000
Interest cost	24,000,000	29,000,000
Plan participants' contributions	42,000,000	43,000,000
Actuarial (gain) loss	25,000,000	4,000,000
Settlement gain	(22,000,000)	0
Benefits paid	(84,000,000)	(91,000,000)
Settlements	(18,000,000)	0
Foreign currency exchange rate impact and other	1,000,000	0
Balance at measurment date	542,000,000	574,000,000
Change in Plan Assets at Fair Value
Beginning of year balance	69,000,000	90,000,000
Actual return on plan assets	0	3,000,000
Company contributions	44,000,000	32,000,000
Settlements	(18,000,000)	0
Foreign currency exchange rate impact and other	(8,000,000)	(8,000,000)
Balance at measurement date	45,000,000	69,000,000
Funded Status	$ (497,000,000)	$ (505,000,000)

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QUARTERLY FINANCIAL INFORMATION (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 02, 2013	Oct. 27, 2012	Jul. 28, 2012	Apr. 28, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 30, 2011	Apr. 30, 2011	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Quarterly Financial Information Disclosure [Abstract]
Revenues	$ 12,260	$ 8,857	$ 9,467	$ 9,270	$ 12,484	$ 9,405	$ 10,138	$ 9,540	$ 39,854	$ 41,567	$ 42,664
Cost of sales, buying and occupancy	9,097	6,604	6,936	6,703	9,422	7,011	7,537	6,996	29,340	30,966	31,000
Selling and administrative	3,282	2,496	2,437	2,445	2,921	2,635	2,601	2,507	10,660	10,664	10,425
Net income (loss) from continuing operations attributable to Holdings' shareholders	$ (489)	$ (498)	$ (132)	$ 189	$ (2,386)	$ (410)	$ (152)	$ (165)	$ (930)	$ (3,113)	$ 122
Basic (in dollars per share)	$ (4.61)	$ (4.70)	$ (1.25)	$ 1.78	$ (22.47)	$ (3.85)	$ (1.42)	$ (1.53)	$ (8.78)	$ (29.15)	$ 1.09
Diluted (in dollars per share)	$ (4.61)	$ (4.70)	$ (1.25)	$ 1.78	$ (22.47)	$ (3.85)	$ (1.42)	$ (1.53)	$ (8.78)	$ (29.15)	$ 1.09

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Tables)

12 Months Ended

Feb. 02, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurement Amounts for Other Financial Assets and Liabilities Recorded in Condensed Consolidated Balance Sheets at Fair Value

The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Consolidated Balance Sheets at fair value at February 2, 2013 and January 28, 2012:

	Total Fair Value Amounts at
millions	February 2, 2013		Level 1		Level 2		Level 3
Cash equivalents(1)	$	181	$	181	$	—	$	—
Restricted cash(2)	9		9		—		—
Total	$	190	$	190	$	—	$	—

	Total Fair Value Amounts at
millions	January 28, 2012			Level 1		Level 2			Level 3
Cash equivalents(1)	$	341		$	341	$	—		$	—
Restricted cash(2)	7			7		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(6		)	—		(6		)	—
Total	$	343		$	348	$	(5	)	$	—

__________________

⁽¹⁾  Included within Cash and cash equivalents on the Consolidated Balance Sheets.

⁽²⁾  Included within Restricted cash on the Consolidated Balance Sheets.

⁽³⁾  Included within Prepaid expenses and other current assets on the Consolidated Balance Sheets.

⁽⁴⁾  Included within Accrued expenses and other current liabilities on the Consolidated Balance Sheets.

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BORROWINGS Interest Expense (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Debt Disclosure [Abstract]
Interest expense	$ 232	$ 248	$ 242
Accretion of lease obligations at net present value	17	20	21
Amortization of debt issuance costs	18	21	30
Interest expense	$ 267	$ 289	$ 293

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

12 Months Ended

Feb. 02, 2013

Restructuring and Related Activities [Abstract]

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS

Store Closings and Severance

We made the decision to close 48, 74 and 11 stores in our Kmart segment, and 12, 173 and 15 stores in our Sears Domestic segment during 2012, 2011 and 2010, respectively, and changed the format of 22 Essentials/Grands stores in our Sears Domestic segment during 2011. Store closing costs recorded during 2012, 2011 and 2010 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)			Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	21	$	13	$	34		$	8		$	9	$	85
Sears Domestic	14		2		34			(6		)	13		57
Sears Canada	—		16		(1		)	5			—		20
Total 2012 costs	$	35	$	31	$	67		$	7		$	22	$	162
Kmart	$	46	$	14	$	1		$	15		$	5	$	81
Sears Domestic	84		41		4			31			85		245
Sears Canada	—		18		—			—			—		18
Total 2011 costs	$	130	$	73	$	5		$	46		$	90	$	344
Kmart	$	6	$	1	$	4		$	2		$	—	$	13
Sears Domestic	6		2		2			3			10		23
Total 2010 costs	$	12	$	3	$	6		$	5		$	10	$	36

_____________

⁽¹⁾  Recorded within Cost of sales, buying and occupancy on the Consolidated Statements of Operations.

⁽²⁾  Recorded within Selling and administrative on the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  2011 costs include $82 million recorded within impairment charges and $8 million recorded within Depreciation and amortization on the Consolidated Statements of Operations. 2012 and 2010 costs are recorded within Depreciation and amortization on the Consolidated Statements of Operations.

In accordance with accounting standards governing costs associated with exit or disposal activities, expenses related to future rent payments for which we no longer intend to receive any economic benefit are accrued for when we cease to use the leased space and have been reduced for any income that we believe can be realized through sub-leasing the leased space. We do not expect additional charges recorded during 2013 related to stores we made the decision to close in 2012 to be material.

Store closing cost accruals of $193 million and $159 million at February 2, 2013 and January 28, 2012, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at January 29, 2011	$	2		$	68		$	2		$	72
Store closing costs	73			5			46			124
Payments/utilizations	(16		)	(9		)	(12		)	(37		)
Balance at January 28, 2012	59			64			36			159
Store closing costs	31			86			7			124
Store closing capital lease obligations	—			9			—			9
Payments/utilizations	(49		)	(21		)	(29		)	(99		)
Balance at February 2, 2013	$	41		$	138		$	14		$	193

Goodwill

See Note 12 for further information regarding our goodwill impairment charges recorded in 2012 and 2011.

Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, we performed an impairment test of certain of our long-lived assets (principally the value of buildings and other fixed assets associated with our stores) due to events and changes in circumstances during 2012 and 2011 that indicated an impairment might have occurred. The impairment review was triggered by the non-cash charges related to impairment of goodwill balances and establishing a valuation allowance against certain deferred income tax assets as well as a decline in operating performance at certain locations. As a result of this impairment testing, the Company recorded impairment charges of $35 million and $16 million during 2012 and 2011, respectively. The impairment charges recorded during 2012 included a $10 million charge at Kmart and a $25 million charge at Sears Domestic. The impairment charges recorded during 2011 included a $10 million charge at Kmart and a $6 million charge at Sears Domestic.

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LEGAL PROCEEDINGS

12 Months Ended

Feb. 02, 2013

Commitments and Contingencies Disclosure [Abstract]

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

We are a defendant in several lawsuits containing class or collective action allegations in which the plaintiffs are current and former hourly and salaried associates who allege violations of various wage and hour laws, rules and regulations pertaining to alleged misclassification of certain of our employees and the failure to pay overtime and/or the failure to pay for missed meal and rest periods. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We also are a defendant in several putative or certified class action lawsuits in California relating to alleged failure to comply with California laws pertaining to certain operational, marketing and payroll practices. The California laws alleged to have been violated in each of these lawsuits provide the potential for significant statutory penalties. At this time, the Company is not able to either predict the outcome of these lawsuits or reasonably estimate a potential range of loss with respect to the lawsuits.

We are subject to various other legal and governmental proceedings and investigations, including some involving the practices and procedures in our more highly regulated businesses and many involving litigation incidental to those and other businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations and other consumer-based, regulatory or qui tam claims, each of which may seek compensatory, punitive or treble damage claims (potentially in large amounts), as well as other types of relief.

In accordance with accounting standards regarding loss contingencies, we accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. We do not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

Because litigation outcomes are inherently unpredictable, our evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of our financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then we disclose the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material effect on our earnings in any given reporting period. However, in the opinion of our management, after consulting with legal counsel, and taking into account insurance and reserves, the ultimate liability related to current outstanding matters is not expected to have a material effect on our financial position, liquidity or capital resources.

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Condensed Consolidating Statement of Operations (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended								12 Months Ended
	Feb. 02, 2013	Oct. 27, 2012	Jul. 28, 2012	Apr. 28, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 30, 2011	Apr. 30, 2011	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	$ 12,260	$ 8,857	$ 9,467	$ 9,270	$ 12,484	$ 9,405	$ 10,138	$ 9,540	$ 39,854	$ 41,567	$ 42,664
Cost of sales, buying and occupancy	9,097	6,604	6,936	6,703	9,422	7,011	7,537	6,996	29,340	30,966	31,000
Selling and administrative	3,282	2,496	2,437	2,445	2,921	2,635	2,601	2,507	10,660	10,664	10,425
Depreciation and amortization									830	853	869
Impairment charges									330	649	0
Gain on sales of assets									(468)	(64)	(67)
Total costs and expenses									40,692	43,068	42,227
Operating income (loss)									(838)	(1,501)	437
Interest expense									(267)	(289)	(293)
Interest and investment income									94	41	36
Other income (loss)									1	(2)	(14)
Income (loss) from continuing operations before income taxes									(1,010)	(1,751)	166
Income tax expense (benefit)									(44)	(1,369)	(27)
Equity in earnings in subsidiaries									0	0	0
Income (loss) from continuing operations									(1,054)	(3,120)	139
Loss from discontinued operations, net of tax									0	(27)	11
Net income (loss)									(1,054)	(3,147)	150
Loss attributable to noncontrolling interests									124	7	(17)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS									(930)	(3,140)	133
Parent
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services									0	0	0
Cost of sales, buying and occupancy									0	0	0
Selling and administrative									2	2	2
Depreciation and amortization									0	0	0
Impairment charges									0	0
Gain on sales of assets									0	0	0
Total costs and expenses									2	2	2
Operating income (loss)									(2)	(2)	(2)
Interest expense									(227)	(224)	(166)
Interest and investment income									0	0	0
Other income (loss)									0	0	1
Income (loss) from continuing operations before income taxes									(229)	(226)	(167)
Income tax expense (benefit)									89	43	58
Equity in earnings in subsidiaries									(914)	(2,964)	259
Income (loss) from continuing operations										(3,147)	150
Loss from discontinued operations, net of tax										0	0
Net income (loss)									(1,054)	(3,147)	150
Loss attributable to noncontrolling interests									0	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS									(1,054)	(3,147)	150
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services									35,417	36,714	37,587
Cost of sales, buying and occupancy									26,531	27,850	27,877
Selling and administrative									10,054	9,926	9,794
Depreciation and amortization									634	680	694
Impairment charges									35	649
Gain on sales of assets									(298)	(63)	(52)
Total costs and expenses									36,956	39,042	38,313
Operating income (loss)									(1,539)	(2,328)	(726)
Interest expense									(391)	(388)	(429)
Interest and investment income									43	41	38
Other income (loss)									0	0	1
Income (loss) from continuing operations before income taxes									(1,887)	(2,675)	(1,116)
Income tax expense (benefit)									527	(785)	422
Equity in earnings in subsidiaries									65	151	567
Income (loss) from continuing operations										(3,309)	(127)
Loss from discontinued operations, net of tax										0	0
Net income (loss)									(1,295)	(3,309)	(127)
Loss attributable to noncontrolling interests									0	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS									(1,295)	(3,309)	(127)
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services									8,032	8,354	8,573
Cost of sales, buying and occupancy									4,619	4,862	4,830
Selling and administrative									2,389	2,491	2,418
Depreciation and amortization									196	173	175
Impairment charges									295	0
Gain on sales of assets									(170)	(1)	(15)
Total costs and expenses									7,329	7,525	7,408
Operating income (loss)									703	829	1,165
Interest expense									(107)	(112)	(113)
Interest and investment income									509	435	413
Other income (loss)									1	(2)	(16)
Income (loss) from continuing operations before income taxes									1,106	1,150	1,449
Income tax expense (benefit)									(660)	(627)	(507)
Equity in earnings in subsidiaries									0	0
Income (loss) from continuing operations										523	942
Loss from discontinued operations, net of tax										(27)	11
Net income (loss)									446	496	953
Loss attributable to noncontrolling interests									0	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS									446	496	953
Eliminations
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services									(3,595)	(3,501)	(3,496)
Cost of sales, buying and occupancy									(1,810)	(1,746)	(1,707)
Selling and administrative									(1,785)	(1,755)	(1,789)
Depreciation and amortization									0	0	0
Impairment charges									0	0
Gain on sales of assets									0	0	0
Total costs and expenses									(3,595)	(3,501)	(3,496)
Operating income (loss)									0	0	0
Interest expense									458	435	415
Interest and investment income									(458)	(435)	(415)
Other income (loss)									0	0	0
Income (loss) from continuing operations before income taxes									0	0	0
Income tax expense (benefit)									0	0	0
Equity in earnings in subsidiaries									849	2,813	(826)
Income (loss) from continuing operations										2,813	(826)
Loss from discontinued operations, net of tax										0	0
Net income (loss)									849	2,813	(826)
Loss attributable to noncontrolling interests									124	7	(17)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS									$ 973	$ 2,820	$ (843)

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SEARS CANADA (Detail) In Millions, except Per Share data, unless otherwise specified	12 Months Ended			1 Months Ended		3 Months Ended					9 Months Ended	12 Months Ended
	Feb. 02, 2013 USD ($)	Jan. 28, 2012 USD ($)	Jan. 29, 2011 USD ($)	Sep. 10, 2010 Sears Canada USD ($)	Sep. 10, 2010 Sears Canada CAD	Feb. 02, 2013 Sears Canada USD ($)	Jul. 30, 2011 Sears Canada	Oct. 30, 2010 Sears Canada USD ($)	Jul. 31, 2010 Sears Canada USD ($)	May 01, 2010 Sears Canada USD ($)	Oct. 27, 2012 Sears Canada	Feb. 02, 2013 Sears Canada USD ($)	Jan. 28, 2012 Sears Canada USD ($)	Jan. 29, 2011 Sears Canada USD ($)	Dec. 12, 2012 Sears Canada USD ($)	Dec. 12, 2012 Sears Canada CAD	Jan. 29, 2011 Sears Canada CAD	May 18, 2010 Sears Canada USD ($)	May 18, 2010 Sears Canada CAD	Jul. 30, 2011 Sears Canada Maximum
Business Acquisition [Line Items]
Percentage of issued and outstanding common shares to be purchased for cancellation																				5.00%
Number of common shares to be purchased for cancellation							5.3
Share repurchase program expiration date							May 24, 2012
Common shares acquired and cancelled												0.9	2.7	2.2
Value of common shares acquired and cancelled												$ 10	$ 43	$ 43
Shares of beneficial interest						52						52	97
Percentage of ownership interest						51.00%						51.00%	95.00%
Percentage of ownership before transaction											96.00%
Shares of affiliate distributed to shareholders											45
Expected percentage of ownership interest after spin-off											51.00%
Number of shares of acquired common stock										19
Purchase of Sears Canada shares	10	43	603							560
Dividends payable, amount per share					3.50											1			3.50
Dividends payable				356	377									708	102	102	754	352	377
Cash dividends paid						52		321	318					639
Sears Canada dividends paid to minority shareholders	$ 50	$ 0	$ 69			$ 50		$ 35	$ 34					$ 69
Dividends payable, date to be paid				Sep. 24, 2010	Sep. 24, 2010
Dividends payable, date of record				Sep. 22, 2010	Sep. 22, 2010

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STORE CLOSING CHARGES, SEVERANCE COSTS AND IMPAIRMENTS (Tables)

12 Months Ended

Feb. 02, 2013

Restructuring and Related Activities [Abstract]

Store Closing Costs Recorded

Store closing costs recorded during 2012, 2011 and 2010 were as follows:

millions	Markdowns(1)		Severance Costs(2)		Lease Termination Costs(2)			Other Charges(2)			Impairment and Accelerated Depreciation(3)		Total Store Closing Costs
Kmart	$	21	$	13	$	34		$	8		$	9	$	85
Sears Domestic	14		2		34			(6		)	13		57
Sears Canada	—		16		(1		)	5			—		20
Total 2012 costs	$	35	$	31	$	67		$	7		$	22	$	162
Kmart	$	46	$	14	$	1		$	15		$	5	$	81
Sears Domestic	84		41		4			31			85		245
Sears Canada	—		18		—			—			—		18
Total 2011 costs	$	130	$	73	$	5		$	46		$	90	$	344
Kmart	$	6	$	1	$	4		$	2		$	—	$	13
Sears Domestic	6		2		2			3			10		23
Total 2010 costs	$	12	$	3	$	6		$	5		$	10	$	36

_____________

⁽¹⁾  Recorded within Cost of sales, buying and occupancy on the Consolidated Statements of Operations.

⁽²⁾  Recorded within Selling and administrative on the Consolidated Statements of Operations. Lease termination costs are net of estimated sublease income, and include the reversal of closed store reserves for which the lease agreement has been terminated and the reversal of deferred rent balances related to closed stores.

⁽³⁾  2011 costs include $82 million recorded within impairment charges and $8 million recorded within Depreciation and amortization on the Consolidated Statements of Operations. 2012 and 2010 costs are recorded within Depreciation and amortization on the Consolidated Statements of Operations.

Store Closing Cost Accruals

Store closing cost accruals of $193 million and $159 million at February 2, 2013 and January 28, 2012, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at January 29, 2011	$	2		$	68		$	2		$	72
Store closing costs	73			5			46			124
Payments/utilizations	(16		)	(9		)	(12		)	(37		)
Balance at January 28, 2012	59			64			36			159
Store closing costs	31			86			7			124
Store closing capital lease obligations	—			9			—			9
Payments/utilizations	(49		)	(21		)	(29		)	(99		)
Balance at February 2, 2013	$	41		$	138		$	14		$	193

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Feb. 02, 2013	Jan. 28, 2012
Preferred stock, shares authorized	20	20
Preferred atock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500	500
Common stock, shares, outstanding	106	106
Unsecured commercial paper	$ 345	$ 337
SRAC Issued
Unsecured commercial paper	202	230
ESL Investments, Inc. | SRAC Issued
Unsecured commercial paper	285	250
Senior secured	95	95
Subsidiary notes	$ 3	$ 14

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LEASES Minimum Lease Obligations (Details) (USD $) In Millions, unless otherwise specified	Feb. 02, 2013		Jan. 28, 2012	Jan. 29, 2011
Leases Disclosure [Line Items]
Weighted average interest rate	7.20%
Capital
2013	$ 113
2014	107
2015	94
2016	74
2017	51
Later years	204
Total minimum lease payments	643	[1]
Estimated executory costs	(56)
Interest at a weighted average rate of 7.2%	(154)
Capital lease obligations	433		433	455
Less current portion of capital lease obligations	(69)
Long-term capital lease obligations	364
Operating
2013	720
2014	621
2015	527
2016	422
2017	317
Later years	1,928
Total minimum lease payments	4,535	[1]
Less-minimum sublease income	(192)
Net minimum lease payments	4,343
Sears Canada
Operating
Total minimum lease payments	$ 433

[1] (1) Sears Canada: Total operating minimum lease payments of $433 million.

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SEARS CANADA

12 Months Ended

Feb. 02, 2013

Noncontrolling Interest [Abstract]

SEARS CANADA

SEARS CANADA

Sears Canada Share Repurchases

During the second quarter of 2011, Sears Canada renewed its Normal Course Issuer Bid with the Toronto Stock Exchange that permits it to purchase for cancellation up to 5% of its issued and outstanding common shares, representing approximately 5.3 million common shares. The purchase authorization expired on May 24, 2012. Prior to the expiration, Sears Canada purchased and canceled approximately 0.9 million common shares for $10 million, approximately 2.7 million common shares for $43 million and approximately 2.2 million common shares for $43 million during 2012, 2011 and 2010, respectively.

Sears Holdings Ownership of Sears Canada

At February 2, 2013 and January 28, 2012, Sears Holdings was the beneficial holder of approximately 52 million, or 51% and 97 million, or 95%, respectively, of the common shares of Sears Canada.

Partial Spin-Off

On November 13, 2012, we completed a partial spin-off (the “spin-off”) of our interest in Sears Canada. Prior to the spin-off, Holdings beneficially owned approximately 96% of the issued and outstanding common shares of Sears Canada. In connection with the spin-off, we distributed approximately 45 million common shares of Sears Canada held by Holdings on a pro rata basis to holders of Holdings' common stock. Following the spin-off, Holdings was the beneficial holder of approximately 51% of the issued and outstanding common shares of Sears Canada, and as such, Holdings has maintained control of Sears Canada and will continue to consolidate the results of Sears Canada. We accounted for the spin-off as an equity transaction in accordance with accounting standards applicable to noncontrolling interests. Accordingly, we reclassified a portion of our ownership interest in Sears Canada and accumulated other comprehensive loss to noncontrolling interest in the Consolidated Statement of Equity for the period ended February 2, 2013.

Acquisition of Noncontrolling Interest

During the first quarter of 2010, we acquired approximately 19 million additional common shares of Sears Canada. We paid a total of $560 million for the additional shares and accounted for the acquisition of additional interest in Sears Canada as an equity transaction in accordance with accounting standards applicable to noncontrolling interests. Accordingly, we reclassified an accumulated other comprehensive loss from noncontrolling interest to controlling interest in the Consolidated Statement of Equity for the period ended January 29, 2011.

Dividends

On December 12, 2012, Sears Canada announced that its Board of Directors declared a cash dividend of $1 Canadian per common share, or approximately $102 million Canadian ($102 million U.S.) which was paid on December 31, 2012 to shareholders of record at the close of business on December 24, 2012. Accordingly, the Company received dividends of $52 million and minority shareholders in Sears Canada received dividends of $50 million during the fourth quarter of 2012.

On May 18, 2010, Sears Canada announced that its Board of Directors declared a cash dividend of $3.50 Canadian per common share, or approximately $377 million Canadian ($352 million U.S.), which was paid on June 4, 2010 to shareholders of record at the close of business on May 31, 2010. Accordingly, the Company received dividends of $318 million and minority shareholders in Sears Canada received dividends of $34 million during the second quarter of 2010.

On September 10, 2010, Sears Canada announced that its Board of Directors declared an additional cash dividend of $3.50 Canadian per common share, or approximately $377 million Canadian ($356 million U.S.), which was paid on September 24, 2010 to shareholders of record at the close of business on September 22, 2010. Accordingly, the Company received dividends of $321 million and minority shareholders in Sears Canada received dividends of $35 million during the third quarter of 2010.

Sears Canada declared and paid total dividends of $754 million Canadian ($708 million U.S.) during 2010, of which the Company received $639 million and minority shareholders received $69 million.

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BORROWINGS (Wholly owned Insurance Subsidiary and Intercompany Securities) (Details) (USD $) In Billions, unless otherwise specified	May 31, 2006	Nov. 30, 2003	Nov. 30, 2003 Subsidiaries Store	Feb. 02, 2013 Securitized trademark rights	Jan. 28, 2012 Securitized trademark rights	Feb. 02, 2013 Securitized real estate assets	Jan. 28, 2012 Securitized real estate assets
Debt Instrument [Line Items]
Number of stores			125
Mortgage-backed securities owned		$ 1.3
Asset-backed securities issued	1.8
Net book value of the securitized assets				$ 1.0	$ 1.0	$ 0.8	$ 0

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GOODWILL AND INTANGIBLE ASSETS Amortization Expense (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 56	$ 56	$ 60
Estimated Amortization
2013	29
2014	22
2015	10
2016	8
2017	7
Thereafter	$ 102

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BENEFIT PLANS Rollforward of Level 3 Assets (Details) (USD $) In Millions, unless otherwise specified					12 Months Ended				12 Months Ended				12 Months Ended			12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended
	Jan. 28, 2012	Jan. 29, 2011	Feb. 02, 2013 Domestic Defined Benefit Plan	Jan. 28, 2012 Domestic Defined Benefit Plan	Feb. 02, 2013 Domestic Defined Benefit Plan Level 3	Jan. 28, 2012 Domestic Defined Benefit Plan Level 3	Feb. 02, 2013 Domestic Defined Benefit Plan Corporate bonds and notes	Jan. 28, 2012 Domestic Defined Benefit Plan Corporate bonds and notes	Feb. 02, 2013 Domestic Defined Benefit Plan Corporate bonds and notes Level 3	Jan. 28, 2012 Domestic Defined Benefit Plan Corporate bonds and notes Level 3	Feb. 02, 2013 Domestic Defined Benefit Plan Mortgage-backed and asset-backed	Jan. 28, 2012 Domestic Defined Benefit Plan Mortgage-backed and asset-backed	Feb. 02, 2013 Domestic Defined Benefit Plan Mortgage-backed and asset-backed Level 3	Jan. 28, 2012 Domestic Defined Benefit Plan Mortgage-backed and asset-backed Level 3	Jan. 28, 2012 Domestic Defined Benefit Plan Venture and partnerships	Feb. 02, 2013 Domestic Defined Benefit Plan Venture and partnerships Level 3	Jan. 28, 2012 Domestic Defined Benefit Plan Venture and partnerships Level 3	Feb. 02, 2013 Sears Canada Defined Benefit Plan	Jan. 28, 2012 Sears Canada Defined Benefit Plan	Feb. 02, 2013 Sears Canada Defined Benefit Plan Level 3	Jan. 28, 2012 Sears Canada Defined Benefit Plan Level 3	Feb. 02, 2013 Sears Canada Defined Benefit Plan Corporate bonds and notes	Jan. 28, 2012 Sears Canada Defined Benefit Plan Corporate bonds and notes	Feb. 02, 2013 Sears Canada Defined Benefit Plan Corporate bonds and notes Level 3	Jan. 28, 2012 Sears Canada Defined Benefit Plan Corporate bonds and notes Level 3	Feb. 02, 2013 Sears Canada Defined Benefit Plan Mortgage-backed and asset-backed	Jan. 28, 2012 Sears Canada Defined Benefit Plan Mortgage-backed and asset-backed	Feb. 02, 2013 Sears Canada Defined Benefit Plan Mortgage-backed and asset-backed Level 3	Jan. 28, 2012 Sears Canada Defined Benefit Plan Mortgage-backed and asset-backed Level 3	Feb. 02, 2013 Sears Canada Defined Benefit Plan Hedge and pooled equity funds	Jan. 28, 2012 Sears Canada Defined Benefit Plan Hedge and pooled equity funds	Feb. 02, 2013 Sears Canada Defined Benefit Plan Hedge and pooled equity funds Level 3	Jan. 28, 2012 Sears Canada Defined Benefit Plan Hedge and pooled equity funds Level 3
Change in Plan Assets at Fair Value
Beginning of year balance	$ 0	$ 0	$ 3,221	$ 4,051	$ 17	$ 21	$ 1,840	$ 2,186	$ 2	$ 0	$ 6	$ 9	$ 0	$ 1	$ 15	$ 15	$ 20	$ 1,317	$ 1,296	$ 80	$ 184	$ 613	$ 560	$ 0	$ 2	$ 66	$ 73	$ 64	$ 69	$ 3	$ 16	$ 16	$ 113
Net realized and unrealized gains/ (losses)					(1)	(3)			(2)	0			0	0		1	(3)			5	2			0	0			5	5			0	(3)
Purchases					0	2			0	2			0	0		0	0			1	0			1	0			0	0			0	0
Sales and settlements					(4)	(3)			0	0			0	(1)		(4)	(2)			(23)	(104)			0	0			(10)	(10)			(13)	(94)
Net Transfers Into/(Out of) Level 3					0	0			0	0			0	0		0	0			0	(2)			0	(2)			0	0			0	0
Balance at measurement date	$ 0	$ 0	$ 3,221	$ 4,051	$ 12	$ 17	$ 1,840	$ 2,186	$ 0	$ 2	$ 6	$ 9	$ 0	$ 0	$ 15	$ 12	$ 15	$ 1,317	$ 1,296	$ 63	$ 80	$ 613	$ 560	$ 1	$ 0	$ 66	$ 73	$ 59	$ 64	$ 3	$ 16	$ 3	$ 16

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QUARTERLY FINANCIAL INFORMATION (Notes)

12 Months Ended

Feb. 02, 2013

Quarterly Financial Information Disclosure [Abstract]

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	2012
millions, except per share data	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	9,270	$	9,467		$	8,857		$	12,260
Cost of sales, buying and occupancy	6,703		6,936			6,604			9,097
Selling and administrative	2,445		2,437			2,496			3,282
Net income (loss) from continuing operations attributable to Holdings' shareholders	189		(132		)	(498		)	(489		)
Basic net income (loss) per share from continuing operations attributable to Holdings' shareholders	1.78		(1.25		)	(4.70		)	(4.61		)
Diluted net income (loss) per share from continuing operations attributable to Holdings' shareholders	1.78		(1.25		)	(4.70		)	(4.61		)

	2011
millions, except per share data	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	9,540		$	10,138		$	9,405		$	12,484
Cost of sales, buying and occupancy	6,996			7,537			7,011			9,422
Selling and administrative	2,507			2,601			2,635			2,921
Net loss from continuing operations attributable to Holdings' shareholders	(165		)	(152		)	(410		)	(2,386		)
Basic net loss per share from continuing operations attributable to Holdings' shareholders	(1.53		)	(1.42		)	(3.85		)	(22.47		)
Diluted net loss per share from continuing operations attributable to Holdings' shareholders	(1.53		)	(1.42		)	(3.85		)	(22.47		)

Earnings (loss) per share amounts for each quarter are required to be computed independently and may not equal the amount computed for the total year.

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EQUITY Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Feb. 02, 2013	Jan. 28, 2012	Jan. 29, 2011
Other comprehensive income (loss) Pension and postretirement adjustments, before tax amount
Experience gain (loss), before tax amount	$ (564)	$ (872)	$ (116)
Less: cost of settlements, before tax amount	454
Less: amortization of prior service cost included in net period pension cost, before tax amount	189	72	87
Pension and postretirement adjustments, before tax amount	(79)	800	29
Deferred gain (loss) on derivatives, before tax amount	5	(6)	(15)
Currency translation adjustments, before tax amount	(8)	(57)	115
Total other comprehensive income, before tax amount	76	(863)	71
Other comprehensive income (loss) Pension and postretirement adjustments, tax(expense) benefit
Experience gain (loss), tax (expense) benefit	1	14	51
Less: cost of settlements, tax (expense) benefit	0
Less: amortization of prior service cost included in net period pension cost, tax (expense) benefit	(6)	(3)	(34)
Pension and postretirement adjustments, tax (expense) benefit	(5)	11	17
Deferred gain (loss) on derivatives, tax (expense) benefit	0	0	6
Currency translation adjustments, tax (expense) benefit	13	19	(22)
Total other comprehensive income, tax (expense) benefit	8	30	1
Other comprehensive income (loss) Pension and postretirement adjustments, net of tax amount
Experience gain (loss), net of tax amount	(563)	(858)	(65)
Less: cost of settlements, net of tax amount	454
Less: amortization of prior service cost included in net period pension cost, net of tax amount	183	69	53
Pension and postretirement adjustments, net of tax amount	74	(789)	(12)
Deferred gain (loss) on derivatives, net of tax amount	5	(6)	(9)
Currency translation adjustments, net of tax	5	(38)	93
Total other comprehensive income (loss)	$ 84	$ (833)	$ 72

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EQUITY (Tables)

12 Months Ended

Feb. 02, 2013

Stockholders' Equity Note [Abstract]

Changes in Restricted Stock Awards

Changes in restricted stock awards for 2012, 2011, and 2010 were as follows:

	2012				2011				2010
(Shares in thousands)	Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant		Shares		Weighted- Average Fair Value on Date of Grant
Beginning of year balance	496		$	65.02	313		$	74.09	279		$	80.73
Granted	175		49.20		386		59.60		176		83.09
Vested	(172	)	60.89		(72	)	81.55		(110	)	103.19
Forfeited	(75	)	78.59		(131	)	61.62		(32	)	81.38
End of year balance	424		$	57.72	496		$	65.02	313		$	74.09

Aggregate Fair Value of Shares Granted Based on Weighted Average Fair Value at Date of Grant

millions	2012		2011		2010
Aggregate fair value of shares granted based on weighted average fair value at date of grant	$	9	$	23	$	15
Aggregate fair value of shares vesting during period	10		5		10
Aggregate fair value of shares forfeited during period	4		8		2

Components of Accumulated Other Comprehensive Loss

The following table displays the components of accumulated other comprehensive loss:

millions	February 2, 2013			January 28, 2012			January 29, 2011
Pension and postretirement adjustments (net of tax of $(443), $(492) and $(480), respectively)	$	(1,408	)	$	(1,575	)	$	(783	)
Cumulative unrealized derivative gain (loss) (net of tax of $0, $0 and $0, respectively)	—			(5		)	1
Currency translation adjustments (net of tax of $(39), $(26) and $(7), respectively)	(51		)	(29		)	3
Accumulated other comprehensive loss	$	(1,459	)	$	(1,609	)	$	(779	)

Income Tax Expense Allocated to Each Component of Other Comprehensive Income (Loss)

Income tax expense allocated to each component of other comprehensive income (loss) was as follows:

	2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain (loss)	$	(564	)	$	1		$	(563	)
Less: cost of settlements	454			—			454
Less: amortization of prior service cost included in net period pension cost	189			(6		)	183
Pension and postretirement adjustments, net of tax	79			(5		)	74
Deferred gain on derivatives	5			—			5
Currency translation adjustments	(8		)	13			5
Total other comprehensive income	$	76		$	8		$	84

	2011
millions	Before Tax Amount			Tax Benefit			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments
Experience gain (loss)	$	(872	)	$	14		$	(858	)
Less: amortization of prior service cost included in net period pension cost	72			(3		)	69
Pension and postretirement adjustments, net of tax	(800		)	11			(789		)
Deferred loss on derivatives	(6		)	—			(6		)
Currency translation adjustments	(57		)	19			(38		)
Total other comprehensive income (loss)	$	(863	)	$	30		$	(833	)

	2010
millions	Before Tax Amount			Tax (Expense) or Benefit			Net of Tax Amount
Other comprehensive income
Pension and postretirement adjustments
Experience gain (loss)	$	(116	)	$	51		$	(65	)
Less: amortization of prior service cost included in net period pension cost	87			(34		)	53
Pension and postretirement adjustments, net of tax	(29		)	17			(12		)
Deferred gain (loss) on derivatives	(15		)	6			(9		)
Currency translation adjustments	115			(22		)	93
Total other comprehensive income	$	71		$	1		$	72

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GOODWILL AND INTANGIBLE ASSETS (Notes)

12 Months Ended

Feb. 02, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

The following summarizes our intangible assets at February 2, 2013 and January 28, 2012, respectively, the amortization expenses recorded for the years then ended, as well as our estimated amortization expense for the next five years and thereafter.

		February 2, 2013				January 28, 2012
millions	Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets:
Favorable lease rights	29	$	293	$	148	$	360	$	194
Contractual arrangements and customer lists	9	218		188		224		170
Trade names	7	74		71		74		60
		585		407		658		424
Non-amortizing intangible assets:
Trade names		2,703		—		2,703		—
Total		$	3,288	$	407	$	3,361	$	424

Annual Amortization Expense
2012	$	56
2011	56
2010	60

Estimated Amortization
2013	$	29
2014	22
2015	10
2016	8
2017	7
Thereafter	102

Goodwill is the excess of the purchase price over the fair value of the net assets acquired in business combinations accounted for under the purchase method. We recorded $1.7 billion in goodwill in connection with the Merger. We recorded $12 million in connection with our acquisition of an additional 3% interest in Sears Canada during 2008.

Changes in the carrying amount of goodwill by segment during years 2011 and 2012 were as follows:

millions	Sears Domestic			Sears Canada			Total
Balance, January 29, 2011:
Goodwill	$	1,097		$	295		$	1,392
2011 activity:
Impairment charges	(551		)	—			(551		)
Balance, January 28, 2012	546			295			841
2012 activity:
Separation of Sears Hometown and Outlet Stores, Inc.	(167		)	—			(167		)
Impairment charges	—			(295		)	(295		)
Balance, February 2, 2013	$	379		$	—		$	379

In accordance with accounting standards for goodwill and other intangible assets, goodwill is not amortized but requires testing for potential impairment, at a minimum on an annual basis, or when indications of potential impairment exist. The impairment test for goodwill utilizes a fair value approach. The impairment test for identifiable intangible assets not subject to amortization is also performed annually or when impairment indications exist, and consist of a comparison of the fair value of the intangible asset with its carrying amount. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate other long-lived assets. Our annual impairment analysis is performed at the last day of our November accounting period each year.

We perform our annual goodwill and intangible impairment test required under accounting standards at the last day of our November accounting period each year, or when an indication of potential impairment exists. The goodwill impairment test involves a two-step process as described in the “Summary of Significant Accounting Policies” in Note 1. The first step is a comparison of each reporting unit's fair value to its carrying value. If the carrying value of the reporting unit is higher than its fair value, there is an indication that impairment may exist and the second step must be performed to measure the amount of impairment loss.

After performing the first step of the process, we determined goodwill recorded at reporting units within the Sears Canada segment in 2012 and the Sears Domestic segment in 2011 were potentially impaired. The impairment charge was primarily driven by the combination of lower sales and continued margin pressure coupled with expense increases which led to a decline in our operating profit. After performing the second step of the process, we determined that the total amount of goodwill recorded at these reporting units was impaired and recorded charges of $295 million and $551 million in 2012 and 2011, respectively.

A significant amount of judgment is involved in determining if an indicator of impairment has occurred at a date other than the annual impairment test date. Such indicators may include, among others: a significant decline in our stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; the testing for recoverability of a significant asset group within a reporting unit; and slower growth rates.