10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 3, 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

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 (or for such shorter period that the registrant was required to file such reports), 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 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

As of August 16, 2013, the registrant had 106,469,847 common shares, $0.01 par value, outstanding.

SEARS HOLDINGS CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 26 Weeks Ended August 3, 2013 and July 28, 2012	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the 13 and 26 Weeks Ended August 3, 2013 and July 28, 2012	2
	Condensed Consolidated Balance Sheets (Unaudited) at August 3, 2013, July 28, 2012 and February 2, 2013	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the 26 Weeks Ended August 3, 2013 and July 28, 2012	4
	Condensed Consolidated Statements of Equity (Unaudited) for the 26 Weeks Ended August 3, 2013 and July 28, 2012	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	60
Item 4.	Controls and Procedures	61
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 4.	Mine Safety Disclosures	62
Item 6.	Exhibits	63

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

	13 Weeks Ended						26 Weeks Ended
millions, except per share data	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
REVENUES
Merchandise sales and services	$	8,871		$	9,467		$	17,323		$	18,737
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,685			6,936			12,981			13,639
Selling and administrative	2,291			2,437			4,509			4,882
Depreciation and amortization	187			212			378			414
Impairment charges	—			—			8			—
Gain on sales of assets	(241		)	(15		)	(255		)	(410		)
Total costs and expenses	8,922			9,570			17,621			18,525
Operating income (loss)	(51		)	(103		)	(298		)	212
Interest expense	(59		)	(65		)	(120		)	(131		)
Interest and investment income	14			9			21			21
Other income (loss)	(1		)	1			(1		)	1
Income (loss) before income taxes	(97		)	(158		)	(398		)	103
Income tax (expense) benefit	(30		)	25			(21		)	(42		)
Net income (loss)	(127		)	(133		)	(419		)	61
(Income) loss attributable to noncontrolling interests	(67		)	1			(54		)	(4		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(194	)	$	(132	)	$	(473	)	$	57
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic earnings (loss) per share	$	(1.83	)	$	(1.25	)	$	(4.46	)	$	0.54
Diluted earnings (loss) per share	$	(1.83	)	$	(1.25	)	$	(4.46	)	$	0.54
Basic weighted average common shares outstanding	106.1			105.9			106.1			105.9
Diluted weighted average common shares outstanding	106.1			105.9			106.1			106.1

See accompanying notes.

1

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	13 Weeks Ended						26 Weeks Ended
millions	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Net income (loss)	$	(127	)	$	(133	)	$	(419	)	$	61
Other comprehensive income
Pension and postretirement adjustments, net of tax	48			46			94			92
Deferred gain on derivatives, net of tax	—			3			—			5
Currency translation adjustments, net of tax	(20		)	6			(27		)	—
Total other comprehensive income	28			55			67			97
Comprehensive income (loss)	(99		)	(78		)	(352		)	158
Comprehensive (income) loss attributable to noncontrolling interests	(61		)	1			(47		)	(5		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(160	)	$	(77	)	$	(399	)	$	153

See accompanying notes.

2

SEARS HOLDINGS CORPORATION

Condensed Consolidated Balance Sheets

	(Unaudited)
millions	August 3, 2013		July 28, 2012		February 2, 2013
ASSETS
Current assets
Cash and cash equivalents	$	671	$	730	$	609
Restricted cash	10		8		9
Accounts receivable	641		569		635
Merchandise inventories	7,708		8,653		7,558
Prepaid expenses and other current assets	470		385		454
Total current assets	9,500		10,345		9,265
Property and equipment, net	5,786		6,341		6,053
Goodwill	379		841		379
Trade names and other intangible assets	2,864		2,907		2,881
Other assets	749		749		762
TOTAL ASSETS	$	19,278	$	21,183	$	19,340
LIABILITIES
Current liabilities
Short-term borrowings(1)	$	1,756	$	1,176	$	1,094
Current portion of long-term debt and capitalized lease obligations	75		154		83
Merchandise payables	2,903		3,088		2,761
Other current liabilities	2,435		2,742		2,683
Unearned revenues	925		962		931
Other taxes	484		535		480
Short-term deferred tax liabilities	382		515		382
Total current liabilities	8,960		9,172		8,414
Long-term debt and capitalized lease obligations(2)	1,911		1,970		1,943
Pension and postretirement benefits	2,539		2,582		2,730
Other long-term liabilities	2,081		2,124		2,126
Long-term deferred tax liabilities	963		839		955
Total Liabilities	16,454		16,687		16,168
Commitments and contingencies
EQUITY
Total Equity	2,824		4,496		3,172
TOTAL LIABILITIES AND EQUITY	$	19,278	$	21,183	$	19,340

⁽¹⁾ Includes $235 million, $150 million and $285 million at August 3, 2013, July 28, 2012 and February 2, 2013, respectively, of unsecured commercial paper held by ESL and its affiliates.

⁽²⁾ Includes $95 million of senior secured notes and $3 million of subsidiary notes held by ESL and its affiliates at both August 3, 2013 and February 2, 2013. Includes $95 million of senior secured notes and $14 million of subsidiary notes held by ESL and its affiliates at July 28, 2012.

See accompanying notes.

3

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	26 Weeks Ended
millions	August 3, 2013			July 28, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(419	)	$	61
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	378			414
Impairment charges	8			—
Gain on sales of assets	(255		)	(410		)
Pension and postretirement plan contributions	(176		)	(164		)
Settlement of Canadian dollar hedges	—			6
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	12			32
Merchandise inventories	(183		)	(248		)
Merchandise payables	157			178
Income and other taxes	(12		)	14
Mark-to-market adjustments on Sears Canada foreign exchange forward contracts	(1		)	—
Other operating assets	(43		)	91
Other operating liabilities	(181		)	(46		)
Net cash used in operating activities	(715		)	(72		)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	287			456
Net increase in investments and restricted cash	(1		)	(1		)
Purchases of property and equipment	(116		)	(161		)
Net cash provided by investing activities	170			294
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	2			2
Repayments of long-term debt	(46		)	(231		)
Increase in short-term borrowings, primarily 90 days or less	662			1
Purchase of Sears Canada shares	—			(10		)
Net cash provided by (used in) financing activities	618			(238		)
Effect of exchange rate changes on cash and cash equivalents	(11		)	(1		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	62			(17		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	609			747
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	671		$	730
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	$	32		$	20
Cash interest paid	98			100
Unpaid liability to acquire equipment and software	43			50

See accompanying notes.

4

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Equity

(Unaudited)

	Equity Attributable to Holdings’ Shareholders
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 28, 2012	106		$	1	$	(5,981	)	$	10,005		$	1,865		$	(1,609	)	$	60		$	4,341
Comprehensive income
Net income	—		—		—			—			57			—			4			61
Pension and postretirement adjustments, net of tax	—		—		—			—			—			91			1			92
Deferred gain on derivatives, net of tax	—		—		—			—			—			5			—			5
Total Comprehensive Income																				158
Stock awards	—		—		10			(5		)	—			—			—			5
Purchase of Sears Canada shares	—		—		—			(3		)	—			(1		)	(6		)	(10		)
Associate stock purchase	—		—		2			—			—			—			—			2
Balance at July 28, 2012	106	—	$	1	$	(5,969	)	$	9,997		$	1,922		$	(1,514	)	$	59		$	4,496
Balance at February 2, 2013	106		$	1	$	(5,970	)	$	9,298		$	885		$	(1,459	)	$	417		$	3,172
Comprehensive loss
Net loss	—		—		—			—			(473		)	—			54			(419		)
Pension and postretirement adjustments, net of tax	—		—		—			—			—			89			5			94
Currency translation adjustments, net of tax	—		—		—			—			—			(15		)	(12		)	(27		)
Total Comprehensive Loss																				(352		)
Stock awards	—		—		3			(1		)	—			—			—			2
Associate stock purchase	—		—		2			—			—			—			—			2
Balance at August 3, 2013	106		$	1	$	(5,965	)	$	9,297		$	412		$	(1,385	)	$	464		$	2,824

See accompanying notes.

5

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – 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 2,036 full-line and specialty retail stores in the United States, operating through Kmart and Sears, and 461 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.

These interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full fiscal year. The retail business is seasonal in nature, and we generate a high proportion of our revenues and operating cash flows during the fourth quarter of our fiscal year, which includes the holiday season. These interim financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2013.

Depreciation Expense

Depreciation expense included within depreciation and amortization expense reported on the Condensed Consolidated Statements of Operations was $181 million, $361 million, $199 million and $388 million for the 13- and 26- week periods ended August 3, 2013 and July 28, 2012, respectively.

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. 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"), at the completion of the separation, was a majority shareholder of Holdings and was a majority shareholder of Sears Hometown and Outlet Stores, Inc. ("SHO") as a result of exercising subscription rights pursuant to the rights offering. Accordingly, we classified the difference between the proceeds received and 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 14. 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 the Sears Hometown and Outlet businesses through the date of the separation are presented within the consolidated operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 14 to the Condensed Consolidated Financial Statements for further information related to the agreements with SHO.

6

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

NOTE 2 – BORROWINGS

Total borrowings were as follows:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Short-term borrowings:
Unsecured commercial paper	$	247	$	235	$	345
Secured borrowings	1,509		941		749
Long-term debt, including current portion:
Notes and debentures outstanding	1,582		1,668		1,593
Capitalized lease obligations	404		456		433
Total borrowings	$	3,742	$	3,300	$	3,120

The fair value of long-term debt, excluding capitalized lease obligations, was $1.5 billion at August 3, 2013 and $1.4 billion at both July 28, 2012 and February 2, 2013. 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 4 to the Condensed Consolidated Financial Statements.

Unsecured Commercial Paper

We borrow through the commercial paper markets. AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we had outstanding commercial paper borrowings of$247 million, $235 million and $345 million, respectively. ESL held$235 million, $150 million and $285 million, respectively, of our commercial paper atAugust 3, 2013, July 28, 2012 and February 2, 2013, including$143 million, $85 million and $169 million, respectively, held by Edward S. Lampert. See Note 14 for further discussion of these borrowings.

Domestic Credit Agreement

During the first quarter of 2011, we entered into a$3.275 billionamended 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 plus2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus1.0% to 1.5%. Commitment fees are in a range of0.375% to 0.625%based on usage.

The Domestic Credit Agreement includes a$1.5 billionletter 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 billionin additional borrowing capacity if we so choose. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to$2.0 billion, of which$1.2 billionsecond lien notes were outstanding atAugust 3, 2013, providing the Company the capacity to issue up to an additional$760 millionin 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, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least15%and an exception that requires

7

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The Domestic Credit Agreement 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 than1.0to 1.0.

AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we had $1.5 billion, $941 million and $749 million, respectively, of borrowings and$680 million, $744 million and $754 million, respectively, of letters of credit outstanding under the Domestic Credit Agreement. As a result, our availability under the agreement was$1.1 billion at August 3, 2013, $1.6 billion at July 28, 2012 and $1.8 billion at February 2, 2013. 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 billionaggregate principal amount of senior secured notes (the “Notes”), which bear interest at 6 5/8% per annum and mature onOctober 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold$250 millionaggregate principal amount of Notes to the Company’s domestic pension plan in a private placement, of which approximately$110 million remains in the domestic pension plan. 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 our domestic credit facility 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 to101%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, plus50basis 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 afive-year,$800 millionCanadian 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 account and credit card receivables, subject to certain limitations. AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we hadnoborrowings outstanding under the Sears Canada Facility.Availability under this agreement was approximately$530 million ($551 millionCanadian),$542 million ($545 millionCanadian) and$503 million ($502 millionCanadian), respectively, atAugust 3, 2013, July 28, 2012 and February 2, 2013. The current availability may be reduced by reserves currently estimated by the Company to be approximately$262 millionwhich 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 potential additional reserve amount may increase or decrease in the future based on estimated net pension liabilities.

8

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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 August 3, 2013, July 28, 2012 and February 2, 2013, 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 $0.7 billion at August 3, 2013, and approximately $0.8 billion at both July 28, 2012 and February 2, 2013.

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 3 – DERIVATIVE FINANCIAL INSTRUMENTS

We primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market, and do not use derivative financial instruments for trading or speculative purposes. Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars.

During the second quarter of 2013, Sears Canada entered into $165 million notional amount of foreign exchange forward contracts. These forward contracts are used to reduce the foreign exchange risk with respect to U.S. dollar denominated assets and liabilities and purchases of goods or services.

Sears Canada has merchandise purchase contracts denominated in U.S. currency. The merchandise purchase contracts are considered embedded derivatives under relevant accounting rules.

We record mark-to-market adjustments for the fair value of forward contracts and embedded derivatives at the end of each period. 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 foreign currency exchange rates by entering into foreign exchange forward contracts. Since the Company's functional currency is the U.S. dollar, we are not directly exposed

9

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

to the risk of exchange rate changes due to Sears Canada's contracts, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk.

NOTE 4 – 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 Condensed 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 2 to the Condensed Consolidated Financial Statements. The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Condensed Consolidated Balance Sheets at fair value at August 3, 2013, July 28, 2012 and February 2, 2013:

millions	Total Fair Value Amounts at August 3, 2013			Level 1		Level 2			Level 3
Cash equivalents(1)	$	211		$	211	$	—		$	—
Restricted cash(2)	10			10		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(1		)	—		(1		)	—
Total	$	221		$	221	$	—		$	—

millions	Total Fair Value Amounts at July 28, 2012		Level 1		Level 2		Level 3
Cash equivalents(1)	$	274	$	274	$	—	$	—
Restricted cash(2)	8		8		—		—
Total	$	282	$	282	$	—	$	—

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

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

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

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

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

10

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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.

NOTE 5 – SEARS CANADA

Sears Holdings Ownership of Sears Canada

At both August 3, 2013 and February 2, 2013, Sears Holdings was the beneficial holder of approximately 52 million, or 51%, of the common shares of Sears Canada. At July 28, 2012, Sears Holdings was the beneficial holder of approximately 97 million, or 96%, 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.

Sears Canada Share Repurchases

During the second quarter of 2013, 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 5.1 million common shares. The purchase authorization expires on May 23, 2014 or on such earlier date as Sears Canada may complete its purchases pursuant to the Normal Course Issuer bid. There were no share purchases during the 13- and 26-week periods ended August 3, 2013. As part of a Normal Course Issuer Bid in place for the period from May 25, 2011 to May 24, 2012, and canceled, Sears Canada purchased and canceled approximately 0.7 million common shares for $7 million and approximately 0.9 million common shares for $10 million during the 13- and 26-week periods ended July 28, 2012, respectively.

NOTE 6 – STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

Store Closing Costs and Severance

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. During the second quarter of 2013 we closed 16 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close. During the first half of 2013, we closed 27 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $1 million for 4 of these stores at Kmart.

During the second quarter of 2012, we closed 29 stores in our Kmart segment and 41 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $8 million for 22 of these stores at Kmart and $8 million for 29 of these stores at Sears Domestic. During the first half of 2012 we closed 52 stores in our Kmart segment and 125 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $11 million for 36 of these stores at Kmart and $39 million for 46 of these stores at Sears Domestic.

11

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

We made the decision to close 12 stores in our Kmart segment and 6 stores in our Sears Domestic segment during the second quarter of 2013, and 25 stores in our Kmart segment and 12 stores in our Sears Domestic segment during the first half of 2013.

Store closing costs recorded for the 13- and 26- week periods ended August 3, 2013 and July 28, 2012 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	$	4	$	1	$	—		$	3	$	—	$	8
Sears Domestic	3		1		(3		)	1		1		3
Total for the 13-week period ended August 3, 2013	$	7	$	2	$	(3	)	$	4	$	1	$	11
Kmart	$	—	$	—	$	8		$	—	$	1	$	9
Sears Domestic	—		—		8			—		6		14
Sears Canada	—		2		—			—		—		2
Total for the 13-week period ended July 28, 2012	$	—	$	2	$	16		$	—	$	7	$	25
Kmart	$	9	$	2	$	(1	)	$	6	$	1	$	17
Sears Domestic	6		2		(6		)	3		9		14
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended August 3, 2013	$	15	$	6	$	(7	)	$	9	$	10	$	33
Kmart	$	—	$	—	$	11		$	—	$	1	$	12
Sears Domestic	—		—		39			—		6		45
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended July 28, 2012	$	—	$	2	$	50		$	—	$	7	$	59

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

⁽²⁾  Recorded within Selling and administrative on the Condensed 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⁾  Costs for the 26- week period ended August 3, 2013 include $8 million recorded within Impairment charges and $2 million recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 13- week period ended August 3, 2013 and the 13- week and 26- week periods ended July 28, 2012 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations.

12

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Store closing cost accruals of $157 million, $165 million and $193 million at August 3, 2013, July 28, 2012 and February 2, 2013, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at July 28, 2012	$	21		$	123		$	21		$	165
Store closing costs	29			25			7			61
Payments/utilizations	(9		)	(10		)	(14		)	(33		)
Balance at February 2, 2013	41			138			14			193
Store closing costs	6			(7		)	9			8
Payments/utilizations	(24		)	(12		)	(8		)	(44		)
Balance at August 3, 2013	$	23		$	119		$	15		$	157

Real Estate Transactions

During the second quarter of 2013, we recorded gains on the sales of assets of $235 million in connection with real estate transactions which included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. Gains on sales of assets recorded in the second quarter of 2013 also included gains of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store.

During the first quarter of 2012, we recorded gains on the sales of assets of $386 million in connection with real estate transactions which included a gain of $223 million recognized on the sale of 11 (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 up to 23 months from the date of closing.

NOTE 7 – EQUITY

Accumulated Other Comprehensive Loss

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

millions	August 3, 2013			July 28, 2012			February 2, 2013
Pension and postretirement adjustments (net of tax of $(441), $(489) and $(443), respectively)	$	(1,319	)	$	(1,485	)	$	(1,408	)
Currency translation adjustments (net of tax of $(40), $(27) and $(39), respectively)	(66		)	(29		)	(51		)
Accumulated other comprehensive loss	$	(1,385	)	$	(1,514	)	$	(1,459	)

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 August 3, 2013, July 28, 2012, and February 2, 2013 was $71 million, $7 million and $64 million, respectively.

13

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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:

	13 Weeks Ended August 3, 2013									13 Weeks Ended July 28, 2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments(1)	$	49		$	(1	)	$	48		$	47		$	(1	)	$	46
Deferred gain on derivatives	—			—			—			3			—			3
Currency translation adjustments	(20		)	—			(20		)	5			1			6
Total other comprehensive income (loss)	$	29		$	(1	)	$	28		$	55		$	—		$	55
	26 Weeks Ended August 3, 2013									26 Weeks Ended July 28, 2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments(1)	$	97		$	(3	)	$	94		$	95		$	(3	)	$	92
Deferred gain on derivatives	—			—			—			5			—			5
Currency translation adjustments	(28		)	1			(27		)	(1		)	1			—
Total other comprehensive income (loss)	$	69		$	(2	)	$	67		$	99		$	(2	)	$	97

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 8 to the Condensed Consolidated Financial Statements.

Share Repurchase Program

During the 13- and 26- week periods ended August 3, 2013 and July 28, 2012, we repurchased no shares of our common stock under our common share repurchase program. At August 3, 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.

14

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

NOTE 8 – BENEFIT PLANS

Pension and Postretirement Benefit Plans

We provide benefits to certain associates who are eligible under various defined benefit pension plans, contributory defined benefit pension plans and other postretirement plans, primarily retiree medical benefits. 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. The following table summarizes the components of total net periodic benefit expense, recorded within Selling and administrative on the Condensed Consolidated Statements of Operations, for our retirement plans:

	13 Weeks Ended						26 Weeks Ended
millions	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Components of net periodic expense:
Interest cost	$	75		$	96		$	150		$	192
Expected return on plan assets	(77		)	(93		)	(154		)	(186		)
Amortization of experience losses	49			47			97			95
Net periodic expense	$	47		$	50		$	93		$	101

Contributions

During the 13- and 26- week periods ended August 3, 2013, we made total contributions of $87 million and $176 million, respectively, to our pension and postretirement plans. During the 13- and 26- week periods ended July 28, 2012, we made total contributions of $78 million and $164 million, respectively, to our pension and postretirement plans. We anticipate making aggregate contributions to our domestic and Canadian defined benefit and postretirement plans of approximately $244 million over the remainder of 2013.

NOTE 9 – INCOME TAXES

We had gross unrecognized tax benefits of $142 million at August 3, 2013, and $161 million at both July 28, 2012 and February 2, 2013. Of the amount at August 3, 2013, $86 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. During the 13- and 26- week periods ended August 3, 2013, gross unrecognized tax benefits decreased by $9 million and $19 million, respectively, due to foreign and state audit activity. During the 26-week period ended July 28, 2012, gross unrecognized tax benefits decreased by $31 million due to federal, foreign, and state audit activity. We expect that our unrecognized tax benefits could decrease by as much as $22 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 August 3, 2013, July 28, 2012, and February 2, 2013, the total amount of interest and penalties included in our tax accounts in our Condensed Consolidated Balance Sheet was $51 million ($35 million net of federal benefit), $58 million ($39 million net of federal benefit), and $57 million ($39 million net of federal benefit), respectively. The total amount of net interest income recognized as part of income tax benefit in our Condensed Consolidated Statements of Operations was $2 million and $4 million (net of federal benefit) for the 13- and 26- week periods ended August 3, 2013, respectively.

We file income tax returns in the United States, as well as various foreign jurisdictions. The IRS has completed its examination of Holdings’ federal income tax returns through 2009, and all matters have been resolved except one issue in the 2008 and 2009 returns for which we are currently working with the IRS Appeals. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2011, and Kmart is under examination by such jurisdictions for the years 2003 through 2011.

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

15

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

At February 2, 2013, we had a valuation allowance of $2.7 billion 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 objective negative evidence 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 as the year progresses for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset. 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 the remainder of 2013, an additional valuation allowance may be required.

The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax accounting income. For the second quarter of 2013, our effective income tax rate was an expense of 30.9% primarily due to not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the second quarter of 2013 benefited from favorable audit settlements and the lower tax on the Sears Canada gain on sales of assets.

NOTE 10 – 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.

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 & garden, tools & 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 & 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.

16

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

	13 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	977		$	2,458		$	484		$	3,919
Apparel and Soft Home	1,003			1,120			387			2,510
Food and Drug	1,169			3			—			1,172
Service and Other	19			1,202			49			1,270
Total merchandise sales and services	3,168			4,783			920			8,871
Costs and expenses
Cost of sales, buying and occupancy	2,459			3,544			682			6,685
Selling and administrative	747			1,301			243			2,291
Depreciation and amortization	33			129			25			187
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)
Total costs and expenses	3,224			4,929			769			8,922
Operating income (loss)	$	(56	)	$	(146	)	$	151		$	(51	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	4		$	47		$	5		$	56

	13 Weeks Ended July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,033		$	3,129		$	577		$	4,739
Apparel and Soft Home	1,024			1,195			406			2,625
Food and Drug	1,297			12			—			1,309
Service and Other	20			726			48			794
Total merchandise sales and services	3,374			5,062			1,031			9,467
Costs and expenses
Cost of sales, buying and occupancy	2,586			3,611			739			6,936
Selling and administrative	763			1,389			285			2,437
Depreciation and amortization	38			149			25			212
Gain on sales of assets	(9		)	(5		)	(1		)	(15		)
Total costs and expenses	3,378			5,144			1,048			9,570
Operating loss	$	(4	)	$	(82	)	$	(17	)	$	(103	)
Total assets	$	4,637		$	13,736		$	2,810		$	21,183
Capital expenditures	$	35		$	26		$	20		$	81

17

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

	26 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,875		$	4,641		$	925		$	7,441
Apparel and Soft Home	1,996			2,285			741			5,022
Food and Drug	2,359			6			—			2,365
Service and Other	41			2,358			96			2,495
Total merchandise sales and services	6,271			9,290			1,762			17,323
Costs and expenses
Cost of sales, buying and occupancy	4,857			6,837			1,287			12,981
Selling and administrative	1,460			2,556			493			4,509
Depreciation and amortization	66			262			50			378
Impairment charges	—			8			—			8
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)
Total costs and expenses	6,355			9,617			1,649			17,621
Operating income (loss)	$	(84	)	$	(327	)	$	113		$	(298	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	25		$	76		$	15		$	116

	26 Weeks Ended July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	2,001		$	6,104		$	1,071		$	9,176
Apparel and Soft Home	2,086			2,452			772			5,310
Food and Drug	2,659			23			—			2,682
Service and Other	43			1,421			105			1,569
Total merchandise sales and services	6,789			10,000			1,948			18,737
Costs and expenses
Cost of sales, buying and occupancy	5,151			7,098			1,390			13,639
Selling and administrative	1,515			2,804			563			4,882
Depreciation and amortization	71			292			51			414
Gain on sales of assets	(14		)	(233		)	(163		)	(410		)
Total costs and expenses	6,723			9,961			1,841			18,525
Operating income	$	66		$	39		$	107		$	212
Total assets	$	4,637		$	13,736		$	2,810		$	21,183
Capital expenditures	$	67		$	58		$	36		$	161

18

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

NOTE 11 – SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at August 3, 2013, July 28, 2012 and February 2, 2013 consisted of the following:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Unearned revenues	$	858	$	791	$	843
Self-insurance reserves	705		735		714
Other	518		598		569
Total	$	2,081	$	2,124	$	2,126

NOTE 12 – 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.

NOTE 13 – RECENT ACCOUNTING PRONOUNCEMENTS

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which requires an unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss

19

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

carryforward, a similar tax loss or a tax credit carryforward that the entity intends to use and is available for settlement at the reporting date. The update will be effective for the Company in the first quarter of 2014 and is not expected to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.

Disclosures about Reclassification Adjustments out of Accumulated Other Comprehensive Income

In February 2013, the 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 was effective and adopted by the Company in the first quarter of 2013 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.

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. This update was effective and adopted by the Company in the first quarter of 2013 and did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued an accounting standards update which requires disclosures of gross and net information about financial derivative instruments eligible for offset in the statement of financial position or subject to a master netting agreement. In January 2013, the FASB issued an accounting standards update which narrows the scope of the disclosure requirements to derivatives, securities borrowings, and securities lending transactions that are either offset or subject to a master netting arrangement. This update was effective for and adopted by the Company in the first quarter of 2013 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 14 – 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 August 3, 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

20

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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 the first half of 2013 and 2012, ESL and its affiliates purchased unsecured commercial paper issued by Sears Roebuck Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Sears Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding was 30.6 days, 2.78% and $273 million and 27.4 days, 1.82% and $197 million, respectively, in the first half of 2013 and 2012. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2013 was $305 million and the aggregate amount of interest paid by SRAC to ESL during the first half of 2013 was $4 million. ESL held $235 million, $150 million and $285 million, respectively, in principal amount of commercial paper at August 3, 2013, July 28, 2012 and February 2, 2013, which included $143 million, $85 million and $169 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 "6 5/8% 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”). The Subsidiary Notes issued by Sears DC Corp. matured in 2012. At both August 3, 2013 and February 2, 2013, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% Notes and $1 million and $2 million, respectively, of principal amount of Subsidiary Notes. At July 28, 2012, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% 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 August 3, 2013, July 28, 2012 and February 2, 2013, ESL held a participation interest totaling $97 million, $180 million and $234 million, respectively, in the financial institution’s agreements relating to the Company.

Sears Canada

ESL directly 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 48% of the outstanding common stock of SHO (based on publicly available information as of June 10, 2013).

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

21

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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, 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 August 3, 2013 and February 2, 2013, Holdings reported a net amount receivable from SHO of $77 million and $79 million, respectively, in the Accounts receivable line of the Condensed Consolidated Balance Sheets. Amounts related to the sale of inventory and related services, royalties, and corporate shared services were $451 million and $885 million, respectively, and the net amounts SHO earned related to commissions were $24 million and $63 million, respectively, for the 13- and 26- week periods ended August 3, 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 of our Annual Report on Form 10-K for the fiscal year ended February 2, 2013 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 15 – GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At August 3, 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 notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by SRAC (the “guarantor subsidiaries”). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at August 3, 2013, July 28, 2012 and February 2, 2013, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13-and 26- week periods ended August 3, 2013 and July 28, 2012, and the Condensed Consolidating Statements of Cash flows for the 26-week periods ended August 3, 2013 and July 28, 2012 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 $670 million and $125 million, respectively, at July 28, 2012 attributable to the Sears Hometown and Outlet businesses. Merchandise sales and services included revenues of approximately $645 million and $1.3 billion, respectively, from the Sears Hometown and Outlet businesses for the 13- and 26- week periods ended July 28, 2012. Net income (loss) attributable to Holdings' shareholders included net income of approximately $21 million and $42 million, respectively, from the Sears Hometown and Outlet businesses for the 13- and 26- week periods ended July 28, 2012. The financial information for the Sears Hometown and Outlet businesses is reflected within the guarantor subsidiaries balances for this period. The condensed consolidated financial information at and for the period ended August 3, 2013 reflects 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

22

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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

August 3, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	335	$	—		$	671
Intercompany receivables	—		—		26,087		(26,087		)	—
Accounts receivable	—		530		111		—			641
Merchandise inventories	—		6,856		852		—			7,708
Prepaid expenses and other current assets	92		1,093		470		(1,175		)	480
Total current assets	92		8,815		27,855		(27,262		)	9,500
Total property and equipment, net	—		4,241		1,545		—			5,786
Goodwill and intangible assets	—		955		2,288		—			3,243
Other assets	15		227		2,905		(2,398		)	749
Investment in subsidiaries	15,822		25,301		—		(41,123		)	—
TOTAL ASSETS	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278
Current liabilities
Short-term borrowings	$	—	$	1,756	$	—	$	—		$	1,756
Current portion of long-term debt and capitalized lease obligations	—		60		15		—			75
Merchandise payables	—		2,530		373		—			2,903
Intercompany payables	12,442		13,645		—		(26,087		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,405		2,555		(1,142		)	3,844
Total current liabilities	12,471		20,808		2,943		(27,262		)	8,960
Long-term debt and capitalized lease obligations	1,237		2,923		101		(2,350		)	1,911
Pension and postretirement benefits	—		2,150		389		—			2,539
Long-term deferred tax liabilities	—		8		889		66			963
Other long-term liabilities	—		826		1,508		(253		)	2,081
Total Liabilities	13,708		26,715		5,830		(29,799		)	16,454
EQUITY
Shareholder’s equity	2,221		12,824		28,763		(41,448		)	2,360
Noncontrolling interest	—		—		—		464			464
Total Equity	2,221		12,824		28,763		(40,984		)	2,824
TOTAL LIABILITIES AND EQUITY	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278

23

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

July 28, 2012

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	359	$	371	$	—		$	730
Intercompany receivables	—		—		25,527		(25,527		)	—
Accounts receivable	—		405		164		—			569
Merchandise inventories	—		7,819		834		—			8,653
Prepaid expenses and other current assets	81		620		471		(779		)	393
Total current assets	81		9,203		27,367		(26,306		)	10,345
Total property and equipment, net	—		4,660		1,681		—			6,341
Goodwill and intangible assets	—		1,155		2,593		—			3,748
Other assets	21		308		2,420		(2,000		)	749
Investment in subsidiaries	17,178		25,890		—		(43,068		)	—
TOTAL ASSETS	$	17,280	$	41,216	$	34,061	$	(71,374	)	$	21,183
Current liabilities
Short-term borrowings	$	—	$	1,176	$	—	$	—		$	1,176
Current portion of long-term debt and capitalized lease obligations	—		138		16		—			154
Merchandise payables	—		2,695		393		—			3,088
Intercompany payables	11,942		13,585		—		(25,527		)	—
Short-term deferred tax liabilities	5		540		—		(30		)	515
Other current liabilities	24		2,752		2,212		(749		)	4,239
Total current liabilities	11,971		20,886		2,621		(26,306		)	9,172
Long-term debt and capitalized lease obligations	1,237		2,828		104		(2,199		)	1,970
Pension and postretirement benefits	—		2,139		443		—			2,582
Long-term deferred tax liabilities	—		—		772		67			839
Other long-term liabilities	—		830		1,525		(231		)	2,124
Total Liabilities	13,208		26,683		5,465		(28,669		)	16,687
EQUITY
Shareholder’s equity	4,072		14,533		28,596		(42,764		)	4,437
Noncontrolling interest	—		—		—		59			59
Total Equity	4,072		14,533		28,596		(42,705		)	4,496
TOTAL LIABILITIES AND EQUITY	$	17,280	$	41,216	$	34,061	$	(71,374	)	$	21,183

24

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

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

25

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,030		$	1,780		$	(939	)	$	8,871
Cost of sales, buying and occupancy	—			6,121			1,037			(473		)	6,685
Selling and administrative	1			2,219			537			(466		)	2,291
Depreciation and amortization	—			142			45			—			187
Gain on sales of assets	—			(60		)	(181		)	—			(241		)
Total costs and expenses	1			8,422			1,438			(939		)	8,922
Operating income (loss)	(1		)	(392		)	342			—			(51		)
Interest expense	(55		)	(90		)	(22		)	108			(59		)
Interest and investment income	—			10			112			(108		)	14
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(56		)	(472		)	431			—			(97		)
Income tax (expense) benefit	—			37			(67		)	—			(30		)
Equity (deficit) in earnings in subsidiaries	(71		)	281			—			(210		)	—
Net income (loss)	(127		)	(154		)	364			(210		)	(127		)
Income attributable to noncontrolling interests	—			—			—			(67		)	(67		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(127	)	$	(154	)	$	364		$	(277	)	$	(194	)

26

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,422		$	1,944		$	(899	)	$	9,467
Cost of sales, buying and occupancy	—			6,276			1,103			(443		)	6,936
Selling and administrative	1			2,287			605			(456		)	2,437
Depreciation and amortization	—			163			49			—			212
Gain on sales of assets	—			(14		)	(1		)	—			(15		)
Total costs and expenses	1			8,712			1,756			(899		)	9,570
Operating income (loss)	(1		)	(290		)	188			—			(103		)
Interest expense	(56		)	(95		)	(27		)	113			(65		)
Interest and investment income	—			9			113			(113		)	9
Other income	—			—			1			—			1
Income (loss) before income taxes	(57		)	(376		)	275			—			(158		)
Income tax (expense) benefit	20			53			(48		)	—			25
Equity (deficit) in earnings in subsidiaries	(96		)	144			—			(48		)	—
Net income (loss)	(133		)	(179		)	227			(48		)	(133		)
Loss attributable to noncontrolling interests	—			—			—			1			1
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(133	)	$	(179	)	$	227		$	(47	)	$	(132	)

27

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	15,608		$	3,475		$	(1,760	)	$	17,323
Cost of sales, buying and occupancy	—			11,888			1,949			(856		)	12,981
Selling and administrative	1			4,306			1,106			(904		)	4,509
Depreciation and amortization	—			286			92			—			378
Impairment charges	—			8			—			—			8
Gain on sales of assets	—			(74		)	(181		)	—			(255		)
Total costs and expenses	1			16,414			2,966			(1,760		)	17,621
Operating income (loss)	(1		)	(806		)	509			—			(298		)
Interest expense	(110		)	(184		)	(48		)	222			(120		)
Interest and investment income	—			19			224			(222		)	21
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(111		)	(971		)	684			—			(398		)
Income tax (expense) benefit	—			86			(107		)	—			(21		)
Equity (deficit) in earnings in subsidiaries	(308		)	408			—			(100		)	—
Net income (loss)	(419		)	(477		)	577			(100		)	(419		)
Income attributable to noncontrolling interests	—			—			—			(54		)	(54		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(419	)	$	(477	)	$	577		$	(154	)	$	(473	)

28

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	16,732		$	3,770		$	(1,765	)	$	18,737
Cost of sales, buying and occupancy	—			12,375			2,133			(869		)	13,639
Selling and administrative	1			4,570			1,207			(896		)	4,882
Depreciation and amortization	—			316			98			—			414
Gain on sales of assets	—			(247		)	(163		)	—			(410		)
Total costs and expenses	1			17,014			3,275			(1,765		)	18,525
Operating income (loss)	(1		)	(282		)	495			—			212
Interest expense	(112		)	(191		)	(54		)	226			(131		)
Interest and investment income	—			20			227			(226		)	21
Other income	—			—			1			—			1
Income (loss) before income taxes	(113		)	(453		)	669			—			103
Income tax (expense) benefit	39			35			(116		)	—			(42		)
Equity in earnings in subsidiaries	135			388			—			(523		)	—
Net income (loss)	61			(30		)	553			(523		)	61
Income attributable to noncontrolling interests	—			—			—			(4		)	(4		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	61		$	(30	)	$	553		$	(527	)	$	57

29

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(127	)	$	(154	)	$	364		$	(210	)	$	(127	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			6			—			48
Currency translation adjustments, net of tax	—			—			(20		)	—			(20		)
Unrealized net loss, net of tax	—			(3		)	(100		)	103			—
Total other comprehensive income (loss)	—			39			(114		)	103			28
Comprehensive income (loss)	(127		)	(115		)	250			(107		)	(99		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(61		)	(61		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(127	)	$	(115	)	$	250		$	(168	)	$	(160	)

30

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(133	)	$	(179	)	$	227		$	(48	)	$	(133	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			4			—			46
Deferred gain on derivatives, net of tax	3			—			—			—			3
Currency translation adjustments, net of tax	23			—			(17		)	—			6
Unrealized net loss, net of tax	—			(269		)	(96		)	365			—
Total other comprehensive income (loss)	26			(227		)	(109		)	365			55
Comprehensive income (loss)	(107		)	(406		)	118			317			(78		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			1			1
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(107	)	$	(406	)	$	118		$	318		$	(77	)

31

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(419	)	$	(477	)	$	577		$	(100	)	$	(419	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			84			10			—			94
Currency translation adjustments, net of tax	—			—			(27		)	—			(27		)
Unrealized net loss, net of tax	—			(2		)	(44		)	46			—
Total other comprehensive income (loss)	—			82			(61		)	46			67
Comprehensive income (loss)	(419		)	(395		)	516			(54		)	(352		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(47		)	(47		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(419	)	$	(395	)	$	516		$	(101	)	$	(399	)

32

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended July 28, 2012

millions	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	61	$	(30	)	$	553		$	(523	)	$	61
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—		83			9			—			92
Deferred gain on derivatives, net of tax	5		—			—			—			5
Currency translation adjustments, net of tax	6		—			(6		)	—			—
Unrealized net loss, net of tax	—		(269		)	(96		)	365			—
Total other comprehensive income (loss)	11		(186		)	(93		)	365			97
Comprehensive income (loss)	72		(216		)	460			(158		)	158
Comprehensive income attributable to noncontrolling interests	—		—			—			(5		)	(5		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	72	$	(216	)	$	460		$	(163	)	$	153

33

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,213	)	$	498		$	—		$	(715	)
Proceeds from sales of property and investments	—			100			187			—			287
Net increase in investments and restricted cash	—			—			(1		)	—			(1		)
Purchases of property and equipment	—			(101		)	(15		)	—			(116		)
Net investing with Affiliates	—			—			45			(45		)	—
Net cash provided by (used in) investing activities	—			(1		)	216			(45		)	170
Proceeds from debt issuances	—			—			2			—			2
Repayments of long-term debt	—			(39		)	(7		)	—			(46		)
Increase in short-term borrowings, primarily 90 days or less	—			662			—			—			662
Intercompany dividend	257			21			(278		)	—			—
Net borrowing with Affiliates	(257		)	586			(374		)	45			—
Net cash provided by (used in) financing activities	—			1,230			(657		)	45			618
Effect of exchange rate changes on cash and cash equivalents	—			—			(11		)	—			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			16			46			—			62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			320			289			—			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	336		$	335		$	—		$	671

34

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements — (Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended July 28, 2012

millions	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—	$	(450	)	$	378		$	—		$	(72	)
Proceeds from sales of property and investments	—		284			172			—			456
Net increase in investments and restricted cash	—		—			(1		)	—			(1		)
Purchases of property and equipment	—		(124		)	(37		)	—			(161		)
Net investing with Affiliates	—		—			(81		)	81			—
Net cash provided by investing activities	—		160			53			81			294
Proceeds from debt issuances	—		—			2			—			2
Repayments of long-term debt	—		(120		)	(111		)	—			(231		)
Increase in short-term borrowings, primarily 90 days or less	—		1			—			—			1
Purchase of Sears Canada shares	—		—			(10		)	—			(10		)
Net borrowing with Affiliates	—		432			(351		)	(81		)	—
Net cash provided by (used in) financing activities	—		313			(470		)	(81		)	(238		)
Effect of exchange rate changes on cash and cash equivalents	—		—			(1		)	—			(1		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—		23			(40		)	—			(17		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—		336			411			—			747
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—	$	359		$	371		$	—		$	730

35

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 2, 2013.

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 2,036 full-line and specialty retail stores in the United States, operating through Kmart and Sears, and 461 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 approximately 90 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^TM, a social shopping experience where members have the ability to earn points, receive additional benefits and interact/shop with each other through shopyourway.com. Our Shop Your Way membership program is continuing to gain traction with our members as members continue to engage in all aspects of our program, including points and other program benefits. 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 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 Part I, Item 1 of our Annual Report on Form 10-K for the year ended February 2, 2013.

On October 11, 2012, we completed the separation of our Sears Hometown and Outlet businesses through a rights offering transaction. In connection with the separation, the Company and certain of its subsidiaries have entered into various agreements with Sears Hometown and Outlet Stores, Inc. ("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. The financial impact of these agreements are presented within the Condensed Consolidated Results of Operations after the separation date.

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. Following the spin-off, Holdings was the beneficial holder of approximately 51% of the issued and outstanding common shares of Sears Canada.

36

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

CONSOLIDATED RESULTS OF OPERATIONS

	13 Weeks Ended						26 Weeks Ended
millions, except per share data	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
REVENUES
Merchandise sales and services	$	8,871		$	9,467		$	17,323		$	18,737
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,685			6,936			12,981			13,639
Gross margin dollars	2,186			2,531			4,342			5,098
Gross margin rate	24.6		%	26.7		%	25.1		%	27.2		%
Selling and administrative	2,291			2,437			4,509			4,882
Selling and administrative expense as a percentage of total revenues	25.8		%	25.7		%	26.0		%	26.1		%
Depreciation and amortization	187			212			378			414
Impairment charges	—			—			8			—
Gain on sales of assets	(241		)	(15		)	(255		)	(410		)
Total costs and expenses	8,922			9,570			17,621			18,525
Operating income (loss)	(51		)	(103		)	(298		)	212
Interest expense	(59		)	(65		)	(120		)	(131		)
Interest and investment income	14			9			21			21
Other income (loss)	(1		)	1			(1		)	1
Income (loss) before income taxes	(97		)	(158		)	(398		)	103
Income tax (expense) benefit	(30		)	25			(21		)	(42		)
Net income (loss)	(127		)	(133		)	(419		)	61
(Income) loss attributable to noncontrolling interests	(67		)	1			(54		)	(4		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(194	)	$	(132	)	$	(473	)	$	57
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic earnings (loss) per share	$	(1.83	)	$	(1.25	)	$	(4.46	)	$	0.54
Diluted earnings (loss) per share	$	(1.83	)	$	(1.25	)	$	(4.46	)	$	0.54
Basic weighted average common shares outstanding	106.1			105.9			106.1			105.9
Diluted weighted average common shares outstanding	106.1			105.9			106.1			106.1

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. Comparable store sales amounts include online sales from sears.com and kmart.com shipped directly to customers. These online sales resulted in a benefit of approximately 75 basis points and 80 basis points to total domestic comparable store sales for the second quarter and first half of 2013, respectively. In addition, comparable store sales have been adjusted for the change in the unshipped sales reserves recorded at the end of each reporting period, which resulted in a negative impact of approximately 60 basis points and a benefit of approximately 10 basis points, for the second quarter and first half of 2013, respectively.

Our fiscal 2013second quarter was comprised of the 13-week period ended August 3, 2013, while our fiscal 2012second quarter was comprised of the 13-week period ended July 28, 2012. This one week shift in sales had no impact on the domestic comparable store sales results reported herein due to the fact that for purposes of reporting domestic comparable store sales for the second quarter, weeks 14 through 26 for fiscal 2013 have been compared to weeks 15 through 27 of fiscal year 2012, thereby eliminating the impact of the one week shift.

37

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Net Income (Loss) Attributable to Holdings’ Shareholders, Adjusted EBITDA and Adjusted Earnings (Loss) per Share

We recorded a net loss attributable to Holdings’ shareholders for the second quarter of $194 million, or $1.83 loss per diluted share and $132 million, or $1.25 loss per diluted share for 2013 and 2012, respectively. We recorded a net loss attributable to Holdings' shareholders for the first half of 2013 of $473 million, or $4.46 loss per diluted share, and net income attributable to Holdings' shareholders of $57 million, or $0.54 per diluted share, for the first half of 2012.

In addition to our net income (loss) 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 Condensed Consolidated Statements of Operations excluding income (loss) attributable to noncontrolling interests, income tax (expense) benefit, 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 ongoing operating performance, and useful to investors, 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. Adjustments to EBITDA include impairment charges related to fixed assets and intangible assets, closed store and severance charges, domestic pension expense and the SHO separation. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations and reflect past investment decisions.

38

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Adjusted EBITDA was determined as follows:

	13 Weeks Ended						26 Weeks Ended
millions	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Net income (loss) attributable to SHC per statement of operations	$	(194	)	$	(132	)	$	(473	)	$	57
Income (loss) attributable to noncontrolling interests	67			(1		)	54			4
Income tax expense (benefit)	30			(25		)	21			42
Interest expense	59			65			120			131
Interest and investment income	(14		)	(9		)	(21		)	(21		)
Other (income) loss	1			(1		)	1			(1		)
Operating income (loss)	(51		)	(103		)	(298		)	212
Depreciation and amortization	187			212			378			414
Gain on sales of assets	(241		)	(15		)	(255		)	(410		)
Before excluded items	(105		)	94			(175		)	216
Closed store reserve and severance	10			18			23			52
Domestic pension expense	40			41			81			82
Impairment charges	—			—			8			—
Adjusted EBITDA	(55		)	153			(63		)	350
SHO separation	—			(37		)	—			(74		)
Adjusted EBITDA as defined	$	(55	)	$	116		$	(63	)	$	276
% to revenues	(0.6		)%	1.3		%	(0.4		)%	1.6		%

39

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Adjusted EBITDA for our segments was as follows:

	13 Weeks Ended
	August 3, 2013												July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating income (loss) per statement of operations	$	(56	)	$	(146	)	$	151		$	(51	)	$	(4	)	$	(82	)	$	(17	)	$	(103	)
Depreciation and amortization	33			129			25			187			38			149			25			212
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)	(9		)	(5		)	(1		)	(15		)
Before excluded items	(38		)	(62		)	(5		)	(105		)	25			62			7			94
Closed store reserve and severance	8			2			—			10			8			8			2			18
Domestic pension expense	—			40			—			40			—			41			—			41
Adjusted EBITDA	(30		)	(20		)	(5		)	(55		)	33			111			9			153
SHO separation	—			—			—			—			—			(37		)	—			(37		)
Adjusted EBITDA as defined	$	(30	)	$	(20	)	$	(5	)	$	(55	)	$	33		$	74		$	9		$	116
% to revenues	(0.9		)%	(0.4		)%	(0.5		)%	(0.6		)%	1.0		%	1.7		%	0.9		%	1.3		%

	26 Weeks Ended
	August 3, 2013												July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating income (loss) per statement of operations	$	(84	)	$	(327	)	$	113		$	(298	)	$	66		$	39		$	107		$	212
Depreciation and amortization	66			262			50			378			71			292			51			414
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)	(14		)	(233		)	(163		)	(410		)
Before excluded items	(46		)	(111		)	(18		)	(175		)	123			98			(5		)	216
Closed store reserve and severance	16			5			2			23			11			39			2			52
Domestic pension expense	—			81			—			81			—			82			—			82
Impairment charges	—			8			—			8			—			—			—			—
Adjusted EBITDA	(30		)	(17		)	(16		)	(63		)	134			219			(3		)	350
SHO separation	—			—			—			—			—			(74		)	—			(74		)
Adjusted EBITDA as defined	$	(30	)	$	(17	)	$	(16	)	$	(63	)	$	134		$	145		$	(3	)	$	276
% to revenues	(0.5		)%	(0.2		)%	(0.9		)%	(0.4		)%	2.0		%	1.7		%	(0.2		)%	1.6		%

40

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

These other significant items included in Adjusted EBITDA are further explained as follows:

• Impairment charges – Accounting standards require the Company to evaluate the carrying value of fixed assets, goodwill and intangible assets for impairment. As a result of the Company’s analysis, we have recorded impairment charges related to certain fixed assets balances.

• Closed store reserve and severance – We are transforming our Company to a less asset-intensive business model. Throughout this transformation, we continue to make choices related to our stores, which could result in sales, closures, lease terminations or a variety of other decisions.

•Domestic pension expense – Contributions to our pension plans remain a significant use of our cash on an annual basis. Cash contributions to our pension and postretirement plans are separately disclosed on the cash flow statement. 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 statement of operations 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. Pension expense is comprised of interest cost, expected return on plan assets and amortization of experience losses. This adjustment eliminates the entire pension expense from the statement of operations to improve comparability. Pension expense is included in the determination of Net Income. The components of the adjustments to EBITDA related to domestic pension expense were as follows:        

	13 Weeks Ended						26 Weeks Ended
millions	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Components of net periodic expense:
Interest cost	$	55		$	73		$	109		$	145
Expected return on plan assets	(57		)	(73		)	(112		)	(146		)
Amortization of experience losses	42			41			84			83
Net periodic expense	$	40		$	41		$	81		$	82

In accordance with U.S. GAAP, we recognize on the balance sheet actuarial gains and losses for defined benefit pension plans annually in the fourth quarter of each fiscal year and whenever a plan is determined to qualify for a remeasurement during a fiscal year. For income statement purposes, these actuarial gains and losses are recognized throughout the year through an amortization process. The Company recognizes in its results of operations, as a corridor adjustment, any unrecognized actuarial net gains or losses that exceed 10% of the larger of projected benefit obligations or plan assets. Accumulated gains/losses that are inside the 10% corridor are not recognized, while accumulated actuarial gains/losses that are outside the 10% corridor are amortized over the “average future service” of the population and are included in the amortization of experience losses line item above.

Actuarial gains and losses occur when actual experience differs from the estimates used to allocate the change in value of pension plans to expense throughout the year or when assumptions change, as they may each year. Significant factors that can contribute to the recognition of actuarial gains and losses include changes in discount rates used to remeasure pension obligations on an annual basis or upon a qualifying remeasurement, differences between actual and expected returns on plan assets and other changes in actuarial assumptions. Management believes these actuarial gains and losses are primarily financing activities that are more reflective of changes in current conditions in global financial markets (and in particular interest rates) that are not directly related to the underlying business and that do not have an immediate, corresponding impact on the benefits provided to eligible retirees. For further information on the actuarial assumptions and plan assets referenced above, see MD&A - Application of Critical Accounting Policies and Estimates - Defined Benefit Pension Plans, included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2013, and Note 8 of Notes to Consolidated Financial Statements.

41

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

• SHO separation – The results of the Sears Hometown and Outlet businesses that were included in our results of operations prior to the separation.

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 Condensed Consolidated Statements of Operations during the second quarter and first half of 2013 and 2012.

	13 Weeks Ended August 3, 2013
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve and Severance			Gain on Sales of Assets			Tax Matters		As Adjusted
Gross margin impact	$	2,186		$	—		$	7		$	—		$	—	$	2,193
Selling and administrative impact	2,291			(40		)	(3		)	—			—		2,248
Depreciation and amortization impact	187			—			(1		)	—			—		186
Gain on sales of assets impact	(241		)	—			—			235			—		(6		)
Operating loss impact	(51		)	40			11			(235		)	—		(235		)
Income tax expense impact	(30		)	(15		)	(4		)	89			65		105
Income attributable to noncontrolling interest impact	(67		)	—			—			88			—		21
After tax and noncontrolling interest impact	(194		)	25			7			(58		)	65		(155		)
Diluted loss per share impact	$	(1.83	)	$	0.24		$	0.07		$	(0.55	)	$	0.61	$	(1.46	)

	13 Weeks Ended July 28, 2012
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve and Severance			Mark-to-Market Gains			As Adjusted - Reported			SHO Separation			As Adjusted (1)
Gross margin impact	$	2,531		$	—		$	—		$	—		$	2,531		$	(160	)	$	2,371
Selling and administrative impact	2,437			(41		)	(18		)	—			2,378			(124		)	2,254
Depreciation and amortization impact	212			—			(7		)	—			205			(2		)	203
Operating loss impact	(103		)	41			25			—			(37		)	(34		)	(71		)
Other income impact	1			—			—			(1		)	—			(1		)	(1		)
Income tax benefit impact	25			(15		)	(9		)	—			1			14			15
After tax and noncontrolling interest impact	(132		)	26			16			(1		)	(91		)	(21		)	(112		)
Diluted loss per share impact	$	(1.25	)	$	0.25		$	0.15		$	(0.01	)	$	(0.86	)	$	(0.20	)	$	(1.06	)

⁽¹⁾ Adjusted to reflect the results of the Sears Hometown and Outlet businesses that were included in our results of operations prior to the separation.

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

	26 Weeks Ended August 3, 2013
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve, Store Impairments and Severance			Gain on Sales of Assets			Tax Matters		As Adjusted
Gross margin impact	$	4,342		$	—		$	15		$	—		$	—	$	4,357
Selling and administrative impact	4,509			(81		)	(8		)	—			—		4,420
Depreciation and amortization impact	378			—			(2		)	—			—		376
Impairment charges impact	8			—			(8		)	—			—		—
Gain on sales of assets impact	(255		)	—			—			235			—		(20		)
Operating loss impact	(298		)	81			33			(235		)	—		(419		)
Income tax expense impact	(21		)	(30		)	(13		)	89			170		195
Income attributable to noncontrolling interest impact	(54		)	—			(1		)	88			—		33
After tax and noncontrolling interest impact	(473		)	51			19			(58		)	170		(291		)
Diluted loss per share impact	$	(4.46	)	$	0.49		$	0.18		$	(0.55	)	$	1.60	$	(2.74	)

	26 Weeks Ended July 28, 2012
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Closed Store Reserve and Severance			Gain on Sales of Assets			Tax Matters			As Adjusted - Reported			SHO Separation			As Adjusted(1)
Gross margin impact	$	5,098		$	—		$	—		$	—		$	—		$	5,098		$	(319	)	$	4,779
Selling and administrative impact	4,882			(82		)	(52		)	—			—			4,748			(246		)	4,502
Depreciation and amortization impact	414			—			(7		)	—			—			407			(5		)	402
Gain on sales of assets impact	(410		)	—			—			386			—			(24		)	—			(24		)
Operating income impact	212			82			59			(386		)	—			(33		)	(68		)	(101		)
Income tax expense impact	(42		)	(31		)	(22		)	145			(37		)	13			27			40
Income attributable to noncontrolling interest impact	(4		)	—			—			8			—			4			—			4
After tax and noncontrolling interest impact	57			51			37			(233		)	(37		)	(125		)	(42		)	(167		)
Diluted earnings per share impact	$	0.54		$	0.48		$	0.35		$	(2.20	)	$	(0.35	)	$	(1.18	)	$	(0.40	)	$	(1.58	)

⁽¹⁾ Adjusted to reflect the results of the Sears Hometown and Outlet businesses that were included in our results of operations prior to the separation.

We also believe that our use of Adjusted EPS provides an appropriate measure for investors to use in assessing our performance across periods, given that this measure provides an adjustment for certain significant items which may vary significantly from period to period, improving the comparability of year-to-year results and is therefore representative of our ongoing performance. Therefore, we have adjusted our results for them to make our statements more useful and comparable. However, we do not, and do not recommend that you, solely use Adjusted EPS to

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13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

assess our financial and earnings performance. We also use, and recommend that you use, diluted earnings per share in addition to Adjusted EPS in assessing our earnings performance.

In addition to the significant items included in the Adjusted EBITDA calculation, Adjusted EPS includes the following 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.

• Gains on sales of assets – We have recorded significant gains on sales of assets which were primarily attributable to several real estate transactions. Management considers these gains on sale of assets to result from investing decisions rather than ongoing operations.

• Tax Matters – In 2011, we recorded a non-cash charge to establish a valuation allowance against substantially all of 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. As this valuation allowance has a significant impact on the effective tax rate, we have adjusted our results to reflect a standard effective tax rate for the Company.

13-week period ended August 3, 2013 compared to the 13-week period ended July 28, 2012

Revenues and Comparable Store Sales

Revenues decreased$596 million to $8.9 billion for the quarter ended August 3, 2013, as compared to revenues of $9.5 billion for the quarter ended July 28, 2012. The decrease in revenue was largely due to the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for approximately $210 million of the decline. Revenues were also impacted by approximately $195 million for the separation of the Sears Hometown and Outlet businesses which occurred in the third quarter of 2012. We recorded revenues from SHO of approximately $450 million, primarily related to merchandise sold to SHO for resale, in the second quarter of 2013. The prior year quarter included revenues of approximately $645 million related to the Sears Hometown and Outlet businesses' merchandise sales to its customers. In addition, our revenues were impacted by lower domestic comparable store sales, which accounted for approximately $100 million of the decline. For the quarter, revenues at Sears Canada declined approximately $53 million as a result of a new licensing arrangement related to the Sears Home Improvements Product Services ("SHIPS") business. Second quarter2013 revenues also included a decrease of $13 million due to foreign currency exchange rates.

For the quarter, domestic comparable store sales decreased1.5%, comprised of decreases of 2.1% at Kmart and 0.8% at Sears Domestic. The decline at Kmart primarily reflects decreases in our transactional categories such as grocery & household, pharmacy and drugstore. It also includes declines in consumer electronics and toys. These decreases were partially offset by increases in the footwear and lawn & garden categories.

Sears Domestic comparable stores sales declined 0.8% due to a decrease in the home appliance category, which was partially offset by increases in the lawn & garden, apparel and home categories. The Sears Domestic apparel category has now achieved comparable store sales increases for eight consecutive quarters.

Gross Margin

For the quarter, our gross margin decreased$345 million to $2.2 billion in 2013 due to the above noted decline in sales as well as a decline in gross margin rate. Gross margin included charges of $7 million related to store closures in the second quarter of 2013 while the second quarter of 2012 included gross margin of $160 million from the Sears Hometown and Outlet businesses. Excluding these items, gross margin decreased $178 million.

The gross margin rate for both Kmart and Sears Domestic was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. As compared to prior year, Kmart's gross margin rate for the second quarter declined100 basis points, as decreases in the footwear, seasonal and toys categories were only partially offset by improvement in the apparel category. Sears Domestic's gross margin rate declined280 basis points for the quarter mainly due to selling merchandise to SHO at cost pursuant to the terms of the separation,

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

which accounted for approximately 170 basis points of the decline. Sears Domestic also experienced decreases in the home appliances and automotive categories, which were only partially offset by an improvement in the apparel category. Sears Canada’s gross margin rate declined240 basis points for the second quarter due to increases in inventory reserves requirements.

Selling and Administrative Expenses

Selling and administrative expenses decreased$146 million in the second quarter of 2013 compared to the prior year quarter and included expenses related to domestic pension plans, store closings and severance of $43 million and $59 million for 2013 and 2012, respectively. The second quarter of 2012 also included selling and administrative expenses of $124 million related to the Sears Hometown and Outlet businesses. Excluding these items, selling and administrative expenses declined $6 million due to favorable legal settlements during the second quarter of 2013, which were partially offset by increases in a number of other expense categories.

Our selling and administrative expenses as a percentage of total revenues (“selling and administrative expense rate”) was 25.8% for the second quarter of 2013, compared to 25.7% in the prior year, as the decreases in overall selling and administrative expenses were offset by the above noted decline in revenues.

Gain on Sales of Assets

We recorded total gains on sales of assets for the quarter of $241 million in 2013 and $15 million in 2012. The gains recorded during the second quarter of 2013 included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. Gain on sales of assets recorded in the second quarter of 2013 also included a gain of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store, for which the Company received $86 million in cash proceeds.

Operating Loss

We reported an operating loss of $51 million and $103 million for the second quarter of 2013 and 2012, respectively. Operating loss for the second quarter of 2013 included expenses related to domestic pension plans, store closings, and severance as well as gains on sales of assets which aggregated to operating income of $184 million. Operating loss for the second quarter of 2012 included expenses related to domestic pension plans, store closings and severance, as well as operating income from the Sears Hometown and Outlet businesses, which aggregated to operating loss of $32 million. Excluding these items, we would have reported an operating loss of $235 million and $71 million in the second quarter of 2013 and 2012, respectively. Operating loss increased due to the above noted declines in revenues and gross margin rate, partially offset by a decrease in selling and administrative expenses

Income Taxes

Our effective tax rate for the second quarter of 2013 was an expense rate of 30.9% compared with a benefit rate of 15.8% in 2012. Our tax rate in 2013 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 would be realized. In addition, the second quarter of 2013 benefited from favorable audit settlements and the lower tax on the Sears Canada gain on sales of assets.

26-week period ended August 3, 2013 compared to the 26-week period ended July 28, 2012

Revenues and Comparable Store Sales

For the first half of 2013, revenues decreased$1.4 billion to $17.3 billion, as compared to revenues of $18.7 billion for the first half of 2012. The decrease in revenue was primarily due to the effect of having fewer Kmart and Sears Full-line stores in operation, which accounted for approximately $580 million of the decline. Revenue was also impacted by $380 million for the separation of the Sears Hometown and Outlet businesses which occurred in the third quarter of 2012. We recorded revenues from SHO of approximately $890 million, primarily related to merchandise sold to SHO for resale, in the first half of 2013. The prior year first half included revenues of

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

approximately $1.3 billion related to the Sears Hometown and Outlet businesses' merchandise sales to its customers. In addition, our revenues were impacted by lower domestic comparable store sales, which accounted for approximately $275 million of the decline. For the first half, revenues at Sears Canada declined approximately $70 million as a result of a new licensing arrangement related to the SHIPS business. Revenues for the first half of 2013 also included a decrease of $32 million due to foreign currency exchange rates.

Domestic comparable store sales decreased2.5%, comprised of decreases of 3.3% at Kmart and 1.6% at Sears Domestic. The decline at Kmart primarily reflects decreases in our transactional categories such as grocery & household, pharmacy and drugstore. These decreases were partially offset by increases in the footwear and home categories. The decline at Sears Domestic primarily reflects decreases in the home appliances, lawn & garden and consumer electronics categories, which were partially offset by increases in the apparel and home categories. The Sears Domestic apparel category has achieved comparable store sales increases for eight consecutive quarters.

Gross Margin

For the first half of the year, our gross margin decreased$756 million to $4.3 billion in 2013 due to the above noted decline in sales as well as a decline in gross margin rate. Gross margin included charges of $15 million related to store closures in the first half of 2013 while the first half of 2012 included gross margin of $319 million from the Sears Hometown and Outlet businesses. Excluding these items, gross margin decreased $422 million.

The gross margin rate for both Kmart and Sears Domestic was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. As compared to prior year, Kmart's gross margin rate for the first halfdeclined160 basis points primarily due to decreases in the grocery & household, apparel and footwear categories. Sears Domestic's gross margin rate declined260 basis points for the first half mainly due to selling merchandise to SHO at cost pursuant to the terms of the separation, which accounted for approximately 170 basis points of the decline. Sears Domestic also experienced decreases in the home appliances and automotive categories. Sears Canada’s gross margin rate declined160 basis points for the first half due to increases in inventory reserves requirements.

Selling and Administrative Expenses

Selling and administrative expenses decreased$373 million in the first half of 2013 compared to the first half of 2012 and included expenses related to domestic pension plans, store closings and severance of $89 million and $134 million for 2013 and 2012, respectively. The first half of 2012 also included selling and administrative expenses of $246 million related to the Sears Hometown and Outlet businesses. Excluding these items, selling and administrative expenses declined $82 million due to a decreases in payroll and advertising expenses and favorable legal settlements partially offset by increases in a number of other expense categories.

Our selling and administrative expense rate was 26.0% for the first half of 2013, compared to 26.1% for the first half of 2012, as the decreases in overall selling and administrative expenses were partially offset by the above noted decline in revenues.

Gain on Sales of Assets

We recorded total gains on sales of assets for the first half of $255 million in 2013 and $410 million in 2012. The gains recorded during the first half of 2013 included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. Gain on sales of assets recorded for the first half of 2013 also included a gain of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store for which the Company received $86 million in cash proceeds.

The gains recorded during the first half of 2012 included a gain of $223 million recognized on the sale of 11 (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.

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Operating Income (Loss)

We reported an operating loss of $298 million for the first half of 2013 compared to operating income of $212 million for the first half of 2012. Operating loss for the first half of 2013 included expenses related to domestic pension plans, store closings, store impairments and severance as well as gains on sales of assets which aggregated to operating income of $121 million. Operating income for the first half of 2012 included expenses related to domestic pension plans, store closings and severance, as well as gains on sales of assets and operating income from the Sears Hometown and Outlet businesses, which aggregated to operating income of $313 million. Excluding these items, we would have reported an operating loss of $419 million and $101 million in the first half of 2013 and 2012, respectively. Operating loss increased due to the above noted declines in revenues and gross margin rate, partially offset by a decrease in selling and administrative expenses.

Income Taxes

Our effective tax rate for the first half of 2013 was an expense rate of 5.3% compared with an expense rate of 40.8% for the first half of 2012. Our tax rate in 2013 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 would be realized. In addition, the first half of 2013 benefited from favorable audit settlements and the lower tax on the Sears Canada gain on sales of assets.

SEGMENT OPERATIONS

The following discussion of our business segment results is organized into three reportable segments: Kmart, Sears Domestic and Sears Canada.

Kmart

Kmart results and key statistics were as follows:

	13 Weeks Ended						26 Weeks Ended
millions, except number of stores	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Merchandise sales and services	$	3,168		$	3,374		$	6,271		$	6,789
Cost of sales, buying and occupancy	2,459			2,586			4,857			5,151
Gross margin dollars	709			788			1,414			1,638
Gross margin rate	22.4		%	23.4		%	22.5		%	24.1		%
Selling and administrative	747			763			1,460			1,515
Selling and administrative expense rate	23.6		%	22.6		%	23.3		%	22.3		%
Depreciation and amortization	33			38			66			71
Gain on sales of assets	(15		)	(9		)	(28		)	(14		)
Total costs and expenses	3,224			3,378			6,355			6,723
Operating income (loss)	$	(56	)	$	(4	)	$	(84	)	$	66
Adjusted EBITDA	$	(30	)	$	33		$	(30	)	$	134
Number of stores							1,195			1,261

13-week period ended August 3, 2013 compared to the 13-week period ended July 28, 2012

Revenues and Comparable Store Sales

For the quarter, Kmart’s revenues decreased by $206 million to $3.2 billion, primarily due to the effect of having fewer stores in operation during the second quarter of 2013, which accounted for approximately $125 million of the decline. Revenues were also impacted by a decrease in comparable store sales of 2.1%, which accounted for

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

approximately $80 million of the decline. The decrease in comparable store sales primarily reflects decreases in our transactional categories such as grocery & household, pharmacy and drugstore. It also includes declines in consumer electronics and toys. These decreases were partially offset by increases in the footwear and lawn & garden categories.

Gross Margin

For the quarter, Kmart generated $709 million in gross margin in 2013 compared to $788 million in 2012. The decrease in Kmart’s gross margin is due to both the decrease in sales as well as a decrease in gross margin rate. Kmart’s gross margin rate declined100 basis points to 22.4% in 2013 from 23.4% in 2012 and was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. The gross margin rate reflects decreases in the footwear, seasonal and toys categories that were only partially offset by an improvement in the apparel category. Gross margin for 2013 included charges of $4 million related to store closures.

Selling and Administrative Expenses

For the quarter, Kmart’s selling and administrative expenses decreased$16 million as compared to the second quarter in 2012 primarily due to a decrease in payroll expense. Selling and administrative expenses for the second quarter of 2013 and 2012, respectively, were impacted by expenses of $4 million and $8 million related to store closings and severance.

Kmart’s selling and administrative expense rate for the quarter was 23.6% in 2013 and 22.6% in 2012 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Gain on Sales of Assets

Kmart recorded total gains on sales of assets for the second quarter of $15 million in 2013 and $9 million in 2012. The gains recorded during the second quarter of 2013 included a gain of $12 million related to the sale of one Kmart store for which the Company received $12 million in cash proceeds.

Operating Loss

For the quarter, Kmart recorded an operating loss of $56 million and $4 million in 2013 and 2012, respectively. Operating loss for the second quarter of 2013 included expenses related to store closings and severance as well as gains on sales of assets, which aggregated to operating income of $4 million. Operating loss for the second quarter of 2012 included expenses related to store closings and severance of $9 million. Excluding these items, Kmart would have reported an operating loss of $60 million in the second quarter of 2013 compared with operating income of $5 million in 2012. The increase in operating loss was primarily the result of the above noted declines in sales and gross margin rate, partially offset by a decrease in selling and administrative expenses.

26-week period ended August 3, 2013 compared to the 26-week period ended July 28, 2012

Revenues and Comparable Store Sales

For the first half of 2013, Kmart’s revenues decreased by $518 million, primarily due to the effect of having fewer stores in operation during the first half of 2013, which accounted for approximately $315 million of the decline. Revenues were also impacted by a decrease in comparable store sales of 3.3% which accounted for approximately $195 million of the decline. The decrease in comparable store sales reflects declines in our transactional categories such as grocery & household, pharmacy and drugstore. These decreases were partially offset by increases in the footwear and home categories.

Gross Margin

For the first half of 2013, Kmart generated $1.4 billion in gross margin compared to $1.6 billion in the first half of 2012. The decrease in Kmart’s gross margin is due to both the decrease in sales as well as a decrease in gross margin rate. Kmart’s gross margin rate declined160 basis points basis points to 22.5% in 2013 from 24.1% in 2012 and was impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. The

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

gross margin rate primarily reflects decreases in the grocery & household, apparel and footwear categories. Gross margin for 2013 included charges of $9 million related to store closures.

Selling and Administrative Expenses

For the first half of 2013, Kmart’s selling and administrative expenses decreased$55 million as compared to the first half of 2012 which primarily reflects a decrease in payroll expense. Selling and administrative expenses for the first half of 2013 and 2012, respectively, were impacted by expenses of $7 million and $11 million related to store closings and severance.

Kmart’s selling and administrative expense rate for the first half was 23.3% in 2013 and 22.3% in 2012 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Gain on Sales of Assets

Kmart recorded total gains on sales of assets for the first half of $28 million in 2013 and $14 million in 2012. The gains recorded during the first half of 2013 included a gain of $12 million related to the sale of one Kmart store for which the Company received $12 million in cash proceeds.

Operating Income (Loss)

For the first half, Kmart recorded an operating loss of $84 million in 2013 and operating income of $66 million in 2012. Operating loss for the first half of 2013 included expenses related to store closings and severance as well as gains on sales of assets which aggregated to an operating loss of $5 million. Operating income for the first half of 2012 included expenses related to store closings and severance of $12 million. Excluding these items, Kmart would have reported an operating loss of $79 million in the first half of 2013 compared with operating income of $78 million in 2012. The increase in operating loss was primarily the result of the above noted declines in sales and gross margin, partially offset by a decrease in selling and administrative expenses.

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Sears Domestic

Sears Domestic results and key statistics were as follows:

	13 Weeks Ended						26 Weeks Ended
millions, except number of stores	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Merchandise sales and services	$	4,783		$	5,062		$	9,290		$	10,000
Cost of sales, buying and occupancy	3,544			3,611			6,837			7,098
Gross margin dollars	1,239			1,451			2,453			2,902
Gross margin rate	25.9		%	28.7		%	26.4		%	29.0		%
Selling and administrative	1,301			1,389			2,556			2,804
Selling and administrative expense rate	27.2		%	27.4		%	27.5		%	28.0		%
Depreciation and amortization	129			149			262			292
Impairment charges	—			—			8			—
Gain on sales of assets	(45		)	(5		)	(46		)	(233		)
Total costs and expenses	4,929			5,144			9,617			9,961
Operating income (loss)	$	(146	)	$	(82	)	$	(327	)	$	39
Adjusted EBITDA	$	(20	)	$	111		$	(17	)	$	219
SHO separation	—			(37		)	—			(74		)
Adjusted EBITDA as defined (1)	$	(20	)	$	74		$	(17	)	$	145
Number of:
Full-line stores(2)							791			814
Specialty stores(3)							50			1,282
Total Domestic Sears Stores							841			2,096

⁽¹⁾ Adjusted to reflect the results of the Sears Hometown and Outlet businesses that were included in our results of operations prior to the separation.

⁽²⁾ The period ended August 3, 2013 included 781 Full-line stores and 10 Sears Essentials/Grand stores; The period ended July 28, 2012 included 804 Full-line stores and 10 Sears Essentials/Grand stores

⁽³⁾ The period ended July 28, 2012 included 1,228 stores from Sears Hometown and Outlet businesses

13-week period ended August 3, 2013 compared to the 13-week period ended July 28, 2012

Revenues and Comparable Store Sales

For the quarter, Sears Domestic’s revenues decreased by $279 million to $4.8 billion. Revenues were impacted by approximately $195 million for the separation of the Sears Hometown and Outlet businesses, which occurred in the third quarter of 2012. We recorded revenues from SHO of approximately $450 million, primarily related to merchandise sold to SHO for resale, in the second quarter of 2013. The prior year quarter included revenues of approximately $645 million related to the Sears Hometown and Outlet businesses' merchandise sales to its customers. Revenues were also impacted by the effect of having fewer Sears Full-line stores in operation during the second quarter of 2013, which accounted for approximately $85 million of the decline. In addition, revenues were also impacted by a decrease in comparable stores sales, which accounted for approximately $20 million of the decline.

Sears Domestic comparable store sales declined 0.8% due to a decrease in the home appliance category, which was partially offset by increases in the lawn & garden, apparel and home categories. The Sears Domestic apparel category has now achieved comparable store sales increases for eight consecutive quarters.

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SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Gross Margin

For the quarter, Sears Domestic generated gross margin dollars of $1.2 billion and $1.5 billion in 2013 and 2012, respectively. Gross margin for the second quarter of 2013 included charges of $3 million related to store closures while the second quarter of 2012 included gross margin of $160 million from the Sears Hometown and Outlet businesses. Excluding these items, gross margin for the quarter decreased $49 million compared to the same period in the prior year.

Sears Domestic’s gross margin rate during the second quarter was 25.9% in 2013 and 28.7% in 2012. The decrease of 280 basis points was primarily due to selling merchandise to SHO at cost pursuant to the terms of the separation, which accounted for approximately 170 basis points of the decline. Gross margin rate was also impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. Sears Domestic experienced decreases in the home appliances and automotive categories, which were only partially offset by an improvement in the apparel category.

Selling and Administrative Expenses

For the quarter, Sears Domestic’s selling and administrative expenses decreased$88 million in 2013 as compared to 2012. Selling and administrative expenses for the second quarter of 2013 and 2012, respectively, were impacted by expenses related to domestic pension plans, store closings and severance of $39 million and $49 million. The second quarter of 2012 also included selling and administrative expenses of $124 million related to the Sears Hometown and Outlet businesses. Excluding these items, selling and administrative expenses increased $46 million primarily due to increases in payroll and a number other expense categories, partially offset by favorable legal settlements.

Sears Domestic’s selling and administrative expense rate for the quarter was 27.2% in 2013 and 27.4% in 2012 and decreased as a result of the above noted expense reduction.

Gain on Sales of Assets

Sears Domestic recorded a total gain on sales of assets for the quarter of $45 million in 2013 and $5 million in 2012. The gains recorded in the second quarter of 2013 included a gain of $43 million related to the sale of a store previously operated under The Great Indoors format and two Sears Full-line stores for which the Company received $74 million in cash proceeds.

Operating Loss

For the quarter, Sears Domestic reported an operating loss of $146 million in 2013 and $82 million in 2012. Sears Domestic’s operating loss for the second quarter of 2013 included expenses related to domestic pension plans, store closings and severance as well as gains on sales of assets which aggregated to zero. Sears Domestic's operating loss for the second quarter of 2012 included expenses related to domestic pension plans, store closings and severance, as well as operating income from the Sears Hometown and Outlet businesses, which aggregated to an operating loss of $21 million. Excluding these items, Sears Domestic would have reported an operating loss of $146 million and $61 million in the second quarter of 2013 and 2012, respectively. The increase in operating loss in 2013 was primarily due to the above noted declines in revenues and gross margin, as well as an an increase in selling and administrative expenses.

26-week period ended August 3, 2013 compared to the 26-week period ended July 28, 2012

Revenues and Comparable Store Sales

For the first half of the year, Sears Domestic’s revenues decreased by $710 million. The decline in revenues was partially due to the separation of the Sears Hometown and Outlet businesses, which occurred in the third quarter of 2012, and accounted for $380 million of the decline. We recorded revenues from SHO of approximately $890 million, primarily related to merchandise sold to SHO for resale, in the first half of 2013. The prior year first half included revenues of approximately $1.3 billion related to the Sears Hometown and Outlet businesses' merchandise sales to its customers. Revenues were also impacted by the effect of having fewer Sears Full-line stores in operation

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during the first half of 2013, which accounted for approximately $265 million of the decline, and a decrease in comparable stores sales , which accounted for approximately $80 million of the decline.

Sears Domestic's comparable store sales declined 1.6% predominately driven by decreases in the home appliances, lawn & garden and consumer electronics categories. These decreases were partially offset by increases in the apparel and home categories. The Sears apparel category has now achieved comparable store sales increases for eight consecutive quarters.

Gross Margin

For the first half of the year, Sears Domestic generated gross margin dollars of $2.5 billion and $2.9 billion in 2013 and 2012, respectively. Gross margin for the first half of 2013 included charges of $6 million related to store closures while the first half of 2012 included gross margin of $319 million from the Sears Hometown and Outlet businesses. Excluding these items, gross margin decreased $124 million compared to the same period in the prior year.

Sears Domestic’s gross margin rate during the first half was 26.4% in 2013 and 29.0% in 2012. The decrease of 260 basis points was mainly due to selling merchandise to SHO at cost pursuant to the terms of the separation, which accounted for approximately 170 basis points of the decline. Gross margin rate was also impacted by transactions that offer both traditional promotional marketing discounts and Shop Your Way points. Sears Domestic experienced decreases in the home appliances and automotive categories.

Selling and Administrative Expenses

For the first half of the year, Sears Domestic’s selling and administrative expenses decreased$248 million in 2013 as compared to 2012 and included expenses related to domestic pension plans, store closings and severance of $80 million and $121 million in 2013 and 2012. The first half of 2012 also included selling and administrative expenses of $246 million related to the Sears Hometown and Outlet businesses. Excluding these items, selling and administrative expenses increased $39 million primarily due to increases in payroll and a number other expense categories, partially offset by favorable legal settlements.

Sears Domestic’s selling and administrative expense rate for the first half was 27.5% in 2013 and 28.0% in 2012 and decreased as a result of the above noted expense decline.

Gain on Sales of Assets

Sears Domestic recorded a total gain on sales of assets for the first half of $46 million in 2013 and $233 million in 2012. The gains recorded in the first half of 2013 included a gain of $43 million related to the sale of a store previously operated under The Great Indoors format and two Sears Full-line stores for which the Company received $74 million in cash proceeds. The gains recorded during the first quarter of 2012 included a gain of $223 million recognized on the sale of 11 (six owned and five leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds.

Operating Income (Loss)

For the first half of the year, Sears Domestic reported an operating loss of $327 million in 2013 compared to operating income of $39 million in 2012. Sears Domestic’s operating loss for the first half of 2013 included expenses related to domestic pension plans, store closings, store impairments and severance as well as gains on sales of assets which aggregated to operating loss of $52 million. Sears Domestic's operating income for the first half of 2012 included expenses related to domestic pension plans, store closings and severance, as well as gains on sales of assets and operating income from the Sears Hometown and Outlet businesses, which aggregated to operating income of $164 million. Excluding these items, Sears Domestic would have reported an operating loss of $275 million and $125 million in the first half of 2013 and 2012, respectively. The increase in operating loss in the first half of 2013 was driven by the above noted decline in revenues and gross margin, as well as an increase in selling and administrative expenses.

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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:

	13 Weeks Ended						26 Weeks Ended
millions, except number of stores	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Merchandise sales and services	$	920		$	1,031		$	1,762		$	1,948
Cost of sales, buying and occupancy	682			739			1,287			1,390
Gross margin dollars	238			292			475			558
Gross margin rate	25.9		%	28.3		%	27.0		%	28.6		%
Selling and administrative	243			285			493			563
Selling and administrative expense rate	26.4		%	27.6		%	28.0		%	28.9		%
Depreciation and amortization	25			25			50			51
Gain on sales of assets	(181		)	(1		)	(181		)	(163		)
Total costs and expenses	769			1,048			1,649			1,841
Operating income (loss)	$	151		$	(17	)	$	113		$	107
Adjusted EBITDA	$	(5	)	$	9		$	(16	)	$	(3	)
Number of:
Full-line stores							118			122
Specialty stores							343			369
Total Sears Canada Stores							461			491

13-week period ended August 3, 2013 compared to the 13-week period ended July 28, 2012

Revenues and Comparable Store Sales

Sears Canada’s revenues decreased$111 million for the second quarter of 2013 as compared to the same period last year and included a decrease of $13 million due to the impact of exchange rates during the quarter. On a Canadian dollar basis, revenues decreased by $98 million. Revenues primarily decreased as a result of a new licensing arrangement related to the SHIPS business, which accounted for approximately $53 million of the decline. Revenues also decreased as a result of the closure of four Full-line stores, which accounted for approximately $25 million of the decline, and lower comparable store sales, which accounted for approximately $20 million of the decline. Comparable store sales declined 2.5%, which was primarily driven by declines in the home furnishings, electronics and tools categories, partially offset by increases in apparel and accessories.

Gross Margin

Total gross margin dollars for the second quarter decreased$54 million in 2013 to $238 million and included a $4 million decrease due to the impact of exchange rates. Gross margin decreased $50 million on a Canadian dollar basis. For the quarter, Sears Canada’s gross margin rate declined240 basis points to 25.9%, from 28.3% in 2012, due to increases in inventory reserves requirements.

Selling and Administrative Expenses

For the second quarter of 2013, Sears Canada’s selling and administrative expenses decreased$42 million, and included a decrease of $4 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses decreased by $38 million primarily due to decreases in advertising and payroll expense.

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Selling and administrative expenses for the second quarter of 2012 were impacted by expenses of $2 million related to store closings and severance.

Sears Canada’s selling and administrative expense rate for the quarter was 26.4% in 2013 and 27.6% in 2012 and decreased as a result of the decline in selling and administrative expenses, partially offset by the above noted decline in revenues.

Gain on Sales of Assets

Sears Canada recorded a total gain on sales of assets for the quarter of $181 million and $1 million in 2013 and 2012, respectively. The gains recorded during the second quarter of 2013 included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds.

Operating Income (Loss)

Sears Canada recorded operating income of $151 million in the second quarter of 2013 compared to an operating loss of $17 million in 2012. Sears Canada's operating income for the second quarter of 2013 included gains on sales of assets of $180 million, while the second quarter 2012 operating loss included $2 million related to store closings and severance. Adjusting for these items, Sears Canada would have reported an operating loss of $29 million and $15 million for the second quarter of 2013 and 2012, respectively. Operating loss increased in 2013 as declines in revenues and gross margin were partially offset by a decrease in selling and administrative expenses.

26-week period ended August 3, 2013 compared to the 26-week period ended July 28, 2012

Revenues and Comparable Store Sales

Sears Canada’s revenues decreased$186 million for the first half of 2013 as compared to the same period last year and included a decrease of $32 million due to the impact of exchange rates during the first half. On a Canadian dollar basis, revenues decreased by $154 million. Revenues primarily decreased as a result of a new licensing arrangement related to the SHIPS business, which accounted for approximately $70 million of the decline. Revenues also decreased as a result of the closure of four Full-line stores, which accounted for approximately $40 million of the decline, and lower comparable store sales, which accounted for approximately $35 million of the decline. Comparable store sales declined 2.5%, which was primarily driven by sales declines in the home furnishings, electronics, tools, and major appliance categories, partially offset by increases in apparel and accessories.

Gross Margin

Total gross margin dollars for the first halfdecreased$83 million in 2013 to $475 million and included a $9 million decrease due to the impact of exchange rates. Gross margin decreased $74 million on a Canadian dollar basis. For the quarter, Sears Canada’s gross margin rate declined160 basis points to 27.0%, from 28.6% in 2012 due to increases in inventory reserves requirements.

Selling and Administrative Expenses

For the first half of 2013, Sears Canada’s selling and administrative expenses decreased$70 million, and included a decrease of $9 million due to the impact of exchange rates. On a Canadian dollar basis, selling and administrative expenses decreased by $61 million primarily due to decreases in advertising and payroll expense. Selling and administrative expenses for the first half of 2013 were impacted by expenses of $2 million related to severance. Selling and administrative expenses for the first half of 2012 were impacted by expenses of $2 million related to store closings and severance.

Sears Canada’s selling and administrative expense rate for the first half was 28.0% in 2013 and 28.9% in 2012 and decreased as a result of the decline in selling and administrative expenses, partially offset by the above noted decline in revenues.

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Gain on Sales of Assets

Sears Canada recorded a total gain on sales of assets for the first half of $181 million in 2013 and $163 million in 2012. The gains recorded during the first half of 2013 included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. The gains recorded during the first half of 2012 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.

Operating Income

Sears Canada recorded operating income of $113 million and $107 million in the first half of 2013 and 2012, respectively. Sears Canada's operating income for the first half included expense related to severance as well as gains on sales of assets which aggregated to income of $178 million in 2013, while 2012 operating income included expenses related to store closings and severance as well as gains on sales of assets which aggregated to income of $161 million. Adjusting for these items, Sears Canada would have reported an operating loss of $65 million and $54 million for the first half of 2013 and 2012, respectively. Operating loss increased in 2013 as declines in revenues and gross margin were partially offset by a decrease 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 August 3, 2013, July 28, 2012 and February 2, 2013 are detailed in the following table.

millions	August 3, 2013		July 28, 2012		February 2, 2013
Domestic
Cash and equivalents	$	206	$	212	$	227
Cash posted as collateral	19		20		20
Credit card deposits in transit	158		174		133
Total domestic cash and cash equivalents	383		406		380
Sears Canada	288		324		229
Total cash and cash equivalents	671		730		609
Restricted cash	10		8		9
Total cash balances	$	681	$	738	$	618

We had total cash balances of $681 million at August 3, 2013, $738 million at July 28, 2012 and $618 million at February 2, 2013. The increase in cash during the first half of 2013 was primarily due to proceeds received from the sales of properties which were partially offset by higher 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

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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 $89 million, $56 million and $114 million as of August 3, 2013, July 28, 2012 and February 2, 2013, respectively.

Operating Activities

During the first half of 2013, we used $715 million of cash compared to $72 million in the first half of 2012. 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. We used more cash in operations in the first half of 2013 compared to the prior year first half primarily due to the increase in net loss.

Merchandise inventories were $7.7 billion at August 3, 2013 and $8.7 billion at July 28, 2012. Merchandise payables were $2.9 billion at August 3, 2013 and $3.1 billion at July 28, 2012. Our Domestic inventory balances decreased approximately $968 million from $7.9 billion at July 28, 2012 to $6.9 billion at August 3, 2013. Excluding the inventory related to the Sears Hometown and Outlet store businesses, domestic inventory decreased approximately $564 million from the prior year second quarter 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 and tools categories, as well as in apparel, sporting goods and jewelry. Kmart inventory also decreased in virtually all categories with the most notable decreases in the consumer electronics, grocery & household and drugstore categories.

Investing Activities

For the first half of 2013, we generated net cash flows from investing activities of $170 million which resulted from cash proceeds generated from the sale of properties of $287 million, partially offset by cash used for capital expenditures of $116 million. For the first half of 2012, we generated net cash flows from investing activities of $294 million which included cash proceeds from the sales of properties of $456 million, partially offset by cash used for capital expenditures of $161 million.

Financing Activities

For the first half of 2013, we generated net cash flows from financing activities of $618 million due to an increase in short-term borrowings of $662 million. This compares to cash used in financing activities of $238 million in the first half of 2012 which included repayments of long-term debt of $231 million.

During the first half of 2013, our short term borrowings increased by approximately $660 million from February 2, 2013, as opposed to the prior year first half, when our short-term borrowings were flat. Since 2012 was a 53-week year, the current year quarter ended a week later than the prior year, after the fiscal month. This is important as many disbursements, such as rent and payroll, are made at the end or beginning of the calendar month. As such, through the comparable period last year, second quarter revolver borrowings would have increased by $142 million. In addition, the prior year benefited from the $270 million of cash proceeds for the domestic real estate sales which closed in April 2012. The current year increase in borrowings was also impacted by lower earnings through the first half of the year as compared to the prior year first half.

We did not repurchase any of our common shares under our share repurchase program in the first half of 2013 or 2012. 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 August 3, 2013, we had $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.

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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 is subject to potential reserves, and $1.24 billion of senior secured notes due in 2018. Further, there is approximately $327 million of remaining Sears, Roebuck and Co. debt from the merger. These funding resources are described in more detail below. We continue to have discussions with our lenders regarding a variety of financing alternatives including, but not limited to, financing under the accordion feature of our domestic revolving credit facility. At August 3, 2013, we had liquid assets of $5.5 billion consisting of cash balances of $681 million and $4.8 billion of inventory, net of payables. The third quarter of our fiscal year, and in particular, November, is our peak borrowing period. We anticipate sufficient liquidity to meet our commitments and debt covenants. 

The domestic credit facility and senior secured notes are in place for the next several years and are supported by an asset base which includes $6.9 billion of inventory, owned and leased real estate assets, market leading proprietary brands such as Kenmore, Craftsman and DieHard, and stand-alone businesses such as Lands’ End and Sears Canada. This asset base provides us flexibility as we continue to transform our business.

In November 2012, we announced that we would be considering actions to raise at least $500 million of additional liquidity in 2013. While we believe that we continue to have potential options relating to our protection agreement business, we have not decided what actions, if any, to take with regard to this business. Regardless of the outcome of this process, we have made significant progress toward our goal to raise at least $500 million of additional liquidity in 2013, which includes generating approximately $290 million of proceeds from real estate transactions.

In addition to our asset monetization efforts, we 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 closed or expected to close, 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, much of which will occur in the second half of 2013.

Our outstanding borrowings at August 3, 2013, July 28, 2012 and February 2, 2013 were as follows:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Short-term borrowings:
Unsecured commercial paper	$	247	$	235	$	345
Secured borrowings	1,509		941		749
Long-term debt, including current portion:
Notes and debentures outstanding	1,582		1,668		1,593
Capitalized lease obligations	404		456		433
Total borrowings	$	3,742	$	3,300	$	3,120

Domestic Credit Agreement

During the first quarter of 2011, we entered into a$3.275 billionamended 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 plus2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus1.0% to 1.5%. Commitment fees are in a range of0.375% to 0.625%based on usage.

The Domestic Credit Agreement includes a$1.5 billionletter 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 billionin additional borrowing capacity if we so choose. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to$2.0 billion, of which$1.2 billionsecond lien notes were outstanding atAugust 3, 2013, providing the Company the capacity to issue up to an additional$760 millionin 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, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least15%and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The Domestic Credit Agreement 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 than1.0to 1.0. Based on availability, none of these requirements was in effect at August 3, 2013.    

AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we had $1.5 billion, $941 million and $749 million, respectively, of borrowings and$680 million, $744 million and $754 million, respectively, of letters of credit outstanding under the Domestic Credit Agreement. As a result, our availability under the agreement was$1.1 billion at August 3, 2013, and $1.6 billion at July 28, 2012 and $1.8 billion at February 2, 2013. 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 billionaggregate principal amount of senior secured notes (the “Notes”), which bear interest at 6 5/8% per annum and mature onOctober 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold$250 millionaggregate principal amount of Notes to the Company’s domestic pension plan in a private placement, of which approximately$110 million remains in the domestic pension plan. 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 our domestic credit facility 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 to101%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, plus50basis 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 afive-year,$800 millionCanadian 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 account and credit card

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receivables, subject to certain limitations. AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we hadnoborrowings outstanding under the Sears Canada Facility.Availability under this agreement was approximately$530 million ($551 millionCanadian),$542 million ($545 millionCanadian) and$503 million ($502 millionCanadian), respectively, atAugust 3, 2013, July 28, 2012 and February 2, 2013. The current availability may be reduced by reserves currently estimated by the Company to be approximately$262 millionwhich 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 potential additional reserve amount may increase or decrease in the future based on estimated net pension liabilities.

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.

Unsecured Commercial Paper

We borrow through the commercial paper markets. AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we had outstanding commercial paper borrowings of$247 million, $235 million and $345 million, respectively. ESL held$235 million, $150 million and $285 million, respectively, of our commercial paper atAugust 3, 2013, July 28, 2012 and February 2, 2013, including$143 million, $85 million and $169 million, respectively, held by Edward S. Lampert. See Note 14 for further discussion of these borrowings.

Debt Ratings

Our corporate family debt ratings at August 3, 2013 appear in the table below:

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

Domestic Pension Plan Funding

In our Annual Report on Form 10-K for the fiscal year ended February 2, 2013, we disclosed that we expected our contributions to our domestic pension plans to be approximately $352 million in 2013 and $510 million in 2014. The ultimate amount of pension contributions and timing could be affected by changes in the applicable regulations as well as financial market and investment performance.

Recent Accounting Pronouncements

See Part I, Item 1, “Financial Statements—Notes to Condensed Consolidated Financial Statements,” Note 13—“Recent Accounting Pronouncements,” for information regarding new accounting pronouncements.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements made in this Quarterly Report on Form 10-Q 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

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13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

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 our integrated retail strategy; 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; conditions and 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 our lenders; our ability to successfully achieve our plans to generate liquidity, reduce inventory and reduce fixed costs; whether we have possible strategic alternatives with respect to our businesses and assets that we could choose to pursue, whether we explore or pursue such alternatives, and, if so, our ability to complete any such possible strategic alternatives we are exploring, including with respect to our protection agreement business, on terms that are favorable to us, on intended timetables or at all; vendors’ lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; 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 of 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; and other risks, uncertainties and factors discussed in our most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. 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.

Certain of these and other factors are discussed in more detail in our filings with the Securities and Exchange Commission and the Annual Report on Form 10-K of Sears Holdings Corporation for the fiscal year ended February 2, 2013, which may be accessed through the Commission's website at www.sec.gov.

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.

Item 3. 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 and interest rate derivatives. All debt securities and interest-rate derivative instruments are considered non-trading. At August 3, 2013, 47% of our debt portfolio was variable rate. Based on the size of this variable rate debt portfolio at August 3, 2013, which totaled approximately $1.8 billion, an immediate 100 basis point change in interest rates would have affected annual pretax funding costs by $18 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.

60

SEARS HOLDINGS CORPORATION

13 and 26 Weeks Ended August 3, 2013 and July 28, 2012

Foreign Currency Risk

At August 3, 2013, we had foreign exchange forward contracts outstanding totaling $165 million notional amount. These forward contracts are used to reduce the foreign exchange risk with respect to U.S. dollar denominated assets and liabilities and purchases of goods or services. The fair value of the forward contracts at August 3, 2013 was $1 million. A hypothetical 1% adverse movement in the level of the Canadian exchange rate relative to the U.S. dollar at August 3, 2013, with all other variables held constant, would have resulted in a fair value of our forward contracts of a liability of approximately $0.2 million, a decrease of $1.2 million.

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 August 3, 2013. We had no derivative instruments at July 28, 2012 or February 2, 2013.

Item 4. 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 fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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SEARS HOLDINGS CORPORATION

PART II. OTHER INFORMATION

Item 1. 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 has received a notice of violation from the California South Coast Air Quality Management District (“SCAQMD”) alleging that Sears stores that are located in the SCAQMD jurisdiction sold architectural coating products that exceed the current SCAQMD limitations on volatile organic compounds. The parties are currently negotiating toward a resolution of this matter.

See Part I, Item 1, “Financial Statements—Notes to Consolidated Financial Statements,” Note 12—“Legal Proceedings,” for additional information regarding legal proceedings, which information is incorporated herein by this reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about shares of common stock we acquired during the second quarter of 2013. During the 13 weeks ended August 3, 2013, we did not repurchase any shares of our common stock under our common share repurchase program. At August 3, 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
May 5, 2013 to June 1, 2013	1,581	$	57.43	—	$	—
June 2, 2013 to July 6, 2013	720	49.25		—	—
July 7, 2013 to August 3, 2013	329	46.08		—	—
Total	2,630	$	53.77	—	$	—	$	503,907,832

⁽¹⁾  Consists entirely of 2,630 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 limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least15%and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The Domestic Credit Agreement 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 than1.0to 1.0.

Item 4. Mine Safety Disclosures

Not applicable.

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SEARS HOLDINGS CORPORATION

Item 6. Exhibits

Certain of the agreements filed with or 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.

(a) Exhibits.

An Exhibit Index has been filed as part of this Report on Page E-1.

63

SEARS HOLDINGS CORPORATION

SIGNATURE

Pursuant to the requirements 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: August 22, 2013

64

SEARS HOLDINGS CORPORATION

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)).
*31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32	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	The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended August 3, 2013, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 26 Weeks Ended August 3, 2013 and July 28, 2012; (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the 13 and 26 Weeks Ended August 3, 2013 and July 28, 2012 (iii) the Condensed Consolidated Balance Sheets (Unaudited) at August 3, 2013, July 28, 2012 and February 2, 2013; (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 26 Weeks Ended August 3, 2013 and July 28, 2012; (v) the Condensed Consolidated Statements of Equity (Unaudited) for the 26 Weeks Ended August 3, 2013 and July 28, 2012; and (vi) the Notes to the Condensed Consolidated Financial Statements (Unaudited).

___________________

* Filed herewith.

E-1

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Edward S. Lampert, certify that:

1.	I have reviewed this quarterly report on Form 10-Q 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: August 22, 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 quarterly report on Form 10-Q 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: August 22, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended August 3, 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.

August 22, 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

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SUMMARY OF SEGMENT DATA

6 Months Ended

Aug. 03, 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.

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 & garden, tools & 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 & 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.

	13 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	977		$	2,458		$	484		$	3,919
Apparel and Soft Home	1,003			1,120			387			2,510
Food and Drug	1,169			3			—			1,172
Service and Other	19			1,202			49			1,270
Total merchandise sales and services	3,168			4,783			920			8,871
Costs and expenses
Cost of sales, buying and occupancy	2,459			3,544			682			6,685
Selling and administrative	747			1,301			243			2,291
Depreciation and amortization	33			129			25			187
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)
Total costs and expenses	3,224			4,929			769			8,922
Operating income (loss)	$	(56	)	$	(146	)	$	151		$	(51	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	4		$	47		$	5		$	56

	13 Weeks Ended July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,033		$	3,129		$	577		$	4,739
Apparel and Soft Home	1,024			1,195			406			2,625
Food and Drug	1,297			12			—			1,309
Service and Other	20			726			48			794
Total merchandise sales and services	3,374			5,062			1,031			9,467
Costs and expenses
Cost of sales, buying and occupancy	2,586			3,611			739			6,936
Selling and administrative	763			1,389			285			2,437
Depreciation and amortization	38			149			25			212
Gain on sales of assets	(9		)	(5		)	(1		)	(15		)
Total costs and expenses	3,378			5,144			1,048			9,570
Operating loss	$	(4	)	$	(82	)	$	(17	)	$	(103	)
Total assets	$	4,637		$	13,736		$	2,810		$	21,183
Capital expenditures	$	35		$	26		$	20		$	81

	26 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,875		$	4,641		$	925		$	7,441
Apparel and Soft Home	1,996			2,285			741			5,022
Food and Drug	2,359			6			—			2,365
Service and Other	41			2,358			96			2,495
Total merchandise sales and services	6,271			9,290			1,762			17,323
Costs and expenses
Cost of sales, buying and occupancy	4,857			6,837			1,287			12,981
Selling and administrative	1,460			2,556			493			4,509
Depreciation and amortization	66			262			50			378
Impairment charges	—			8			—			8
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)
Total costs and expenses	6,355			9,617			1,649			17,621
Operating income (loss)	$	(84	)	$	(327	)	$	113		$	(298	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	25		$	76		$	15		$	116

	26 Weeks Ended July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	2,001		$	6,104		$	1,071		$	9,176
Apparel and Soft Home	2,086			2,452			772			5,310
Food and Drug	2,659			23			—			2,682
Service and Other	43			1,421			105			1,569
Total merchandise sales and services	6,789			10,000			1,948			18,737
Costs and expenses
Cost of sales, buying and occupancy	5,151			7,098			1,390			13,639
Selling and administrative	1,515			2,804			563			4,882
Depreciation and amortization	71			292			51			414
Gain on sales of assets	(14		)	(233		)	(163		)	(410		)
Total costs and expenses	6,723			9,961			1,841			18,525
Operating income	$	66		$	39		$	107		$	212
Total assets	$	4,637		$	13,736		$	2,810		$	21,183
Capital expenditures	$	67		$	58		$	36		$	161

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Other Long-Term Liabilities (Detail) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Supplemental Financial Information Disclosure [Abstract]
Unearned revenues	$ 858	$ 843	$ 791
Self-insurance reserves	705	714	735
Other	518	569	598
Total	$ 2,081	$ 2,126	$ 2,124

XML

Condensed Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Aug. 03, 2013		Feb. 02, 2013		Jul. 28, 2012
Current assets
Cash and cash equivalents	$ 671		$ 609		$ 730
Restricted cash	10		9		8
Accounts receivable	641		635		569
Merchandise inventories	7,708		7,558		8,653
Prepaid expenses and other current assets	470		454		385
Total current assets	9,500		9,265		10,345
Property and equipment, net	5,786		6,053		6,341
Goodwill	379		379		841
Trade names and other intangible assets	2,864		2,881		2,907
Other assets	749		762		749
TOTAL ASSETS	19,278		19,340		21,183
Current liabilities
Short-term borrowings	1,756	[1]	1,094	[1]	1,176	[1]
Current portion of long-term debt and capitalized lease obligations	75		83		154
Merchandise payables	2,903		2,761		3,088
Other current liabilities	2,435		2,683		2,742
Unearned revenues	925		931		962
Other taxes	484		480		535
Short-term deferred tax liabilities	382		382		515
Total current liabilities	8,960		8,414		9,172
Long-term debt and capitalized lease obligations	1,911	[2]	1,943	[2]	1,970	[2]
Pension and postretirement benefits	2,539		2,730		2,582
Other long-term liabilities	2,081		2,126		2,124
Long-term deferred tax liabilities	963		955		839
Total Liabilities	16,454		16,168		16,687
EQUITY
Total Equity	2,824		3,172		4,496
TOTAL LIABILITIES AND EQUITY	$ 19,278		$ 19,340		$ 21,183

[1] Includes $235 million, $150 million and $285 million at August 3, 2013, July 28, 2012 and February 2, 2013, respectively, of unsecured commercial paper held by ESL and its affiliates.

[2] Includes $95 million of senior secured notes and $3 million of subsidiary notes held by ESL and its affiliates at both August 3, 2013 and February 2, 2013. Includes $95 million of senior secured notes and $14 million of subsidiary notes held by ESL and its affiliates at July 28, 2012.

XML

DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Aug. 03, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

We primarily use derivatives as a risk management tool to decrease our exposure to fluctuations in the foreign currency market, and do not use derivative financial instruments for trading or speculative purposes. Sears Canada is exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars.

During the second quarter of 2013, Sears Canada entered into $165 million notional amount of foreign exchange forward contracts. These forward contracts are used to reduce the foreign exchange risk with respect to U.S. dollar denominated assets and liabilities and purchases of goods or services.

Sears Canada has merchandise purchase contracts denominated in U.S. currency. The merchandise purchase contracts are considered embedded derivatives under relevant accounting rules.

We record mark-to-market adjustments for the fair value of forward contracts and embedded derivatives at the end of each period. 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 foreign currency exchange rates by entering into foreign exchange forward contracts. 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 contracts, and therefore we do not account for these instruments as a hedge of our foreign currency exposure risk.

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Tables)

6 Months Ended

Aug. 03, 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 Condensed Consolidated Balance Sheets at fair value at August 3, 2013, July 28, 2012 and February 2, 2013:

millions	Total Fair Value Amounts at August 3, 2013			Level 1		Level 2			Level 3
Cash equivalents(1)	$	211		$	211	$	—		$	—
Restricted cash(2)	10			10		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(1		)	—		(1		)	—
Total	$	221		$	221	$	—		$	—

millions	Total Fair Value Amounts at July 28, 2012		Level 1		Level 2		Level 3
Cash equivalents(1)	$	274	$	274	$	—	$	—
Restricted cash(2)	8		8		—		—
Total	$	282	$	282	$	—	$	—

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

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

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

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

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

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Condensed Consolidating Balance Sheet (Detail) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013		Feb. 02, 2013		Jul. 28, 2012		Jan. 28, 2012
Current assets
Cash and cash equivalents	$ 671		$ 609		$ 730		$ 747
Intercompany receivables	0		0		0
Accounts receivable	641		635		569
Merchandise inventories	7,708		7,558		8,653
Prepaid expenses and other current assets	480		463		393
Total current assets	9,500		9,265		10,345
Total property and equipment, net	5,786		6,053		6,341
Goodwill and intangible assets	3,243		3,260		3,748
Other assets	749		762		749
Investment in subsidiaries	0		0		0
TOTAL ASSETS	19,278		19,340		21,183
Current liabilities
Short-term borrowings	1,756	[1]	1,094	[1]	1,176	[1]
Current portion of long-term debt and capitalized lease obligations	75		83		154
Merchandise payables	2,903		2,761		3,088
Intercompany payables	0		0		0
Short-term deferred tax liabilities	382		382		515
Other current liabilities	3,844		4,094		4,239
Total current liabilities	8,960		8,414		9,172
Long-term debt and capitalized lease obligations	1,911	[2]	1,943	[2]	1,970	[2]
Pension and postretirement benefits	2,539		2,730		2,582
Long-term deferred tax liabilities	963		955		839
Other long-term liabilities	2,081		2,126		2,124
Total Liabilities	16,454		16,168		16,687
EQUITY
Shareholder's equity	2,360		2,755		4,437
Noncontrolling interest	464		417		59
Total Equity	2,824		3,172		4,496		4,341
TOTAL LIABILITIES AND EQUITY	19,278		19,340		21,183
Parent
Current assets
Cash and cash equivalents	0		0		0		0
Intercompany receivables	0		0		0
Accounts receivable	0		0		0
Merchandise inventories	0		0		0
Prepaid expenses and other current assets	92		92		81
Total current assets	92		92		81
Total property and equipment, net	0		0		0
Goodwill and intangible assets	0		0		0
Other assets	15		17		21
Investment in subsidiaries	15,822		16,413		17,178
TOTAL ASSETS	15,929		16,522		17,280
Current liabilities
Short-term borrowings	0		0		0
Current portion of long-term debt and capitalized lease obligations	0		0		0
Merchandise payables	0		0		0
Intercompany payables	12,442		12,594		11,942
Short-term deferred tax liabilities	3		3		5
Other current liabilities	26		26		24
Total current liabilities	12,471		12,623		11,971
Long-term debt and capitalized lease obligations	1,237		1,237		1,237
Pension and postretirement benefits	0		0		0
Long-term deferred tax liabilities	0		0		0
Other long-term liabilities	0		0		0
Total Liabilities	13,708		13,860		13,208
EQUITY
Shareholder's equity	2,221		2,662		4,072
Noncontrolling interest	0		0		0
Total Equity	2,221		2,662		4,072
TOTAL LIABILITIES AND EQUITY	15,929		16,522		17,280
Guarantor Subsidiaries
Current assets
Cash and cash equivalents	336		320		359		336
Intercompany receivables	0		0		0
Accounts receivable	530		506		405
Merchandise inventories	6,856		6,709		7,819
Prepaid expenses and other current assets	1,093		970		620
Total current assets	8,815		8,505		9,203
Total property and equipment, net	4,241		4,412		4,660
Goodwill and intangible assets	955		968		1,155
Other assets	227		223		308
Investment in subsidiaries	25,301		24,988		25,890
TOTAL ASSETS	39,539		39,096		41,216
Current liabilities
Short-term borrowings	1,756		1,094		1,176
Current portion of long-term debt and capitalized lease obligations	60		66		138
Merchandise payables	2,530		2,392		2,695
Intercompany payables	13,645		12,959		13,585
Short-term deferred tax liabilities	412		412		540
Other current liabilities	2,405		2,640		2,752
Total current liabilities	20,808		19,563		20,886
Long-term debt and capitalized lease obligations	2,923		3,081		2,828
Pension and postretirement benefits	2,150		2,310		2,139
Long-term deferred tax liabilities	8		0		0
Other long-term liabilities	826		861		830
Total Liabilities	26,715		25,815		26,683
EQUITY
Shareholder's equity	12,824		13,281		14,533
Noncontrolling interest	0		0		0
Total Equity	12,824		13,281		14,533
TOTAL LIABILITIES AND EQUITY	39,539		39,096		41,216
Non-Guarantor Subsidiaries
Current assets
Cash and cash equivalents	335		289		371		411
Intercompany receivables	26,087		25,553		25,527
Accounts receivable	111		129		164
Merchandise inventories	852		849		834
Prepaid expenses and other current assets	470		461		471
Total current assets	27,855		27,281		27,367
Total property and equipment, net	1,545		1,641		1,681
Goodwill and intangible assets	2,288		2,292		2,593
Other assets	2,905		3,147		2,420
Investment in subsidiaries	0		0		0
TOTAL ASSETS	34,593		34,361		34,061
Current liabilities
Short-term borrowings	0		0		0
Current portion of long-term debt and capitalized lease obligations	15		17		16
Merchandise payables	373		369		393
Intercompany payables	0		0		0
Short-term deferred tax liabilities	0		0		0
Other current liabilities	2,555		2,455		2,212
Total current liabilities	2,943		2,841		2,621
Long-term debt and capitalized lease obligations	101		135		104
Pension and postretirement benefits	389		420		443
Long-term deferred tax liabilities	889		914		772
Other long-term liabilities	1,508		1,513		1,525
Total Liabilities	5,830		5,823		5,465
EQUITY
Shareholder's equity	28,763		28,538		28,596
Noncontrolling interest	0		0		0
Total Equity	28,763		28,538		28,596
TOTAL LIABILITIES AND EQUITY	34,593		34,361		34,061
Eliminations
Current assets
Cash and cash equivalents	0		0		0		0
Intercompany receivables	(26,087)		(25,553)		(25,527)
Accounts receivable	0		0		0
Merchandise inventories	0		0		0
Prepaid expenses and other current assets	(1,175)		(1,060)		(779)
Total current assets	(27,262)		(26,613)		(26,306)
Total property and equipment, net	0		0		0
Goodwill and intangible assets	0		0		0
Other assets	(2,398)		(2,625)		(2,000)
Investment in subsidiaries	(41,123)		(41,401)		(43,068)
TOTAL ASSETS	(70,783)		(70,639)		(71,374)
Current liabilities
Short-term borrowings	0		0		0
Current portion of long-term debt and capitalized lease obligations	0		0		0
Merchandise payables	0		0		0
Intercompany payables	(26,087)		(25,553)		(25,527)
Short-term deferred tax liabilities	(33)		(33)		(30)
Other current liabilities	(1,142)		(1,027)		(749)
Total current liabilities	(27,262)		(26,613)		(26,306)
Long-term debt and capitalized lease obligations	(2,350)		(2,510)		(2,199)
Pension and postretirement benefits	0		0		0
Long-term deferred tax liabilities	66		41		67
Other long-term liabilities	(253)		(248)		(231)
Total Liabilities	(29,799)		(29,330)		(28,669)
EQUITY
Shareholder's equity	(41,448)		(41,726)		(42,764)
Noncontrolling interest	464		417		59
Total Equity	(40,984)		(41,309)		(42,705)
TOTAL LIABILITIES AND EQUITY	$ (70,783)		$ (70,639)		$ (71,374)

[1] Includes $235 million, $150 million and $285 million at August 3, 2013, July 28, 2012 and February 2, 2013, respectively, of unsecured commercial paper held by ESL and its affiliates.

[2] Includes $95 million of senior secured notes and $3 million of subsidiary notes held by ESL and its affiliates at both August 3, 2013 and February 2, 2013. Includes $95 million of senior secured notes and $14 million of subsidiary notes held by ESL and its affiliates at July 28, 2012.

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SUPPLEMENTAL FINANCIAL INFORMATION

6 Months Ended

Aug. 03, 2013

Supplemental Financial Information Disclosure [Abstract]

SUPPLEMENTAL FINANCIAL INFORMATION

SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at August 3, 2013, July 28, 2012 and February 2, 2013 consisted of the following:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Unearned revenues	$	858	$	791	$	843
Self-insurance reserves	705		735		714
Other	518		598		569
Total	$	2,081	$	2,124	$	2,126

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EQUITY (Income Tax Expense Allocated to Each Component of Other Comprehensive Income) (Loss) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Adjustment, before Tax	$ 49	$ 47	$ 97	$ 95
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Tax	(1)	(1)	(3)	(3)
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax	0	3	0	5
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	0	0	0	0
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax	0	3	0	5
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax	(20)	5	(28)	(1)
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax	0	1	1	1
Other Comprehensive Income (Loss), before Tax	29	55	69	99
Other Comprehensive Income (Loss), Tax	(1)	0	(2)	(2)
Other comprehensive income (loss) Pension and postretirement adjustments, net of tax amount
Pension and postretirement adjustments, net of tax	48	46	94	92
Currency translation adjustments, net of tax amount	(20)	6	(27)	0
Total other comprehensive income	$ 28	$ 55	$ 67	$ 97

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Condensed Consolidating Statement of Operations (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	$ 8,871	$ 9,467	$ 17,323	$ 18,737
Cost of sales, buying and occupancy	6,685	6,936	12,981	13,639
Selling and administrative	2,291	2,437	4,509	4,882
Depreciation and amortization	187	212	378	414
Impairment charges	0	0	8	0
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	(241)	(15)	(255)	(410)
Costs and Expenses	8,922	9,570	17,621	18,525
Operating Income (Loss)	(51)	(103)	(298)	212
Interest Expense	(59)	(65)	(120)	(131)
Interest and investment income	14	9	21	21
Other Nonoperating Income (Expense)	(1)	1	(1)	1
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	(97)	(158)	(398)	103
Income Tax Expense (Benefit)	(30)	25	(21)	(42)
Equity In Earnings Of Subsidiaries	0	0	0	0
Net income (loss)	(127)	(133)	(419)	61
Net Income (Loss) Attributable to Noncontrolling Interest	(67)	1	(54)	(4)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(194)	(132)	(473)	57
Parent
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	0	0	0	0
Cost of sales, buying and occupancy	0	0	0	0
Selling and administrative	1	1	1	1
Depreciation and amortization	0	0	0	0
Impairment charges			0
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	0	0	0	0
Costs and Expenses	1	1	1	1
Operating Income (Loss)	(1)	(1)	(1)	(1)
Interest Expense	(55)	(56)	(110)	(112)
Interest and investment income	0	0	0	0
Other Nonoperating Income (Expense)	0	0	0	0
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	(56)	(57)	(111)	(113)
Income Tax Expense (Benefit)	0	20	0	39
Equity In Earnings Of Subsidiaries	(71)	(96)	(308)	135
Net income (loss)	(127)	(133)	(419)	61
Net Income (Loss) Attributable to Noncontrolling Interest	0	0	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(127)	(133)	(419)	61
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	8,030	8,422	15,608	16,732
Cost of sales, buying and occupancy	6,121	6,276	11,888	12,375
Selling and administrative	2,219	2,287	4,306	4,570
Depreciation and amortization	142	163	286	316
Impairment charges			8
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	(60)	(14)	(74)	(247)
Costs and Expenses	8,422	8,712	16,414	17,014
Operating Income (Loss)	(392)	(290)	(806)	(282)
Interest Expense	(90)	(95)	(184)	(191)
Interest and investment income	10	9	19	20
Other Nonoperating Income (Expense)	0	0	0	0
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	(472)	(376)	(971)	(453)
Income Tax Expense (Benefit)	37	53	86	35
Equity In Earnings Of Subsidiaries	281	144	408	388
Net income (loss)	(154)	(179)	(477)	(30)
Net Income (Loss) Attributable to Noncontrolling Interest	0	0	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	(154)	(179)	(477)	(30)
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	1,780	1,944	3,475	3,770
Cost of sales, buying and occupancy	1,037	1,103	1,949	2,133
Selling and administrative	537	605	1,106	1,207
Depreciation and amortization	45	49	92	98
Impairment charges			0
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	(181)	(1)	(181)	(163)
Costs and Expenses	1,438	1,756	2,966	3,275
Operating Income (Loss)	342	188	509	495
Interest Expense	(22)	(27)	(48)	(54)
Interest and investment income	112	113	224	227
Other Nonoperating Income (Expense)	(1)	1	(1)	1
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	431	275	684	669
Income Tax Expense (Benefit)	(67)	(48)	(107)	(116)
Equity In Earnings Of Subsidiaries	0	0	0	0
Net income (loss)	364	227	577	553
Net Income (Loss) Attributable to Noncontrolling Interest	0	0	0	0
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	364	227	577	553
Eliminations
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	(939)	(899)	(1,760)	(1,765)
Cost of sales, buying and occupancy	(473)	(443)	(856)	(869)
Selling and administrative	(466)	(456)	(904)	(896)
Depreciation and amortization	0	0	0	0
Impairment charges			0
Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property	0	0	0	0
Costs and Expenses	(939)	(899)	(1,760)	(1,765)
Operating Income (Loss)	0	0	0	0
Interest Expense	108	113	222	226
Interest and investment income	(108)	(113)	(222)	(226)
Other Nonoperating Income (Expense)	0	0	0	0
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest	0	0	0	0
Income Tax Expense (Benefit)	0	0	0	0
Equity In Earnings Of Subsidiaries	(210)	(48)	(100)	(523)
Net income (loss)	(210)	(48)	(100)	(523)
Net Income (Loss) Attributable to Noncontrolling Interest	(67)	1	(54)	(4)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$ (277)	$ (47)	$ (154)	$ (527)

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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	Aug. 03, 2013 Securitized trademark rights	Feb. 02, 2013 Securitized trademark rights	Jul. 28, 2012 Securitized trademark rights	Aug. 03, 2013 Securitized real estate assets	Feb. 02, 2013 Securitized real estate assets	Jul. 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	$ 1.0	$ 0.7	$ 0.8	$ 0.8

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BENEFIT PLANS (Tables)

6 Months Ended

Aug. 03, 2013

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Summary of Components of Total Net Periodic Benefit Expense for Retirement Plans

The following table summarizes the components of total net periodic benefit expense, recorded within Selling and administrative on the Condensed Consolidated Statements of Operations, for our retirement plans:

	13 Weeks Ended						26 Weeks Ended
millions	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Components of net periodic expense:
Interest cost	$	75		$	96		$	150		$	192
Expected return on plan assets	(77		)	(93		)	(154		)	(186		)
Amortization of experience losses	49			47			97			95
Net periodic expense	$	47		$	50		$	93		$	101

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EQUITY (Tables)

6 Months Ended

Aug. 03, 2013

Stockholders' Equity Note [Abstract]

Components of Accumulated Other Comprehensive Loss

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

millions	August 3, 2013			July 28, 2012			February 2, 2013
Pension and postretirement adjustments (net of tax of $(441), $(489) and $(443), respectively)	$	(1,319	)	$	(1,485	)	$	(1,408	)
Currency translation adjustments (net of tax of $(40), $(27) and $(39), respectively)	(66		)	(29		)	(51		)
Accumulated other comprehensive loss	$	(1,385	)	$	(1,514	)	$	(1,459	)

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 August 3, 2013, July 28, 2012, and February 2, 2013 was $71 million, $7 million and $64 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:

	13 Weeks Ended August 3, 2013									13 Weeks Ended July 28, 2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments(1)	$	49		$	(1	)	$	48		$	47		$	(1	)	$	46
Deferred gain on derivatives	—			—			—			3			—			3
Currency translation adjustments	(20		)	—			(20		)	5			1			6
Total other comprehensive income (loss)	$	29		$	(1	)	$	28		$	55		$	—		$	55
	26 Weeks Ended August 3, 2013									26 Weeks Ended July 28, 2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments(1)	$	97		$	(3	)	$	94		$	95		$	(3	)	$	92
Deferred gain on derivatives	—			—			—			5			—			5
Currency translation adjustments	(28		)	1			(27		)	(1		)	1			—
Total other comprehensive income (loss)	$	69		$	(2	)	$	67		$	99		$	(2	)	$	97

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 8 to the Condensed Consolidated Financial Statements.

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EQUITY (Components of Accumulated Other Comprehensive Loss) (Detail) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Stockholders' Equity Note [Abstract]
Pension and postretirement adjustments (net of tax of $(0), $(442) and $(492), respectively)	$ (1,319)	$ (1,408)	$ (1,485)
Currency translation adjustments (net of tax of $(0), $(34) and $(26), respectively)	(66)	(51)	(29)
Accumulated other comprehensive loss	$ (1,385)	$ (1,459)	$ (1,514)

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BORROWINGS (Domestic Credit Agreement) (Details)				3 Months Ended						3 Months Ended
	Aug. 03, 2013 USD ($)	Feb. 02, 2013 USD ($)	Jul. 28, 2012 USD ($)	Apr. 30, 2011 Domestic Credit Agreement USD ($)	Aug. 03, 2013 Domestic Credit Agreement USD ($)	Feb. 02, 2013 Domestic Credit Agreement USD ($)	Jul. 28, 2012 Domestic Credit Agreement USD ($)	Aug. 03, 2013 Domestic Credit Agreement Second Lien USD ($)	Apr. 30, 2011 Domestic Credit Agreement Second Lien USD ($)	Apr. 30, 2011 Minimum Domestic Credit Agreement	Apr. 30, 2011 Minimum Domestic Credit Agreement LIBOR	Apr. 30, 2011 Minimum Domestic Credit Agreement Base Rate	Apr. 30, 2011 Maximum Domestic Credit Agreement USD ($)	Apr. 30, 2011 Maximum Domestic Credit Agreement LIBOR	Apr. 30, 2011 Maximum Domestic Credit Agreement Base Rate	Apr. 30, 2011 Letter of Credit Domestic Credit Agreement USD ($)	Aug. 03, 2013 Sears Canada Five Year Revolving Credit Facility USD ($)	Aug. 03, 2013 Sears Canada Five Year Revolving Credit Facility CAD	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility USD ($)	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility CAD	Jul. 28, 2012 Sears Canada Five Year Revolving Credit Facility USD ($)	Jul. 28, 2012 Sears Canada Five Year Revolving Credit Facility CAD	Sep. 30, 2010 Sears Canada Five Year Revolving Credit Facility USD ($)
Debt Instrument [Line Items]
Credit agreement				$ 3,275,000,000					$ 2,000,000,000							$ 1,500,000,000							$ 800,000,000
Credit agreement, additional borrowing capacity													1,000,000,000
Credit agreement, interest rates margin											2.00%	1.00%		2.50%	1.50%
Commitment fees										0.375%			0.625%
Line of Credit Facility, Amount Outstanding	1,509,000,000	749,000,000	941,000,000		1,500,000,000	749,000,000	941,000,000	1,200,000,000									0		0		0
Fair value of long-term debt	1,500,000,000	1,400,000,000	1,400,000,000
Letters of credit outstanding amount					680,000,000	754,000,000	744,000,000
Credit Agreement available amount					$ 1,100,000,000	$ 1,800,000,000	$ 1,600,000,000	$ 760,000,000									$ 530,000,000	551,000,000	$ 503,000,000	502,000,000	$ 542,000,000	545,000,000
Limit of availability under the credit facility to make restricted payments										15.00%
Fixed charge ratio at the last day of any quarter					1.0
Credit agreement, covenant terms				The Domestic Credit Agreement limits our ability to make restricted payments, including dividends and share repurchases, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least 15% and an exception that requires that the restricted payment is funded from cash on hand and not borrowings under the credit facility. The Domestic Credit Agreement 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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Fair Value Measurement Amounts for Other Financial Assets and Liabilities Recorded in Condensed Consolidated Balance Sheets at Fair Value (Detail) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013		Feb. 02, 2013		Jul. 28, 2012
Fair Value Measurements [Line Items]
Cash equivalents	$ 211	[1]	$ 181	[1]	$ 274	[1]
Restricted cash	10	[2]	9	[2]	8	[2]
Foreign currency derivative assets	1
Foreign Currency Contracts, Liability, Fair Value Disclosure	(1)
Total	221		190		282
Level 1
Fair Value Measurements [Line Items]
Cash equivalents	211	[1]	181	[1]	274	[1]
Restricted cash	10	[2]	9	[2]	8	[2]
Foreign currency derivative assets	0
Foreign Currency Contracts, Liability, Fair Value Disclosure	0
Total	221		190		282
Level 2
Fair Value Measurements [Line Items]
Cash equivalents	0	[1]	0	[1]	0	[1]
Restricted cash	0	[2]	0	[2]	0	[2]
Foreign currency derivative assets	1
Foreign Currency Contracts, Liability, Fair Value Disclosure	(1)
Total	0		0		0
Level 3
Fair Value Measurements [Line Items]
Cash equivalents	0	[1]	0	[1]	0	[1]
Restricted cash	0	[2]	0	[2]	0	[2]
Foreign currency derivative assets	0
Foreign Currency Contracts, Liability, Fair Value Disclosure	0
Total	$ 0		$ 0		$ 0

[1] Included within Cash and cash equivalents on the Condensed Consolidated Balance Sheets.

[2] Included within Restricted cash on the Condensed Consolidated Balance Sheets.

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BENEFIT PLANS Summary of Components of Total Net Periodic Benefit Expense for Retirement Plans (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Components of net periodic expense:
Interest cost	$ 75	$ 96	$ 150	$ 192
Expected return on plan assets	(77)	(93)	(154)	(186)
Amortization of experience losses	49	47	97	95
Net periodic expense	$ 47	$ 50	$ 93	$ 101

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BASIS OF PRESENTATION - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013 United States Full Line And Specialty Retail Stores [Member] [Domain] Store	Aug. 03, 2013 Sears Canada Full Line And Specialty Retail Stores Store	Aug. 03, 2013 Sears Canada	Feb. 02, 2013 Sears Canada	Jul. 28, 2012 Sears Canada
Significant Accounting Policies [Line Items]
Number of stores					2,036	461
Percentage of ownership interest							51.00%	51.00%	96.00%
Depreciation expense	$ 181	$ 199	$ 361	$ 388

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Store Closing Costs Recorded (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Aug. 03, 2013		Jul. 28, 2012		Aug. 03, 2013		Jul. 28, 2012
Restructuring Cost and Reserve [Line Items]
Store closing costs	$ 11		$ 25		$ 33		$ 59
Depreciation expense	181		199		361		388
Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	8		9		17		12
Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	3		14		14		45
Sears Canada
Restructuring Cost and Reserve [Line Items]
Store closing costs			2		2		2
Markdowns
Restructuring Cost and Reserve [Line Items]
Store closing costs	7	[1]	0	[1]	15	[1]	0	[1]
Markdowns | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	4	[1]	0	[1]	9	[1]	0	[1]
Markdowns | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	3	[1]	0	[1]	6	[1]	0	[1]
Markdowns | Sears Canada
Restructuring Cost and Reserve [Line Items]
Store closing costs			0	[1]	0	[1]	0	[1]
Severance Costs
Restructuring Cost and Reserve [Line Items]
Store closing costs	2	[2]	2	[2]	6		2	[2]
Severance Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[2]	0	[2]	2	[2]	0	[2]
Severance Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[2]	0	[2]	2	[2]	0	[2]
Severance Costs | Sears Canada
Restructuring Cost and Reserve [Line Items]
Store closing costs			2	[2]	2	[2]	2	[2]
Lease Termination Costs
Restructuring Cost and Reserve [Line Items]
Store closing costs	(3)	[2]	16	[2]	(7)		50	[2]
Lease Termination Costs | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	0	[2]	8	[2]	(1)	[2]	11	[2]
Lease Termination Costs | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	(3)	[2]	8	[2]	(6)	[2]	39	[2]
Lease Termination Costs | Sears Canada
Restructuring Cost and Reserve [Line Items]
Store closing costs			0	[2]	0	[2]	0	[2]
Other Charges
Restructuring Cost and Reserve [Line Items]
Store closing costs	4	[2]	0	[2]	9		0	[2]
Other Charges | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	3	[2]	0	[2]	6	[2]	0	[2]
Other Charges | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[2]	0	[2]	3	[2]	0	[2]
Other Charges | Sears Canada
Restructuring Cost and Reserve [Line Items]
Store closing costs			0	[2]	0	[2]	0	[2]
Impairment and Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[3]	7	[3]	10	[3]	7	[3]
Impairment charges					8
Depreciation expense					2
Impairment and Accelerated Depreciation | Kmart
Restructuring Cost and Reserve [Line Items]
Store closing costs	0	[3]	1	[3]	1	[3]	1	[3]
Impairment and Accelerated Depreciation | Sears Domestic
Restructuring Cost and Reserve [Line Items]
Store closing costs	1	[3]	6	[3]	9	[3]	6	[3]
Impairment and Accelerated Depreciation | Sears Canada
Restructuring Cost and Reserve [Line Items]
Store closing costs			$ 0	[3]	$ 0	[3]	$ 0	[3]

[1] Recorded within Cost of sales, buying and occupancy on the Condensed Consolidated Statements of Operations.

[2] Recorded within Selling and administrative on the Condensed 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] Costs for the 26- week period ended August 3, 2013 include $8 million recorded within Impairment charges and $2 million recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 13- week period ended August 3, 2013 and the 13- week and 26- week periods ended July 28, 2012 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations.

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STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Tables)

6 Months Ended

Aug. 03, 2013

Store Closing Costs, Impairments and Real Estate Transactions [Abstract]

Store Closing Costs Recorded

Store closing costs recorded for the 13- and 26- week periods ended August 3, 2013 and July 28, 2012 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	$	4	$	1	$	—		$	3	$	—	$	8
Sears Domestic	3		1		(3		)	1		1		3
Total for the 13-week period ended August 3, 2013	$	7	$	2	$	(3	)	$	4	$	1	$	11
Kmart	$	—	$	—	$	8		$	—	$	1	$	9
Sears Domestic	—		—		8			—		6		14
Sears Canada	—		2		—			—		—		2
Total for the 13-week period ended July 28, 2012	$	—	$	2	$	16		$	—	$	7	$	25
Kmart	$	9	$	2	$	(1	)	$	6	$	1	$	17
Sears Domestic	6		2		(6		)	3		9		14
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended August 3, 2013	$	15	$	6	$	(7	)	$	9	$	10	$	33
Kmart	$	—	$	—	$	11		$	—	$	1	$	12
Sears Domestic	—		—		39			—		6		45
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended July 28, 2012	$	—	$	2	$	50		$	—	$	7	$	59

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

⁽²⁾  Recorded within Selling and administrative on the Condensed 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⁾  Costs for the 26- week period ended August 3, 2013 include $8 million recorded within Impairment charges and $2 million recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 13- week period ended August 3, 2013 and the 13- week and 26- week periods ended July 28, 2012 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations.

Store Closing Cost Accruals

Store closing cost accruals of $157 million, $165 million and $193 million at August 3, 2013, July 28, 2012 and February 2, 2013, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at July 28, 2012	$	21		$	123		$	21		$	165
Store closing costs	29			25			7			61
Payments/utilizations	(9		)	(10		)	(14		)	(33		)
Balance at February 2, 2013	41			138			14			193
Store closing costs	6			(7		)	9			8
Payments/utilizations	(24		)	(12		)	(8		)	(44		)
Balance at August 3, 2013	$	23		$	119		$	15		$	157

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Condensed Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (419)	$ 61
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	378	414
Impairment charges	8	0
Gain on sales of assets	(255)	(410)
Pension and postretirement plan contributions	(176)	(164)
Settlement of Canadian dollar hedges	0	6
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	12	32
Merchandise inventories	(183)	(248)
Merchandise payables	157	178
Income and other taxes	(12)	14
Mark-to-market adjustments and settlements on Sears Canada U.S. dollar collar contracts	(1)	0
Other operating assets	(43)	91
Other operating liabilities	(181)	(46)
Net cash used in operating activities	(715)	(72)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	287	456
Net (increase) decrease in investments and restricted cash	(1)	(1)
Purchases of property and equipment	(116)	(161)
Net cash provided by (used in) investing activities	170	294
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances	2	2
Repayments of long-term debt	(46)	(231)
Increase (decrease) in short-term borrowings, primarily 90 days or less	662	1
Purchase of Sears Canada shares	0	(10)
Net cash provided by (used in) financing activities	618	(238)
Effect of exchange rate changes on cash and cash equivalents	(11)	(1)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	62	(17)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	609	747
CASH AND CASH EQUIVALENTS, END OF PERIOD	671	730
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	32	20
Cash interest paid	98	100
Unpaid liability to acquire equipment and software	$ 43	$ 50

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BASIS OF PRESENTATION

6 Months Ended

Aug. 03, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

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 2,036 full-line and specialty retail stores in the United States, operating through Kmart and Sears, and 461 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.

These interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full fiscal year. The retail business is seasonal in nature, and we generate a high proportion of our revenues and operating cash flows during the fourth quarter of our fiscal year, which includes the holiday season. These interim financial statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2013.

Depreciation Expense

Depreciation expense included within depreciation and amortization expense reported on the Condensed Consolidated Statements of Operations was $181 million, $361 million, $199 million and $388 million for the 13- and 26- week periods ended August 3, 2013 and July 28, 2012, respectively.

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. 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"), at the completion of the separation, was a majority shareholder of Holdings and was a majority shareholder of Sears Hometown and Outlet Stores, Inc. ("SHO") as a result of exercising subscription rights pursuant to the rights offering. Accordingly, we classified the difference between the proceeds received and 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 14. 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 the Sears Hometown and Outlet businesses through the date of the separation are presented within the consolidated operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements. Additionally, the Company has guaranteed lease obligations for certain SHO store leases that were assigned as a result of the separation. See Note 14 to the Condensed Consolidated Financial Statements for further information related to the agreements with SHO.

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

6 Months Ended

Aug. 03, 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 Condensed 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 2 to the Condensed Consolidated Financial Statements. The following tables provide the fair value measurement amounts for other financial assets and liabilities recorded in our Condensed Consolidated Balance Sheets at fair value at August 3, 2013, July 28, 2012 and February 2, 2013:

millions	Total Fair Value Amounts at August 3, 2013			Level 1		Level 2			Level 3
Cash equivalents(1)	$	211		$	211	$	—		$	—
Restricted cash(2)	10			10		—			—
Foreign currency derivative assets(3)	1			—		1			—
Foreign currency derivative liabilities(4)	(1		)	—		(1		)	—
Total	$	221		$	221	$	—		$	—

millions	Total Fair Value Amounts at July 28, 2012		Level 1		Level 2		Level 3
Cash equivalents(1)	$	274	$	274	$	—	$	—
Restricted cash(2)	8		8		—		—
Total	$	282	$	282	$	—	$	—

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

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

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

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

⁽⁴⁾ Included within Accrued expenses and other current liabilities on the Condensed 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.

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BORROWINGS

6 Months Ended

Aug. 03, 2013

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

Total borrowings were as follows:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Short-term borrowings:
Unsecured commercial paper	$	247	$	235	$	345
Secured borrowings	1,509		941		749
Long-term debt, including current portion:
Notes and debentures outstanding	1,582		1,668		1,593
Capitalized lease obligations	404		456		433
Total borrowings	$	3,742	$	3,300	$	3,120

The fair value of long-term debt, excluding capitalized lease obligations, was $1.5 billion at August 3, 2013 and $1.4 billion at both July 28, 2012 and February 2, 2013. 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 4 to the Condensed Consolidated Financial Statements.

Unsecured Commercial Paper

We borrow through the commercial paper markets. AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we had outstanding commercial paper borrowings of$247 million, $235 million and $345 million, respectively. ESL held$235 million, $150 million and $285 million, respectively, of our commercial paper atAugust 3, 2013, July 28, 2012 and February 2, 2013, including$143 million, $85 million and $169 million, respectively, held by Edward S. Lampert. See Note 14 for further discussion of these borrowings.

Domestic Credit Agreement

During the first quarter of 2011, we entered into a$3.275 billionamended 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 plus2.0% to 2.5%. Interest rates for base rate-based borrowings vary based on leverage in the range of the applicable base rate plus1.0% to 1.5%. Commitment fees are in a range of0.375% to 0.625%based on usage.

The Domestic Credit Agreement includes a$1.5 billionletter 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 billionin additional borrowing capacity if we so choose. The Domestic Credit Agreement permits aggregate second lien indebtedness of up to$2.0 billion, of which$1.2 billionsecond lien notes were outstanding atAugust 3, 2013, providing the Company the capacity to issue up to an additional$760 millionin 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, subject to specified exceptions that are available if, in each case, no event of default under the credit facility exists immediately before or after giving effect to the restricted payment. These include exceptions that require that projected availability under the credit facility, as defined, is at least15%and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. The Domestic Credit Agreement 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 than1.0to 1.0.

AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we had $1.5 billion, $941 million and $749 million, respectively, of borrowings and$680 million, $744 million and $754 million, respectively, of letters of credit outstanding under the Domestic Credit Agreement. As a result, our availability under the agreement was$1.1 billion at August 3, 2013, $1.6 billion at July 28, 2012 and $1.8 billion at February 2, 2013. 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 billionaggregate principal amount of senior secured notes (the “Notes”), which bear interest at 6 5/8% per annum and mature onOctober 15, 2018. Concurrent with the closing of the sale of the Notes, the Company sold$250 millionaggregate principal amount of Notes to the Company’s domestic pension plan in a private placement, of which approximately$110 million remains in the domestic pension plan. 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 our domestic credit facility 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 to101%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, plus50basis 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 afive-year,$800 millionCanadian 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 account and credit card receivables, subject to certain limitations. AtAugust 3, 2013, July 28, 2012 and February 2, 2013, we hadnoborrowings outstanding under the Sears Canada Facility.Availability under this agreement was approximately$530 million ($551 millionCanadian),$542 million ($545 millionCanadian) and$503 million ($502 millionCanadian), respectively, atAugust 3, 2013, July 28, 2012 and February 2, 2013. The current availability may be reduced by reserves currently estimated by the Company to be approximately$262 millionwhich 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 potential additional reserve amount may increase or decrease in the future based on estimated net pension liabilities.

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 August 3, 2013, July 28, 2012 and February 2, 2013, 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 $0.7 billion at August 3, 2013, and approximately $0.8 billion at both July 28, 2012 and February 2, 2013.

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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SEARS CANADA - Additional Information (Detail) (Sears Canada, USD $) In Millions, unless otherwise specified	3 Months Ended			6 Months Ended		9 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Jul. 30, 2011	Aug. 03, 2013	Jul. 28, 2012	Oct. 27, 2012	Feb. 02, 2013
Business Acquisition [Line Items]
Number of common shares to be purchased for cancellation			5.1
Common shares acquired and cancelled	0	0.7		0	0.9
Value of common shares acquired and cancelled		$ 7			$ 10
Percentage of ownership interest	51.00%	96.00%		51.00%	96.00%		51.00%
Sale of Stock, Percentage of Ownership before Transaction						96.00%
Shares of Affiliate Distributed to Shareholders						45
Shares of beneficial interest	52	97		52	97		52
Expected percentage of ownership interest after spin-off						51.00%
Maximum
Business Acquisition [Line Items]
Percentage of issued and outstanding common shares to be purchased for cancellation			5.00%

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SUMMARY OF SEGMENT DATA (Tables)

6 Months Ended

Aug. 03, 2013

Segment Reporting [Abstract]

Segment Data

	13 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	977		$	2,458		$	484		$	3,919
Apparel and Soft Home	1,003			1,120			387			2,510
Food and Drug	1,169			3			—			1,172
Service and Other	19			1,202			49			1,270
Total merchandise sales and services	3,168			4,783			920			8,871
Costs and expenses
Cost of sales, buying and occupancy	2,459			3,544			682			6,685
Selling and administrative	747			1,301			243			2,291
Depreciation and amortization	33			129			25			187
Gain on sales of assets	(15		)	(45		)	(181		)	(241		)
Total costs and expenses	3,224			4,929			769			8,922
Operating income (loss)	$	(56	)	$	(146	)	$	151		$	(51	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	4		$	47		$	5		$	56

	13 Weeks Ended July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,033		$	3,129		$	577		$	4,739
Apparel and Soft Home	1,024			1,195			406			2,625
Food and Drug	1,297			12			—			1,309
Service and Other	20			726			48			794
Total merchandise sales and services	3,374			5,062			1,031			9,467
Costs and expenses
Cost of sales, buying and occupancy	2,586			3,611			739			6,936
Selling and administrative	763			1,389			285			2,437
Depreciation and amortization	38			149			25			212
Gain on sales of assets	(9		)	(5		)	(1		)	(15		)
Total costs and expenses	3,378			5,144			1,048			9,570
Operating loss	$	(4	)	$	(82	)	$	(17	)	$	(103	)
Total assets	$	4,637		$	13,736		$	2,810		$	21,183
Capital expenditures	$	35		$	26		$	20		$	81

	26 Weeks Ended August 3, 2013
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	1,875		$	4,641		$	925		$	7,441
Apparel and Soft Home	1,996			2,285			741			5,022
Food and Drug	2,359			6			—			2,365
Service and Other	41			2,358			96			2,495
Total merchandise sales and services	6,271			9,290			1,762			17,323
Costs and expenses
Cost of sales, buying and occupancy	4,857			6,837			1,287			12,981
Selling and administrative	1,460			2,556			493			4,509
Depreciation and amortization	66			262			50			378
Impairment charges	—			8			—			8
Gain on sales of assets	(28		)	(46		)	(181		)	(255		)
Total costs and expenses	6,355			9,617			1,649			17,621
Operating income (loss)	$	(84	)	$	(327	)	$	113		$	(298	)
Total assets	$	4,291		$	12,602		$	2,385		$	19,278
Capital expenditures	$	25		$	76		$	15		$	116

	26 Weeks Ended July 28, 2012
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	2,001		$	6,104		$	1,071		$	9,176
Apparel and Soft Home	2,086			2,452			772			5,310
Food and Drug	2,659			23			—			2,682
Service and Other	43			1,421			105			1,569
Total merchandise sales and services	6,789			10,000			1,948			18,737
Costs and expenses
Cost of sales, buying and occupancy	5,151			7,098			1,390			13,639
Selling and administrative	1,515			2,804			563			4,882
Depreciation and amortization	71			292			51			414
Gain on sales of assets	(14		)	(233		)	(163		)	(410		)
Total costs and expenses	6,723			9,961			1,841			18,525
Operating income	$	66		$	39		$	107		$	212
Total assets	$	4,637		$	13,736		$	2,810		$	21,183
Capital expenditures	$	67		$	58		$	36		$	161

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Total Borrowings (Detail) (USD $)	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Debt Instrument [Line Items]
Fair value of long-term debt	$ 1,500,000,000	$ 1,400,000,000	$ 1,400,000,000
Short-term borrowings:
Unsecured commercial paper	247,000,000	345,000,000	235,000,000
Secured borrowings	1,509,000,000	749,000,000	941,000,000
Long-term debt, including current portion:
Notes and debentures outstanding	1,582,000,000	1,593,000,000	1,668,000,000
Capitalized lease obligations	404,000,000	433,000,000	456,000,000
Total borrowings	$ 3,742,000,000	$ 3,120,000,000	$ 3,300,000,000

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BORROWINGS (Letters of Credit Facility) (Details) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding	$ 1,509	$ 749	$ 941

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended					3 Months Ended	6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012	Feb. 02, 2013	Aug. 03, 2013 Guarantor Subsidiaries	Jul. 28, 2012 Guarantor Subsidiaries	Aug. 03, 2013 Guarantor Subsidiaries	Jul. 28, 2012 Guarantor Subsidiaries	Feb. 02, 2013 Guarantor Subsidiaries	Aug. 03, 2013 Senior Secured Note	Oct. 31, 2010 Senior Secured Note	Jul. 28, 2012 Sears Hometown and Outlet Stores, Inc. [Member]	Jul. 28, 2012 Sears Hometown and Outlet Stores, Inc. [Member]
Condensed Financial Statements, Captions [Line Items]
Debt instrument maturity year	2018		2018
Senior secured notes, principal amount outstanding											$ 1,240	$ 1,000
Percentage of collateralized ownership of domestic subsidiaries						100.00%		100.00%
Total assets	19,278	21,183	19,278	21,183	19,340	39,539	41,216	39,539	41,216	39,096			670	670
Total Liabilities	16,454	16,687	16,454	16,687	16,168	26,715	26,683	26,715	26,683	25,815			125	125
Merchandise sales and services	8,871	9,467	17,323	18,737		8,030	8,422	15,608	16,732				645	1,300
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$ (194)	$ (132)	$ (473)	$ 57		$ (154)	$ (179)	$ (477)	$ (30)				$ 21	$ 42

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BENEFIT PLANS - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Defined Benefit Plan Disclosure [Line Items]
Contributions to pension and post-retirement plans	$ 87	$ 78	$ 176	$ 164
Anticipated aggregate contributions to domestic and Canadian defined benefit plans over remainder of fiscal 2013	$ 244

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EQUITY - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012	Feb. 02, 2013
Stockholders' Equity Note [Abstract]
Repurchase of common shares, shares	0	0	0	0
Remaining authorization to repurchase common shares under share repurchase program, value			$ 504
Accumulated other comprehensive income (loss) attributable to noncontrolling interest	$ (71)	$ (7)	$ (71)	$ (7)	$ (64)

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Net income (loss)	$ (127)	$ (133)	$ (419)	$ 61
Other comprehensive income
Pension and postretirement adjustments, net of tax	48	46	94	92
Deferred gain on derivatives, net of tax	0	3	0	5
Currency translation adjustments, net of tax	(20)	6	(27)	0
Total other comprehensive income	28	55	67	97
Comprehensive income (loss)	(99)	(78)	(352)	158
Comprehensive (income) loss attributable to noncontrolling interests	(61)	1	(47)	(5)
Comprehensive income (loss) attributable to Holdings’ shareholders	$ (160)	$ (77)	$ (399)	$ 153

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EQUITY

6 Months Ended

Aug. 03, 2013

Stockholders' Equity Note [Abstract]

EQUITY

EQUITY

Accumulated Other Comprehensive Loss

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

millions	August 3, 2013			July 28, 2012			February 2, 2013
Pension and postretirement adjustments (net of tax of $(441), $(489) and $(443), respectively)	$	(1,319	)	$	(1,485	)	$	(1,408	)
Currency translation adjustments (net of tax of $(40), $(27) and $(39), respectively)	(66		)	(29		)	(51		)
Accumulated other comprehensive loss	$	(1,385	)	$	(1,514	)	$	(1,459	)

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 August 3, 2013, July 28, 2012, and February 2, 2013 was $71 million, $7 million and $64 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:

	13 Weeks Ended August 3, 2013									13 Weeks Ended July 28, 2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments(1)	$	49		$	(1	)	$	48		$	47		$	(1	)	$	46
Deferred gain on derivatives	—			—			—			3			—			3
Currency translation adjustments	(20		)	—			(20		)	5			1			6
Total other comprehensive income (loss)	$	29		$	(1	)	$	28		$	55		$	—		$	55
	26 Weeks Ended August 3, 2013									26 Weeks Ended July 28, 2012
millions	Before Tax Amount			Tax Expense			Net of Tax Amount			Before Tax Amount			Tax Expense			Net of Tax Amount
Other comprehensive income (loss)
Pension and postretirement adjustments(1)	$	97		$	(3	)	$	94		$	95		$	(3	)	$	92
Deferred gain on derivatives	—			—			—			5			—			5
Currency translation adjustments	(28		)	1			(27		)	(1		)	1			—
Total other comprehensive income (loss)	$	69		$	(2	)	$	67		$	99		$	(2	)	$	97

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 8 to the Condensed Consolidated Financial Statements.

Share Repurchase Program

During the 13- and 26- week periods ended August 3, 2013 and July 28, 2012, we repurchased no shares of our common stock under our common share repurchase program. At August 3, 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.

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Condensed Consolidated Balance Sheets Parenthetical (ESL Investments Inc Sears Roebuck Acceptance Corp [Member], USD $) In Millions, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012	Aug. 03, 2013 Senior Secured Note	Feb. 02, 2013 Senior Secured Note	Jul. 28, 2012 Senior Secured Note
Senior secured				$ 95	$ 95	$ 95
Subsidiary notes	$ 3	$ 3	$ 14

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Condensed Consolidating Statement of Comprehensive Income (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	$ (127)	$ (133)	$ (419)	$ 61
Other comprehensive income
Pension and postretirement adjustments, net of tax	48	46	94	92
Deferred gain on derivatives, net of tax	0	3	0	5
Currency translation adjustments, net of tax	(20)	6	(27)	0
Unrealized net loss, net of tax	0	0	0	0
Total other comprehensive income	28	55	67	97
Comprehensive income (loss)	(99)	(78)	(352)	158
Comprehensive (income) loss attributable to noncontrolling interests	(61)	1	(47)	(5)
Comprehensive income (loss) attributable to Holdings’ shareholders	(160)	(77)	(399)	153
Parent
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(127)	(133)	(419)	61
Other comprehensive income
Pension and postretirement adjustments, net of tax	0	0	0	0
Deferred gain on derivatives, net of tax		3		5
Currency translation adjustments, net of tax	0	23	0	6
Unrealized net loss, net of tax	0	0	0	0
Total other comprehensive income	0	26	0	11
Comprehensive income (loss)	(127)	(107)	(419)	72
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	(127)	(107)	(419)	72
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(154)	(179)	(477)	(30)
Other comprehensive income
Pension and postretirement adjustments, net of tax	42	42	84	83
Deferred gain on derivatives, net of tax		0		0
Currency translation adjustments, net of tax	0	0	0	0
Unrealized net loss, net of tax	(3)	(269)	(2)	(269)
Total other comprehensive income	39	(227)	82	(186)
Comprehensive income (loss)	(115)	(406)	(395)	(216)
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	(115)	(406)	(395)	(216)
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	364	227	577	553
Other comprehensive income
Pension and postretirement adjustments, net of tax	6	4	10	9
Deferred gain on derivatives, net of tax		0		0
Currency translation adjustments, net of tax	(20)	(17)	(27)	(6)
Unrealized net loss, net of tax	(100)	(96)	(44)	(96)
Total other comprehensive income	(114)	(109)	(61)	(93)
Comprehensive income (loss)	250	118	516	460
Comprehensive (income) loss attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to Holdings’ shareholders	250	118	516	460
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(210)	(48)	(100)	(523)
Other comprehensive income
Pension and postretirement adjustments, net of tax	0	0	0	0
Deferred gain on derivatives, net of tax		0		0
Currency translation adjustments, net of tax	0	0	0	0
Unrealized net loss, net of tax	103	365	46	365
Total other comprehensive income	103	365	46	365
Comprehensive income (loss)	(107)	317	(54)	(158)
Comprehensive (income) loss attributable to noncontrolling interests	(61)	1	(47)	(5)
Comprehensive income (loss) attributable to Holdings’ shareholders	$ (168)	$ 318	$ (101)	$ (163)

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Condensed Consolidated Statements of Operations (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
REVENUES
Merchandise sales and services	$ 8,871	$ 9,467	$ 17,323	$ 18,737
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,685	6,936	12,981	13,639
Selling and administrative	2,291	2,437	4,509	4,882
Depreciation and amortization	187	212	378	414
Impairment charges	0	0	8	0
Gain on sales of assets	(241)	(15)	(255)	(410)
Total costs and expenses	8,922	9,570	17,621	18,525
Operating income (loss)	(51)	(103)	(298)	212
Interest expense	(59)	(65)	(120)	(131)
Interest and investment income	14	9	21	21
Other Nonoperating Income (Expense)	(1)	1	(1)	1
Income (loss) before income taxes	(97)	(158)	(398)	103
Income tax (expense) benefit	(30)	25	(21)	(42)
Net income (loss)	(127)	(133)	(419)	61
(Income) loss attributable to noncontrolling interests	(67)	1	(54)	(4)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$ (194)	$ (132)	$ (473)	$ 57
NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS
Basic earnings (loss) per share (in USD per share)	$ (1.83)	$ (1.25)	$ (4.46)	$ 0.54
Diluted earnings (loss) per share (in USD per share)	$ (1.83)	$ (1.25)	$ (4.46)	$ 0.54
Basic weighted average common shares outstanding (in shares)	106.1	105.9	106.1	105.9
Diluted weighted average common shares outstanding (in shares)	106.1	105.9	106.1	106.1

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INCOME TAXES - Additional Information (Detail) (USD $)	3 Months Ended	6 Months Ended			12 Months Ended
	Aug. 03, 2013	Aug. 03, 2013	Jul. 28, 2012	Feb. 02, 2013	Feb. 02, 2013 Minimum	Feb. 02, 2013 Maximum
Income Taxes [Line Items]
Gross unrecognized tax benefits	$ 142,000,000	$ 142,000,000	$ 161,000,000	$ 161,000,000
Unrecognized tax benefits that would, if recognized, impact effective tax rate	86,000,000	86,000,000
Decrease in gross unrecognized tax benefits due to federal and state audit settlements	9,000,000	19,000,000	31,000,000
Expected decrease in unrecognized tax benefits over the next 12 months	22,000,000	22,000,000
Interest and penalties recognized on balance sheet	51,000,000	51,000,000	58,000,000	57,000,000
Interest and penalties recognized, net of federal benefit	35,000,000	35,000,000	39,000,000	39,000,000
Net interest expense recognized in statement of income	2,000,000	4,000,000
Deferred tax asset operating loss ("NOL") carryforwards				722,000,000
Operating loss carryforwards expiration year					2019	2033
Credit carryforwards				605,000,000
Credit carryforwards expiration year					2015	2033
Deferred tax asset valuation allowance				2,700,000,000
Deferred Tax Assets, Operating Loss Carryforwards, State and Local				$ 145,000,000

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SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

6 Months Ended

Aug. 03, 2013

Supplemental Financial Information Disclosure [Abstract]

Other Long-Term Liabilities

Other long-term liabilities at August 3, 2013, July 28, 2012 and February 2, 2013 consisted of the following:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Unearned revenues	$	858	$	791	$	843
Self-insurance reserves	705		735		714
Other	518		598		569
Total	$	2,081	$	2,124	$	2,126

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BORROWINGS (Tables)

6 Months Ended

Aug. 03, 2013

Debt Disclosure [Abstract]

Total Borrowings

Total borrowings were as follows:

millions	August 3, 2013		July 28, 2012		February 2, 2013
Short-term borrowings:
Unsecured commercial paper	$	247	$	235	$	345
Secured borrowings	1,509		941		749
Long-term debt, including current portion:
Notes and debentures outstanding	1,582		1,668		1,593
Capitalized lease obligations	404		456		433
Total borrowings	$	3,742	$	3,300	$	3,120

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Store Closing Cost Accruals (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Aug. 03, 2013	Feb. 02, 2013
Restructuring Cost and Reserve [Line Items]
Beginning Balance	$ 193	$ 165
Store closing costs	8	61
Payments/utilizations	(44)	(33)
Ending Balance	157	193
Severance Costs
Restructuring Cost and Reserve [Line Items]
Beginning Balance	41	21
Store closing costs	6	29
Payments/utilizations	(24)	(9)
Ending Balance	23	41
Lease Termination Costs
Restructuring Cost and Reserve [Line Items]
Beginning Balance	138	123
Store closing costs	(7)	25
Payments/utilizations	(12)	(10)
Ending Balance	119	138
Other Charges
Restructuring Cost and Reserve [Line Items]
Beginning Balance	14	21
Store closing costs	9	7
Payments/utilizations	(8)	(14)
Ending Balance	$ 15	$ 14

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RELATED PARTY DISCLOSURE - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended				1 Months Ended		6 Months Ended				1 Months Ended											3 Months Ended	6 Months Ended		6 Months Ended						6 Months Ended
	Oct. 31, 2010	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012	Oct. 31, 2010 Senior Secured Note	Aug. 03, 2013 Senior Secured Note	Aug. 03, 2013 ESL Investments Inc	Feb. 02, 2013 ESL Investments Inc	Jul. 28, 2012 ESL Investments Inc	Jan. 26, 2012 ESL Investments Inc	Oct. 31, 2010 ESL Investments Inc Senior Secured Note	Jan. 28, 2012 ESL Investments Inc Senior Secured Note	Aug. 03, 2013 ESL Investments Inc Unsecured Senior Notes	Feb. 02, 2013 ESL Investments Inc Unsecured Senior Notes	Jul. 28, 2012 ESL Investments Inc Unsecured Senior Notes	Jan. 28, 2012 ESL Investments Inc Unsecured Senior Notes	Aug. 03, 2013 Edward S. Lampert	Feb. 02, 2013 Edward S. Lampert	Jul. 28, 2012 Edward S. Lampert	Aug. 03, 2013 Edward S. Lampert Unsecured Senior Notes	Jul. 28, 2012 Edward S. Lampert Unsecured Senior Notes	Aug. 03, 2013 Sears Hometown and Outlet Stores, Inc. [Member]	Aug. 03, 2013 Sears Hometown and Outlet Stores, Inc. [Member]	Feb. 02, 2013 Sears Hometown and Outlet Stores, Inc. [Member]	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Day	Jul. 28, 2012 Sears Roebuck Acceptance Corp [Member] Day	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] Maximum	Aug. 03, 2013 Sears Roebuck Acceptance Corp [Member] ESL Investments Inc Senior Secured Note	Feb. 02, 2013 Sears Roebuck Acceptance Corp [Member] ESL Investments Inc Senior Secured Note	Jul. 28, 2012 Sears Roebuck Acceptance Corp [Member] ESL Investments Inc Senior Secured Note	Aug. 03, 2013 Sears Canada ESL Investments Inc	Aug. 03, 2013 Sears Hometown and Outlet Stores, Inc. [Member] ESL Investments Inc
Related Party Transaction [Line Items]
Percentage of ownership in Sears outstanding common stock							55.00%																								28.00%	48.00%
Weighted average of maturity period																									30.6	27.4
Interest rate per annum on unsecured commercial paper																									2.78%	1.82%
Unsecured commercial paper		$ 247	$ 345	$ 235			$ 235	$ 285	$ 150								$ 143	$ 169	$ 85						$ 273	$ 197	$ 305
Unsecured commercial paper interest expense																									4
Senior secured					1,000	1,240						95	2	2	10	10				1	4							95	95	95
Senior secured note, interest rate	6.625%				6.625%						6.625%
Debt instrument maturity year		2018
Undivided participating interest in rights and obligations										80.00%
Participation interest in receivables							97	234	180
Due from Affiliate, Current																						77	77	79
Proceeds From Sale Of Inventory And Shared Corporate Services to Affiliate																						451	885
Payments for Commissions to Affiliate																						$ 24	$ 63
Related Party Receivables, Repayment Term																							10 days

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DERIVATIVE FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS (Details) (Foreign Exchange Forward Contracts, USD $) In Millions, unless otherwise specified	Aug. 03, 2013
Foreign Exchange Forward Contracts
Derivative [Line Items]
Notional amount	$ 165

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BORROWINGS (Senior Secured Notes) (Details) (USD $)	1 Months Ended				1 Months Ended				1 Months Ended		1 Months Ended
	Oct. 31, 2010	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012	Oct. 31, 2010 Senior Secured Note	Aug. 03, 2013 Senior Secured Note	Aug. 03, 2013 SHC Domestic, Pension Plans Senior Secured Note	Oct. 31, 2010 SHC Domestic, Pension Plans Senior Secured Note	Oct. 31, 2010 ESL Investments Inc Senior Secured Note	Jan. 28, 2012 ESL Investments Inc Senior Secured Note	Oct. 31, 2010 Treasury Rate Senior Secured Note	Aug. 03, 2013 Five Year Revolving Credit Facility Sears Canada	Feb. 02, 2013 Five Year Revolving Credit Facility Sears Canada	Jul. 28, 2012 Five Year Revolving Credit Facility Sears Canada
Debt Instrument [Line Items]
Line of Credit Facility, Amount Outstanding		$ 1,509,000,000	$ 749,000,000	$ 941,000,000								$ 0	$ 0	$ 0
Fair value of long-term debt		1,500,000,000	1,400,000,000	1,400,000,000
Senior secured notes, interest rate	6.625%				6.625%				6.625%
Senior secured					$ 1,000,000,000	$ 1,240,000,000	$ 110,000,000	$ 250,000,000		$ 95,000,000
Debt instrument maturity date					Oct. 15, 2018
Percentage of note repurchase price per principal amount					101.00%
Credit agreement, interest rates margin											0.50%

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BORROWINGS (Sears Canada Credit Agreement) (Details) In Millions, unless otherwise specified	Aug. 03, 2013 USD ($)	Feb. 02, 2013 USD ($)	Jul. 28, 2012 USD ($)	Sep. 30, 2010 Five Year Revolving Credit Facility	Aug. 03, 2013 Domestic Credit Agreement USD ($)	Feb. 02, 2013 Domestic Credit Agreement USD ($)	Jul. 28, 2012 Domestic Credit Agreement USD ($)	Apr. 30, 2011 Domestic Credit Agreement USD ($)	Aug. 03, 2013 Sears Canada Five Year Revolving Credit Facility USD ($)	Aug. 03, 2013 Sears Canada Five Year Revolving Credit Facility CAD	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility USD ($)	Feb. 02, 2013 Sears Canada Five Year Revolving Credit Facility CAD	Jul. 28, 2012 Sears Canada Five Year Revolving Credit Facility USD ($)	Jul. 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
Line of Credit Facility, Amount Outstanding	1,509	749	941		1,500	749	941		0		0		0
Credit Agreement available amount					1,100	1,800	1,600		530	551	503	502	542	545
Line Of Credit Facility, Reduction in Borrowing Capacity									$ 262

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STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

6 Months Ended

Aug. 03, 2013

Store Closing Costs, Impairments and Real Estate Transactions [Abstract]

STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

Store Closing Costs and Severance

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. During the second quarter of 2013 we closed 16 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close. During the first half of 2013, we closed 27 stores in our Kmart segment and 10 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $1 million for 4 of these stores at Kmart.

During the second quarter of 2012, we closed 29 stores in our Kmart segment and 41 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $8 million for 22 of these stores at Kmart and $8 million for 29 of these stores at Sears Domestic. During the first half of 2012 we closed 52 stores in our Kmart segment and 125 stores in our Sears Domestic segment we previously announced would close, and recorded charges for the related lease obligations of $11 million for 36 of these stores at Kmart and $39 million for 46 of these stores at Sears Domestic.

We made the decision to close 12 stores in our Kmart segment and 6 stores in our Sears Domestic segment during the second quarter of 2013, and 25 stores in our Kmart segment and 12 stores in our Sears Domestic segment during the first half of 2013.

Store closing costs recorded for the 13- and 26- week periods ended August 3, 2013 and July 28, 2012 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	$	4	$	1	$	—		$	3	$	—	$	8
Sears Domestic	3		1		(3		)	1		1		3
Total for the 13-week period ended August 3, 2013	$	7	$	2	$	(3	)	$	4	$	1	$	11
Kmart	$	—	$	—	$	8		$	—	$	1	$	9
Sears Domestic	—		—		8			—		6		14
Sears Canada	—		2		—			—		—		2
Total for the 13-week period ended July 28, 2012	$	—	$	2	$	16		$	—	$	7	$	25
Kmart	$	9	$	2	$	(1	)	$	6	$	1	$	17
Sears Domestic	6		2		(6		)	3		9		14
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended August 3, 2013	$	15	$	6	$	(7	)	$	9	$	10	$	33
Kmart	$	—	$	—	$	11		$	—	$	1	$	12
Sears Domestic	—		—		39			—		6		45
Sears Canada	—		2		—			—		—		2
Total for the 26-week period ended July 28, 2012	$	—	$	2	$	50		$	—	$	7	$	59

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

⁽²⁾  Recorded within Selling and administrative on the Condensed 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⁾  Costs for the 26- week period ended August 3, 2013 include $8 million recorded within Impairment charges and $2 million recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations. Costs for the 13- week period ended August 3, 2013 and the 13- week and 26- week periods ended July 28, 2012 are recorded within Depreciation and amortization on the Condensed Consolidated Statements of Operations.

Store closing cost accruals of $157 million, $165 million and $193 million at August 3, 2013, July 28, 2012 and February 2, 2013, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at July 28, 2012	$	21		$	123		$	21		$	165
Store closing costs	29			25			7			61
Payments/utilizations	(9		)	(10		)	(14		)	(33		)
Balance at February 2, 2013	41			138			14			193
Store closing costs	6			(7		)	9			8
Payments/utilizations	(24		)	(12		)	(8		)	(44		)
Balance at August 3, 2013	$	23		$	119		$	15		$	157

Real Estate Transactions

During the second quarter of 2013, we recorded gains on the sales of assets of $235 million in connection with real estate transactions which included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. Gains on sales of assets recorded in the second quarter of 2013 also included gains of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store.

During the first quarter of 2012, we recorded gains on the sales of assets of $386 million in connection with real estate transactions which included a gain of $223 million recognized on the sale of 11 (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 up to 23 months from the date of closing.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Tables)

6 Months Ended

Aug. 03, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Balance Sheet

der.

Condensed Consolidating Balance Sheet

August 3, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	335	$	—		$	671
Intercompany receivables	—		—		26,087		(26,087		)	—
Accounts receivable	—		530		111		—			641
Merchandise inventories	—		6,856		852		—			7,708
Prepaid expenses and other current assets	92		1,093		470		(1,175		)	480
Total current assets	92		8,815		27,855		(27,262		)	9,500
Total property and equipment, net	—		4,241		1,545		—			5,786
Goodwill and intangible assets	—		955		2,288		—			3,243
Other assets	15		227		2,905		(2,398		)	749
Investment in subsidiaries	15,822		25,301		—		(41,123		)	—
TOTAL ASSETS	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278
Current liabilities
Short-term borrowings	$	—	$	1,756	$	—	$	—		$	1,756
Current portion of long-term debt and capitalized lease obligations	—		60		15		—			75
Merchandise payables	—		2,530		373		—			2,903
Intercompany payables	12,442		13,645		—		(26,087		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,405		2,555		(1,142		)	3,844
Total current liabilities	12,471		20,808		2,943		(27,262		)	8,960
Long-term debt and capitalized lease obligations	1,237		2,923		101		(2,350		)	1,911
Pension and postretirement benefits	—		2,150		389		—			2,539
Long-term deferred tax liabilities	—		8		889		66			963
Other long-term liabilities	—		826		1,508		(253		)	2,081
Total Liabilities	13,708		26,715		5,830		(29,799		)	16,454
EQUITY
Shareholder’s equity	2,221		12,824		28,763		(41,448		)	2,360
Noncontrolling interest	—		—		—		464			464
Total Equity	2,221		12,824		28,763		(40,984		)	2,824
TOTAL LIABILITIES AND EQUITY	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278

Condensed Consolidating Balance Sheet

July 28, 2012

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	359	$	371	$	—		$	730
Intercompany receivables	—		—		25,527		(25,527		)	—
Accounts receivable	—		405		164		—			569
Merchandise inventories	—		7,819		834		—			8,653
Prepaid expenses and other current assets	81		620		471		(779		)	393
Total current assets	81		9,203		27,367		(26,306		)	10,345
Total property and equipment, net	—		4,660		1,681		—			6,341
Goodwill and intangible assets	—		1,155		2,593		—			3,748
Other assets	21		308		2,420		(2,000		)	749
Investment in subsidiaries	17,178		25,890		—		(43,068		)	—
TOTAL ASSETS	$	17,280	$	41,216	$	34,061	$	(71,374	)	$	21,183
Current liabilities
Short-term borrowings	$	—	$	1,176	$	—	$	—		$	1,176
Current portion of long-term debt and capitalized lease obligations	—		138		16		—			154
Merchandise payables	—		2,695		393		—			3,088
Intercompany payables	11,942		13,585		—		(25,527		)	—
Short-term deferred tax liabilities	5		540		—		(30		)	515
Other current liabilities	24		2,752		2,212		(749		)	4,239
Total current liabilities	11,971		20,886		2,621		(26,306		)	9,172
Long-term debt and capitalized lease obligations	1,237		2,828		104		(2,199		)	1,970
Pension and postretirement benefits	—		2,139		443		—			2,582
Long-term deferred tax liabilities	—		—		772		67			839
Other long-term liabilities	—		830		1,525		(231		)	2,124
Total Liabilities	13,208		26,683		5,465		(28,669		)	16,687
EQUITY
Shareholder’s equity	4,072		14,533		28,596		(42,764		)	4,437
Noncontrolling interest	—		—		—		59			59
Total Equity	4,072		14,533		28,596		(42,705		)	4,496
TOTAL LIABILITIES AND EQUITY	$	17,280	$	41,216	$	34,061	$	(71,374	)	$	21,183

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

Con

Condensed Consolidating Statement of Operations

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,030		$	1,780		$	(939	)	$	8,871
Cost of sales, buying and occupancy	—			6,121			1,037			(473		)	6,685
Selling and administrative	1			2,219			537			(466		)	2,291
Depreciation and amortization	—			142			45			—			187
Gain on sales of assets	—			(60		)	(181		)	—			(241		)
Total costs and expenses	1			8,422			1,438			(939		)	8,922
Operating income (loss)	(1		)	(392		)	342			—			(51		)
Interest expense	(55		)	(90		)	(22		)	108			(59		)
Interest and investment income	—			10			112			(108		)	14
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(56		)	(472		)	431			—			(97		)
Income tax (expense) benefit	—			37			(67		)	—			(30		)
Equity (deficit) in earnings in subsidiaries	(71		)	281			—			(210		)	—
Net income (loss)	(127		)	(154		)	364			(210		)	(127		)
Income attributable to noncontrolling interests	—			—			—			(67		)	(67		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(127	)	$	(154	)	$	364		$	(277	)	$	(194	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,422		$	1,944		$	(899	)	$	9,467
Cost of sales, buying and occupancy	—			6,276			1,103			(443		)	6,936
Selling and administrative	1			2,287			605			(456		)	2,437
Depreciation and amortization	—			163			49			—			212
Gain on sales of assets	—			(14		)	(1		)	—			(15		)
Total costs and expenses	1			8,712			1,756			(899		)	9,570
Operating income (loss)	(1		)	(290		)	188			—			(103		)
Interest expense	(56		)	(95		)	(27		)	113			(65		)
Interest and investment income	—			9			113			(113		)	9
Other income	—			—			1			—			1
Income (loss) before income taxes	(57		)	(376		)	275			—			(158		)
Income tax (expense) benefit	20			53			(48		)	—			25
Equity (deficit) in earnings in subsidiaries	(96		)	144			—			(48		)	—
Net income (loss)	(133		)	(179		)	227			(48		)	(133		)
Loss attributable to noncontrolling interests	—			—			—			1			1
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(133	)	$	(179	)	$	227		$	(47	)	$	(132	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	15,608		$	3,475		$	(1,760	)	$	17,323
Cost of sales, buying and occupancy	—			11,888			1,949			(856		)	12,981
Selling and administrative	1			4,306			1,106			(904		)	4,509
Depreciation and amortization	—			286			92			—			378
Impairment charges	—			8			—			—			8
Gain on sales of assets	—			(74		)	(181		)	—			(255		)
Total costs and expenses	1			16,414			2,966			(1,760		)	17,621
Operating income (loss)	(1		)	(806		)	509			—			(298		)
Interest expense	(110		)	(184		)	(48		)	222			(120		)
Interest and investment income	—			19			224			(222		)	21
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(111		)	(971		)	684			—			(398		)
Income tax (expense) benefit	—			86			(107		)	—			(21		)
Equity (deficit) in earnings in subsidiaries	(308		)	408			—			(100		)	—
Net income (loss)	(419		)	(477		)	577			(100		)	(419		)
Income attributable to noncontrolling interests	—			—			—			(54		)	(54		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(419	)	$	(477	)	$	577		$	(154	)	$	(473	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	16,732		$	3,770		$	(1,765	)	$	18,737
Cost of sales, buying and occupancy	—			12,375			2,133			(869		)	13,639
Selling and administrative	1			4,570			1,207			(896		)	4,882
Depreciation and amortization	—			316			98			—			414
Gain on sales of assets	—			(247		)	(163		)	—			(410		)
Total costs and expenses	1			17,014			3,275			(1,765		)	18,525
Operating income (loss)	(1		)	(282		)	495			—			212
Interest expense	(112		)	(191		)	(54		)	226			(131		)
Interest and investment income	—			20			227			(226		)	21
Other income	—			—			1			—			1
Income (loss) before income taxes	(113		)	(453		)	669			—			103
Income tax (expense) benefit	39			35			(116		)	—			(42		)
Equity in earnings in subsidiaries	135			388			—			(523		)	—
Net income (loss)	61			(30		)	553			(523		)	61
Income attributable to noncontrolling interests	—			—			—			(4		)	(4		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	61		$	(30	)	$	553		$	(527	)	$	57

Condensed Consolidating Statement of Comprehensive Income

26 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	16,732		$	3,770		$	(1,765	)	$	18,737
Cost of sales, buying and occupancy	—			12,375			2,133			(869		)	13,639
Selling and administrative	1			4,570			1,207			(896		)	4,882
Depreciation and amortization	—			316			98			—			414
Gain on sales of assets	—			(247		)	(163		)	—			(410		)
Total costs and expenses	1			17,014			3,275			(1,765		)	18,525
Operating income (loss)	(1		)	(282		)	495			—			212
Interest expense	(112		)	(191		)	(54		)	226			(131		)
Interest and investment income	—			20			227			(226		)	21
Other income	—			—			1			—			1
Income (loss) before income taxes	(113		)	(453		)	669			—			103
Income tax (expense) benefit	39			35			(116		)	—			(42		)
Equity in earnings in subsidiaries	135			388			—			(523		)	—
Net income (loss)	61			(30		)	553			(523		)	61
Income attributable to noncontrolling interests	—			—			—			(4		)	(4		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	61		$	(30	)	$	553		$	(527	)	$	57

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(127	)	$	(154	)	$	364		$	(210	)	$	(127	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			6			—			48
Currency translation adjustments, net of tax	—			—			(20		)	—			(20		)
Unrealized net loss, net of tax	—			(3		)	(100		)	103			—
Total other comprehensive income (loss)	—			39			(114		)	103			28
Comprehensive income (loss)	(127		)	(115		)	250			(107		)	(99		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(61		)	(61		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(127	)	$	(115	)	$	250		$	(168	)	$	(160	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(133	)	$	(179	)	$	227		$	(48	)	$	(133	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			4			—			46
Deferred gain on derivatives, net of tax	3			—			—			—			3
Currency translation adjustments, net of tax	23			—			(17		)	—			6
Unrealized net loss, net of tax	—			(269		)	(96		)	365			—
Total other comprehensive income (loss)	26			(227		)	(109		)	365			55
Comprehensive income (loss)	(107		)	(406		)	118			317			(78		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			1			1
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(107	)	$	(406	)	$	118		$	318		$	(77	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(419	)	$	(477	)	$	577		$	(100	)	$	(419	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			84			10			—			94
Currency translation adjustments, net of tax	—			—			(27		)	—			(27		)
Unrealized net loss, net of tax	—			(2		)	(44		)	46			—
Total other comprehensive income (loss)	—			82			(61		)	46			67
Comprehensive income (loss)	(419		)	(395		)	516			(54		)	(352		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(47		)	(47		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(419	)	$	(395	)	$	516		$	(101	)	$	(399	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended July 28, 2012

millions	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	61	$	(30	)	$	553		$	(523	)	$	61
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—		83			9			—			92
Deferred gain on derivatives, net of tax	5		—			—			—			5
Currency translation adjustments, net of tax	6		—			(6		)	—			—
Unrealized net loss, net of tax	—		(269		)	(96		)	365			—
Total other comprehensive income (loss)	11		(186		)	(93		)	365			97
Comprehensive income (loss)	72		(216		)	460			(158		)	158
Comprehensive income attributable to noncontrolling interests	—		—			—			(5		)	(5		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	72	$	(216	)	$	460		$	(163	)	$	153

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,213	)	$	498		$	—		$	(715	)
Proceeds from sales of property and investments	—			100			187			—			287
Net increase in investments and restricted cash	—			—			(1		)	—			(1		)
Purchases of property and equipment	—			(101		)	(15		)	—			(116		)
Net investing with Affiliates	—			—			45			(45		)	—
Net cash provided by (used in) investing activities	—			(1		)	216			(45		)	170
Proceeds from debt issuances	—			—			2			—			2
Repayments of long-term debt	—			(39		)	(7		)	—			(46		)
Increase in short-term borrowings, primarily 90 days or less	—			662			—			—			662
Intercompany dividend	257			21			(278		)	—			—
Net borrowing with Affiliates	(257		)	586			(374		)	45			—
Net cash provided by (used in) financing activities	—			1,230			(657		)	45			618
Effect of exchange rate changes on cash and cash equivalents	—			—			(11		)	—			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			16			46			—			62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			320			289			—			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	336		$	335		$	—		$	671

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended July 28, 2012

millions	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—	$	(450	)	$	378		$	—		$	(72	)
Proceeds from sales of property and investments	—		284			172			—			456
Net increase in investments and restricted cash	—		—			(1		)	—			(1		)
Purchases of property and equipment	—		(124		)	(37		)	—			(161		)
Net investing with Affiliates	—		—			(81		)	81			—
Net cash provided by investing activities	—		160			53			81			294
Proceeds from debt issuances	—		—			2			—			2
Repayments of long-term debt	—		(120		)	(111		)	—			(231		)
Increase in short-term borrowings, primarily 90 days or less	—		1			—			—			1
Purchase of Sears Canada shares	—		—			(10		)	—			(10		)
Net borrowing with Affiliates	—		432			(351		)	(81		)	—
Net cash provided by (used in) financing activities	—		313			(470		)	(81		)	(238		)
Effect of exchange rate changes on cash and cash equivalents	—		—			(1		)	—			(1		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—		23			(40		)	—			(17		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—		336			411			—			747
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—	$	359		$	371		$	—		$	730

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STORE CLOSING COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS - Additional Information (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended												6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended				6 Months Ended				3 Months Ended				6 Months Ended				3 Months Ended				6 Months Ended
	Aug. 03, 2013 USD ($)	Jul. 28, 2012 USD ($)	Aug. 03, 2013 USD ($)	Jul. 28, 2012 USD ($)	Feb. 02, 2013 USD ($)	Aug. 03, 2013 Sears Canada Full Line And Specialty Retail Stores Store	Jul. 28, 2012 Sears Canada Full Line And Specialty Retail Stores USD ($) Property	Jul. 28, 2012 Sears Canada Full Line And Specialty Retail Stores Owned Property	Jul. 28, 2012 Sears Canada Full Line And Specialty Retail Stores Leased Property	Aug. 03, 2013 Sears Canada USD ($) Property	Aug. 03, 2013 Sears Canada CAD	Jul. 28, 2012 Sears Canada USD ($) Property	Jul. 28, 2012 Sears Canada CAD	Jul. 28, 2012 Sears Canada Maximum	Aug. 03, 2013 Sears Full-Line and Kmart USD ($)	Aug. 03, 2013 Sears Domestic USD ($) Store	Jul. 28, 2012 Sears Domestic USD ($) Store	Aug. 03, 2013 Sears Domestic USD ($) Store	Jul. 28, 2012 Sears Domestic USD ($) Store	Aug. 03, 2013 Kmart USD ($) Store	Jul. 28, 2012 Kmart USD ($) Store	Aug. 03, 2013 Kmart USD ($) Store	Jul. 28, 2012 Kmart USD ($) Store	Aug. 03, 2013 Lease Termination Costs USD ($)		Jul. 28, 2012 Lease Termination Costs USD ($)		Aug. 03, 2013 Lease Termination Costs USD ($)	Jul. 28, 2012 Lease Termination Costs USD ($)		Feb. 02, 2013 Lease Termination Costs USD ($)	Aug. 03, 2013 Lease Termination Costs Sears Domestic USD ($)		Jul. 28, 2012 Lease Termination Costs Sears Domestic USD ($) Store		Aug. 03, 2013 Lease Termination Costs Sears Domestic USD ($)		Jul. 28, 2012 Lease Termination Costs Sears Domestic USD ($) Store		Aug. 03, 2013 Lease Termination Costs Kmart USD ($)		Jul. 28, 2012 Lease Termination Costs Kmart USD ($) Store		Aug. 03, 2013 Lease Termination Costs Kmart USD ($) Store		Jul. 28, 2012 Lease Termination Costs Kmart USD ($) Store
Restructuring Cost and Reserve [Line Items]
Number of stores closed																10	41	10	125	16	29	27	52											29				46				22		4		36
Lease obligations																																												$ (1)
Store closing costs	11	25	33	59												3	14	14	45	8	9	17	12	(3)	[1]	16	[1]	(7)	50	[1]		(3)	[1]	8	[1]	(6)	[1]	39	[1]	0	[1]	8	[1]	(1)	[1]	11	[1]
Number of stores closing																6		12		12		25
Store closing cost accruals	157	165	157	165	193																			119		123		119	123		138
Gain from sale of real estate	235	386					223			180					55
Number of properties sold							11	6	5	2	2
Proceed from sale of real estate							270				191
Gain from surrender and early termination of leases on properties												163
Number of stores sold						2														1
Number of terminated leases												3	3
Proceed from surrender and early termination of leases on properties													170
Lease expiration period														23 months

[1] Recorded within Selling and administrative on the Condensed 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.

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INCOME TAXES

6 Months Ended

Aug. 03, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

We had gross unrecognized tax benefits of $142 million at August 3, 2013, and $161 million at both July 28, 2012 and February 2, 2013. Of the amount at August 3, 2013, $86 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. During the 13- and 26- week periods ended August 3, 2013, gross unrecognized tax benefits decreased by $9 million and $19 million, respectively, due to foreign and state audit activity. During the 26-week period ended July 28, 2012, gross unrecognized tax benefits decreased by $31 million due to federal, foreign, and state audit activity. We expect that our unrecognized tax benefits could decrease by as much as $22 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 August 3, 2013, July 28, 2012, and February 2, 2013, the total amount of interest and penalties included in our tax accounts in our Condensed Consolidated Balance Sheet was $51 million ($35 million net of federal benefit), $58 million ($39 million net of federal benefit), and $57 million ($39 million net of federal benefit), respectively. The total amount of net interest income recognized as part of income tax benefit in our Condensed Consolidated Statements of Operations was $2 million and $4 million (net of federal benefit) for the 13- and 26- week periods ended August 3, 2013, respectively.

We file income tax returns in the United States, as well as various foreign jurisdictions. The IRS has completed its examination of Holdings’ federal income tax returns through 2009, and all matters have been resolved except one issue in the 2008 and 2009 returns for which we are currently working with the IRS Appeals. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2011, and Kmart is under examination by such jurisdictions for the years 2003 through 2011.

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

At February 2, 2013, we had a valuation allowance of $2.7 billion 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 objective negative evidence 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 as the year progresses for any change in circumstances that causes a change in judgment about the realizability of the deferred tax asset. 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 the remainder of 2013, an additional valuation allowance may be required.

The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax accounting income. For the second quarter of 2013, our effective income tax rate was an expense of 30.9% primarily due to not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the second quarter of 2013 benefited from favorable audit settlements and the lower tax on the Sears Canada gain on sales of assets.

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SEARS CANADA

6 Months Ended

Aug. 03, 2013

Noncontrolling Interest [Abstract]

SEARS CANADA

SEARS CANADA

Sears Holdings Ownership of Sears Canada

At both August 3, 2013 and February 2, 2013, Sears Holdings was the beneficial holder of approximately 52 million, or 51%, of the common shares of Sears Canada. At July 28, 2012, Sears Holdings was the beneficial holder of approximately 97 million, or 96%, 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.

Sears Canada Share Repurchases

During the second quarter of 2013, 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 5.1 million common shares. The purchase authorization expires on May 23, 2014 or on such earlier date as Sears Canada may complete its purchases pursuant to the Normal Course Issuer bid. There were no share purchases during the 13- and 26-week periods ended August 3, 2013. As part of a Normal Course Issuer Bid in place for the period from May 25, 2011 to May 24, 2012, and canceled, Sears Canada purchased and canceled approximately 0.7 million common shares for $7 million and approximately 0.9 million common shares for $10 million during the 13- and 26-week periods ended July 28, 2012, respectively.

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Condensed 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. 28, 2012	$ 4,341	$ 1	$ (5,981)	$ 10,005	$ 1,865	$ (1,609)	$ 60
Beginning Balance (in shares) at Jan. 28, 2012		106
Comprehensive income (loss)
Net income (loss)	61				57		4
Pension and postretirement adjustments, net of tax	92					91	1
Deferred gain on derivatives, net of tax	5					5
Currency translation adjustments, net of tax	0
Comprehensive income (loss)	158
Stock awards	5		10	(5)
Purchase of Sears Canada shares	(10)			(3)		(1)	(6)
Associate stock purchase	2		2
Ending Balance at Jul. 28, 2012	4,496	1	(5,969)	9,997	1,922	(1,514)	59
Ending Balance (in shares) at Jul. 28, 2012		106
Beginning Balance at Feb. 02, 2013	3,172	1	(5,970)	9,298	885	(1,459)	417
Beginning Balance (in shares) at Feb. 02, 2013		106
Comprehensive income (loss)
Net income (loss)	(419)				(473)		54
Pension and postretirement adjustments, net of tax	94					89	5
Deferred gain on derivatives, net of tax	0
Currency translation adjustments, net of tax	(27)					(15)	(12)
Comprehensive income (loss)	(352)
Stock awards	2		3	(1)
Associate stock purchase	2		2
Ending Balance at Aug. 03, 2013	$ 2,824	$ 1	$ (5,965)	$ 9,297	$ 412	$ (1,385)	$ 464
Ending Balance (in shares) at Aug. 03, 2013		106

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Summary of Segment Data (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012	Feb. 02, 2013
Segment Reporting Information [Line Items]
Merchandise sales and services	$ 8,871	$ 9,467	$ 17,323	$ 18,737
COSTS AND EXPENSES
Cost of sales, buying and occupancy	6,685	6,936	12,981	13,639
Selling and administrative	2,291	2,437	4,509	4,882
Depreciation and amortization	187	212	378	414
Impairment charges	0	0	8	0
Gain on sales of assets	(241)	(15)	(255)	(410)
Total costs and expenses	8,922	9,570	17,621	18,525
Operating income (loss)	(51)	(103)	(298)	212
Total assets	19,278	21,183	19,278	21,183	19,340
Capital expenditures	56	81	116	161
Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services	3,919	4,739	7,441	9,176
Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services	2,510	2,625	5,022	5,310
Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services	1,172	1,309	2,365	2,682
Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services	1,270	794	2,495	1,569
Kmart
Segment Reporting Information [Line Items]
Merchandise sales and services	3,168	3,374	6,271	6,789
COSTS AND EXPENSES
Cost of sales, buying and occupancy	2,459	2,586	4,857	5,151
Selling and administrative	747	763	1,460	1,515
Depreciation and amortization	33	38	66	71
Impairment charges			0
Gain on sales of assets	(15)	(9)	(28)	(14)
Total costs and expenses	3,224	3,378	6,355	6,723
Operating income (loss)	(56)	(4)	(84)	66
Total assets	4,291	4,637	4,291	4,637
Capital expenditures	4	35	25	67
Kmart | Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services	977	1,033	1,875	2,001
Kmart | Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services	1,003	1,024	1,996	2,086
Kmart | Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services	1,169	1,297	2,359	2,659
Kmart | Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services	19	20	41	43
Sears Domestic
Segment Reporting Information [Line Items]
Merchandise sales and services	4,783	5,062	9,290	10,000
COSTS AND EXPENSES
Cost of sales, buying and occupancy	3,544	3,611	6,837	7,098
Selling and administrative	1,301	1,389	2,556	2,804
Depreciation and amortization	129	149	262	292
Impairment charges			(8)
Gain on sales of assets	(45)	(5)	(46)	(233)
Total costs and expenses	4,929	5,144	9,617	9,961
Operating income (loss)	(146)	(82)	(327)	39
Total assets	12,602	13,736	12,602	13,736
Capital expenditures	47	26	76	58
Sears Domestic | Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services	2,458	3,129	4,641	6,104
Sears Domestic | Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services	1,120	1,195	2,285	2,452
Sears Domestic | Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services	3	12	6	23
Sears Domestic | Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services	1,202	726	2,358	1,421
Sears Canada
Segment Reporting Information [Line Items]
Merchandise sales and services	920	1,031	1,762	1,948
COSTS AND EXPENSES
Cost of sales, buying and occupancy	682	739	1,287	1,390
Selling and administrative	243	285	493	563
Depreciation and amortization	25	25	50	51
Impairment charges			0
Gain on sales of assets	(181)	(1)	(181)	(163)
Total costs and expenses	769	1,048	1,649	1,841
Operating income (loss)	151	(17)	113	107
Total assets	2,385	2,810	2,385	2,810
Capital expenditures	5	20	15	36
Sears Canada | Hardlines
Segment Reporting Information [Line Items]
Merchandise sales and services	484	577	925	1,071
Sears Canada | Apparel and Soft Home
Segment Reporting Information [Line Items]
Merchandise sales and services	387	406	741	772
Sears Canada | Food and Drug
Segment Reporting Information [Line Items]
Merchandise sales and services	0	0	0	0
Sears Canada | Services And Other
Segment Reporting Information [Line Items]
Merchandise sales and services	$ 49	$ 48	$ 96	$ 105

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EQUITY (Components of Accumulated Other Comprehensive Loss) (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Stockholders' Equity Note [Abstract]
Pension and postretirement adjustments, tax	$ (441)	$ (443)	$ (489)
Currency translation adjustments, tax	$ (40)	$ (39)	$ (27)

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BORROWINGS (Unsecured Commercial Paper) (Details) (USD $) In Millions, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Debt Instrument [Line Items]
Unsecured commercial paper	$ 247	$ 345	$ 235
ESL Investments Inc
Debt Instrument [Line Items]
Unsecured commercial paper	235	285	150
Edward S. Lampert
Debt Instrument [Line Items]
Unsecured commercial paper	143	169	85
Sears Roebuck Acceptance Corp [Member]
Debt Instrument [Line Items]
Unsecured commercial paper	$ 273		$ 197

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Condensed Consolidating Statement of Cash Flows (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	$ (715)	$ (72)
Proceeds from sales of property and investments	287	456
Net increase in investments and restricted cash	(1)	(1)
Purchases of property and equipment	(116)	(161)
Net investing with Affiliates	0	0
Net cash provided by (used in) investing activities	170	294
Proceeds from debt issuances	2	2
Repayments of long-term debt	(46)	(231)
Increase (decrease) in short-term borrowings, primarily 90 days or less	662	1
Intercompany dividend	0
Purchase of Sears Canada shares	0	(10)
Net borrowing with Affiliates	0	0
Net cash provided by (used in) financing activities	618	(238)
Effect of exchange rate changes on cash and cash equivalents	(11)	(1)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	62	(17)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	609	747
CASH AND CASH EQUIVALENTS, END OF PERIOD	671	730
Parent
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	0	0
Proceeds from sales of property and investments	0	0
Net increase in investments and restricted cash	0	0
Purchases of property and equipment	0	0
Net investing with Affiliates	0	0
Net cash provided by (used in) investing activities	0	0
Proceeds from debt issuances	0	0
Repayments of long-term debt	0	0
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0
Intercompany dividend	(257)
Purchase of Sears Canada shares		0
Net borrowing with Affiliates	(257)	0
Net cash provided by (used in) financing activities	0	0
Effect of exchange rate changes on cash and cash equivalents	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	0	0
Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	(1,213)	(450)
Proceeds from sales of property and investments	100	284
Net increase in investments and restricted cash	0	0
Purchases of property and equipment	(101)	(124)
Net investing with Affiliates	0	0
Net cash provided by (used in) investing activities	(1)	160
Proceeds from debt issuances	0	0
Repayments of long-term debt	(39)	(120)
Increase (decrease) in short-term borrowings, primarily 90 days or less	662	1
Intercompany dividend	(21)
Purchase of Sears Canada shares		0
Net borrowing with Affiliates	586	432
Net cash provided by (used in) financing activities	1,230	313
Effect of exchange rate changes on cash and cash equivalents	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	16	23
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	320	336
CASH AND CASH EQUIVALENTS, END OF PERIOD	336	359
Non-Guarantor Subsidiaries
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	498	378
Proceeds from sales of property and investments	187	172
Net increase in investments and restricted cash	(1)	(1)
Purchases of property and equipment	(15)	(37)
Net investing with Affiliates	45	(81)
Net cash provided by (used in) investing activities	216	53
Proceeds from debt issuances	2	2
Repayments of long-term debt	(7)	(111)
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0
Intercompany dividend	278
Purchase of Sears Canada shares		(10)
Net borrowing with Affiliates	(374)	(351)
Net cash provided by (used in) financing activities	(657)	(470)
Effect of exchange rate changes on cash and cash equivalents	(11)	(1)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	46	(40)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	289	411
CASH AND CASH EQUIVALENTS, END OF PERIOD	335	371
Eliminations
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities	0	0
Proceeds from sales of property and investments	0	0
Net increase in investments and restricted cash	0	0
Purchases of property and equipment	0	0
Net investing with Affiliates	(45)	81
Net cash provided by (used in) investing activities	(45)	81
Proceeds from debt issuances	0	0
Repayments of long-term debt	0	0
Increase (decrease) in short-term borrowings, primarily 90 days or less	0	0
Intercompany dividend	0
Purchase of Sears Canada shares		0
Net borrowing with Affiliates	45	(81)
Net cash provided by (used in) financing activities	45	(81)
Effect of exchange rate changes on cash and cash equivalents	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	0	0
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	0	0
CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 0	$ 0

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LEGAL PROCEEDINGS

6 Months Ended

Aug. 03, 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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BENEFIT PLANS

6 Months Ended

Aug. 03, 2013

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

BENEFIT PLANS

BENEFIT PLANS

Pension and Postretirement Benefit Plans

We provide benefits to certain associates who are eligible under various defined benefit pension plans, contributory defined benefit pension plans and other postretirement plans, primarily retiree medical benefits. 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. The following table summarizes the components of total net periodic benefit expense, recorded within Selling and administrative on the Condensed Consolidated Statements of Operations, for our retirement plans:

	13 Weeks Ended						26 Weeks Ended
millions	August 3, 2013			July 28, 2012			August 3, 2013			July 28, 2012
Components of net periodic expense:
Interest cost	$	75		$	96		$	150		$	192
Expected return on plan assets	(77		)	(93		)	(154		)	(186		)
Amortization of experience losses	49			47			97			95
Net periodic expense	$	47		$	50		$	93		$	101

Contributions

During the 13- and 26- week periods ended August 3, 2013, we made total contributions of $87 million and $176 million, respectively, to our pension and postretirement plans. During the 13- and 26- week periods ended July 28, 2012, we made total contributions of $78 million and $164 million, respectively, to our pension and postretirement plans. We anticipate making aggregate contributions to our domestic and Canadian defined benefit and postretirement plans of approximately $244 million over the remainder of 2013.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

6 Months Ended

Aug. 03, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At August 3, 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 notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by SRAC (the “guarantor subsidiaries”). The following condensed consolidated financial information presents the Condensed Consolidating Balance Sheets at August 3, 2013, July 28, 2012 and February 2, 2013, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13-and 26- week periods ended August 3, 2013 and July 28, 2012, and the Condensed Consolidating Statements of Cash flows for the 26-week periods ended August 3, 2013 and July 28, 2012 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 $670 million and $125 million, respectively, at July 28, 2012 attributable to the Sears Hometown and Outlet businesses. Merchandise sales and services included revenues of approximately $645 million and $1.3 billion, respectively, from the Sears Hometown and Outlet businesses for the 13- and 26- week periods ended July 28, 2012. Net income (loss) attributable to Holdings' shareholders included net income of approximately $21 million and $42 million, respectively, from the Sears Hometown and Outlet businesses for the 13- and 26- week periods ended July 28, 2012. The financial information for the Sears Hometown and Outlet businesses is reflected within the guarantor subsidiaries balances for this period. The condensed consolidated financial information at and for the period ended August 3, 2013 reflects 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

August 3, 2013

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	336	$	335	$	—		$	671
Intercompany receivables	—		—		26,087		(26,087		)	—
Accounts receivable	—		530		111		—			641
Merchandise inventories	—		6,856		852		—			7,708
Prepaid expenses and other current assets	92		1,093		470		(1,175		)	480
Total current assets	92		8,815		27,855		(27,262		)	9,500
Total property and equipment, net	—		4,241		1,545		—			5,786
Goodwill and intangible assets	—		955		2,288		—			3,243
Other assets	15		227		2,905		(2,398		)	749
Investment in subsidiaries	15,822		25,301		—		(41,123		)	—
TOTAL ASSETS	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278
Current liabilities
Short-term borrowings	$	—	$	1,756	$	—	$	—		$	1,756
Current portion of long-term debt and capitalized lease obligations	—		60		15		—			75
Merchandise payables	—		2,530		373		—			2,903
Intercompany payables	12,442		13,645		—		(26,087		)	—
Short-term deferred tax liabilities	3		412		—		(33		)	382
Other current liabilities	26		2,405		2,555		(1,142		)	3,844
Total current liabilities	12,471		20,808		2,943		(27,262		)	8,960
Long-term debt and capitalized lease obligations	1,237		2,923		101		(2,350		)	1,911
Pension and postretirement benefits	—		2,150		389		—			2,539
Long-term deferred tax liabilities	—		8		889		66			963
Other long-term liabilities	—		826		1,508		(253		)	2,081
Total Liabilities	13,708		26,715		5,830		(29,799		)	16,454
EQUITY
Shareholder’s equity	2,221		12,824		28,763		(41,448		)	2,360
Noncontrolling interest	—		—		—		464			464
Total Equity	2,221		12,824		28,763		(40,984		)	2,824
TOTAL LIABILITIES AND EQUITY	$	15,929	$	39,539	$	34,593	$	(70,783	)	$	19,278

Condensed Consolidating Balance Sheet

July 28, 2012

millions	Parent		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—	$	359	$	371	$	—		$	730
Intercompany receivables	—		—		25,527		(25,527		)	—
Accounts receivable	—		405		164		—			569
Merchandise inventories	—		7,819		834		—			8,653
Prepaid expenses and other current assets	81		620		471		(779		)	393
Total current assets	81		9,203		27,367		(26,306		)	10,345
Total property and equipment, net	—		4,660		1,681		—			6,341
Goodwill and intangible assets	—		1,155		2,593		—			3,748
Other assets	21		308		2,420		(2,000		)	749
Investment in subsidiaries	17,178		25,890		—		(43,068		)	—
TOTAL ASSETS	$	17,280	$	41,216	$	34,061	$	(71,374	)	$	21,183
Current liabilities
Short-term borrowings	$	—	$	1,176	$	—	$	—		$	1,176
Current portion of long-term debt and capitalized lease obligations	—		138		16		—			154
Merchandise payables	—		2,695		393		—			3,088
Intercompany payables	11,942		13,585		—		(25,527		)	—
Short-term deferred tax liabilities	5		540		—		(30		)	515
Other current liabilities	24		2,752		2,212		(749		)	4,239
Total current liabilities	11,971		20,886		2,621		(26,306		)	9,172
Long-term debt and capitalized lease obligations	1,237		2,828		104		(2,199		)	1,970
Pension and postretirement benefits	—		2,139		443		—			2,582
Long-term deferred tax liabilities	—		—		772		67			839
Other long-term liabilities	—		830		1,525		(231		)	2,124
Total Liabilities	13,208		26,683		5,465		(28,669		)	16,687
EQUITY
Shareholder’s equity	4,072		14,533		28,596		(42,764		)	4,437
Noncontrolling interest	—		—		—		59			59
Total Equity	4,072		14,533		28,596		(42,705		)	4,496
TOTAL LIABILITIES AND EQUITY	$	17,280	$	41,216	$	34,061	$	(71,374	)	$	21,183

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 Statement of Operations

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,030		$	1,780		$	(939	)	$	8,871
Cost of sales, buying and occupancy	—			6,121			1,037			(473		)	6,685
Selling and administrative	1			2,219			537			(466		)	2,291
Depreciation and amortization	—			142			45			—			187
Gain on sales of assets	—			(60		)	(181		)	—			(241		)
Total costs and expenses	1			8,422			1,438			(939		)	8,922
Operating income (loss)	(1		)	(392		)	342			—			(51		)
Interest expense	(55		)	(90		)	(22		)	108			(59		)
Interest and investment income	—			10			112			(108		)	14
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(56		)	(472		)	431			—			(97		)
Income tax (expense) benefit	—			37			(67		)	—			(30		)
Equity (deficit) in earnings in subsidiaries	(71		)	281			—			(210		)	—
Net income (loss)	(127		)	(154		)	364			(210		)	(127		)
Income attributable to noncontrolling interests	—			—			—			(67		)	(67		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(127	)	$	(154	)	$	364		$	(277	)	$	(194	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	8,422		$	1,944		$	(899	)	$	9,467
Cost of sales, buying and occupancy	—			6,276			1,103			(443		)	6,936
Selling and administrative	1			2,287			605			(456		)	2,437
Depreciation and amortization	—			163			49			—			212
Gain on sales of assets	—			(14		)	(1		)	—			(15		)
Total costs and expenses	1			8,712			1,756			(899		)	9,570
Operating income (loss)	(1		)	(290		)	188			—			(103		)
Interest expense	(56		)	(95		)	(27		)	113			(65		)
Interest and investment income	—			9			113			(113		)	9
Other income	—			—			1			—			1
Income (loss) before income taxes	(57		)	(376		)	275			—			(158		)
Income tax (expense) benefit	20			53			(48		)	—			25
Equity (deficit) in earnings in subsidiaries	(96		)	144			—			(48		)	—
Net income (loss)	(133		)	(179		)	227			(48		)	(133		)
Loss attributable to noncontrolling interests	—			—			—			1			1
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(133	)	$	(179	)	$	227		$	(47	)	$	(132	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	15,608		$	3,475		$	(1,760	)	$	17,323
Cost of sales, buying and occupancy	—			11,888			1,949			(856		)	12,981
Selling and administrative	1			4,306			1,106			(904		)	4,509
Depreciation and amortization	—			286			92			—			378
Impairment charges	—			8			—			—			8
Gain on sales of assets	—			(74		)	(181		)	—			(255		)
Total costs and expenses	1			16,414			2,966			(1,760		)	17,621
Operating income (loss)	(1		)	(806		)	509			—			(298		)
Interest expense	(110		)	(184		)	(48		)	222			(120		)
Interest and investment income	—			19			224			(222		)	21
Other loss	—			—			(1		)	—			(1		)
Income (loss) before income taxes	(111		)	(971		)	684			—			(398		)
Income tax (expense) benefit	—			86			(107		)	—			(21		)
Equity (deficit) in earnings in subsidiaries	(308		)	408			—			(100		)	—
Net income (loss)	(419		)	(477		)	577			(100		)	(419		)
Income attributable to noncontrolling interests	—			—			—			(54		)	(54		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	(419	)	$	(477	)	$	577		$	(154	)	$	(473	)

Condensed Consolidating Statement of Operations

For the 26 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	16,732		$	3,770		$	(1,765	)	$	18,737
Cost of sales, buying and occupancy	—			12,375			2,133			(869		)	13,639
Selling and administrative	1			4,570			1,207			(896		)	4,882
Depreciation and amortization	—			316			98			—			414
Gain on sales of assets	—			(247		)	(163		)	—			(410		)
Total costs and expenses	1			17,014			3,275			(1,765		)	18,525
Operating income (loss)	(1		)	(282		)	495			—			212
Interest expense	(112		)	(191		)	(54		)	226			(131		)
Interest and investment income	—			20			227			(226		)	21
Other income	—			—			1			—			1
Income (loss) before income taxes	(113		)	(453		)	669			—			103
Income tax (expense) benefit	39			35			(116		)	—			(42		)
Equity in earnings in subsidiaries	135			388			—			(523		)	—
Net income (loss)	61			(30		)	553			(523		)	61
Income attributable to noncontrolling interests	—			—			—			(4		)	(4		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS’ SHAREHOLDERS	$	61		$	(30	)	$	553		$	(527	)	$	57

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(127	)	$	(154	)	$	364		$	(210	)	$	(127	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			6			—			48
Currency translation adjustments, net of tax	—			—			(20		)	—			(20		)
Unrealized net loss, net of tax	—			(3		)	(100		)	103			—
Total other comprehensive income (loss)	—			39			(114		)	103			28
Comprehensive income (loss)	(127		)	(115		)	250			(107		)	(99		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(61		)	(61		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(127	)	$	(115	)	$	250		$	(168	)	$	(160	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended July 28, 2012

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(133	)	$	(179	)	$	227		$	(48	)	$	(133	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			42			4			—			46
Deferred gain on derivatives, net of tax	3			—			—			—			3
Currency translation adjustments, net of tax	23			—			(17		)	—			6
Unrealized net loss, net of tax	—			(269		)	(96		)	365			—
Total other comprehensive income (loss)	26			(227		)	(109		)	365			55
Comprehensive income (loss)	(107		)	(406		)	118			317			(78		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			1			1
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(107	)	$	(406	)	$	118		$	318		$	(77	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(419	)	$	(477	)	$	577		$	(100	)	$	(419	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			84			10			—			94
Currency translation adjustments, net of tax	—			—			(27		)	—			(27		)
Unrealized net loss, net of tax	—			(2		)	(44		)	46			—
Total other comprehensive income (loss)	—			82			(61		)	46			67
Comprehensive income (loss)	(419		)	(395		)	516			(54		)	(352		)
Comprehensive income attributable to noncontrolling interests	—			—			—			(47		)	(47		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	(419	)	$	(395	)	$	516		$	(101	)	$	(399	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 26 Weeks Ended July 28, 2012

millions	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	61	$	(30	)	$	553		$	(523	)	$	61
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—		83			9			—			92
Deferred gain on derivatives, net of tax	5		—			—			—			5
Currency translation adjustments, net of tax	6		—			(6		)	—			—
Unrealized net loss, net of tax	—		(269		)	(96		)	365			—
Total other comprehensive income (loss)	11		(186		)	(93		)	365			97
Comprehensive income (loss)	72		(216		)	460			(158		)	158
Comprehensive income attributable to noncontrolling interests	—		—			—			(5		)	(5		)
Comprehensive income (loss) attributable to Holdings’ shareholders	$	72	$	(216	)	$	460		$	(163	)	$	153

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended August 3, 2013

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—		$	(1,213	)	$	498		$	—		$	(715	)
Proceeds from sales of property and investments	—			100			187			—			287
Net increase in investments and restricted cash	—			—			(1		)	—			(1		)
Purchases of property and equipment	—			(101		)	(15		)	—			(116		)
Net investing with Affiliates	—			—			45			(45		)	—
Net cash provided by (used in) investing activities	—			(1		)	216			(45		)	170
Proceeds from debt issuances	—			—			2			—			2
Repayments of long-term debt	—			(39		)	(7		)	—			(46		)
Increase in short-term borrowings, primarily 90 days or less	—			662			—			—			662
Intercompany dividend	257			21			(278		)	—			—
Net borrowing with Affiliates	(257		)	586			(374		)	45			—
Net cash provided by (used in) financing activities	—			1,230			(657		)	45			618
Effect of exchange rate changes on cash and cash equivalents	—			—			(11		)	—			(11		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—			16			46			—			62
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			320			289			—			609
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	336		$	335		$	—		$	671

Condensed Consolidating Statement of Cash Flows

For the 26 Weeks Ended July 28, 2012

millions	Parent		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	—	$	(450	)	$	378		$	—		$	(72	)
Proceeds from sales of property and investments	—		284			172			—			456
Net increase in investments and restricted cash	—		—			(1		)	—			(1		)
Purchases of property and equipment	—		(124		)	(37		)	—			(161		)
Net investing with Affiliates	—		—			(81		)	81			—
Net cash provided by investing activities	—		160			53			81			294
Proceeds from debt issuances	—		—			2			—			2
Repayments of long-term debt	—		(120		)	(111		)	—			(231		)
Increase in short-term borrowings, primarily 90 days or less	—		1			—			—			1
Purchase of Sears Canada shares	—		—			(10		)	—			(10		)
Net borrowing with Affiliates	—		432			(351		)	(81		)	—
Net cash provided by (used in) financing activities	—		313			(470		)	(81		)	(238		)
Effect of exchange rate changes on cash and cash equivalents	—		—			(1		)	—			(1		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	—		23			(40		)	—			(17		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—		336			411			—			747
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—	$	359		$	371		$	—		$	730

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RECENT ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Aug. 03, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists

In July 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which requires an unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward that the entity intends to use and is available for settlement at the reporting date. The update will be effective for the Company in the first quarter of 2014 and is not expected to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows.

Disclosures about Reclassification Adjustments out of Accumulated Other Comprehensive Income

In February 2013, the 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 was effective and adopted by the Company in the first quarter of 2013 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.

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. This update was effective and adopted by the Company in the first quarter of 2013 and did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Disclosures about Offsetting Assets and Liabilities

In December 2011, the FASB issued an accounting standards update which requires disclosures of gross and net information about financial derivative instruments eligible for offset in the statement of financial position or subject to a master netting agreement. In January 2013, the FASB issued an accounting standards update which narrows the scope of the disclosure requirements to derivatives, securities borrowings, and securities lending transactions that are either offset or subject to a master netting arrangement. This update was effective for and adopted by the Company in the first quarter of 2013 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.

XML

Document and Entity Information	6 Months Ended
	Aug. 03, 2013	Aug. 16, 2013
Entity Registrant Name	SEARS HOLDINGS CORP
Entity Central Index Key	0001310067
Current Fiscal Year End Date	--02-01
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Aug. 03, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Amendment Flag	false
Trading Symbol	SHLD
Entity Common Stock, Shares Outstanding		106,469,847

XML

RELATED PARTY DISCLOSURE

6 Months Ended

Aug. 03, 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 August 3, 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 the first half of 2013 and 2012, ESL and its affiliates purchased unsecured commercial paper issued by Sears Roebuck Acceptance Corp. (“SRAC”), an indirect wholly owned subsidiary of Sears Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding was 30.6 days, 2.78% and $273 million and 27.4 days, 1.82% and $197 million, respectively, in the first half of 2013 and 2012. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2013 was $305 million and the aggregate amount of interest paid by SRAC to ESL during the first half of 2013 was $4 million. ESL held $235 million, $150 million and $285 million, respectively, in principal amount of commercial paper at August 3, 2013, July 28, 2012 and February 2, 2013, which included $143 million, $85 million and $169 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 "6 5/8% 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”). The Subsidiary Notes issued by Sears DC Corp. matured in 2012. At both August 3, 2013 and February 2, 2013, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% Notes and $1 million and $2 million, respectively, of principal amount of Subsidiary Notes. At July 28, 2012, Mr. Lampert and ESL held an aggregate of $95 million of principal amount of 6 5/8% 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 August 3, 2013, July 28, 2012 and February 2, 2013, ESL held a participation interest totaling $97 million, $180 million and $234 million, respectively, in the financial institution’s agreements relating to the Company.

Sears Canada

ESL directly 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 48% of the outstanding common stock of SHO (based on publicly available information as of June 10, 2013).

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, 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 August 3, 2013 and February 2, 2013, Holdings reported a net amount receivable from SHO of $77 million and $79 million, respectively, in the Accounts receivable line of the Condensed Consolidated Balance Sheets. Amounts related to the sale of inventory and related services, royalties, and corporate shared services were $451 million and $885 million, respectively, and the net amounts SHO earned related to commissions were $24 million and $63 million, respectively, for the 13- and 26- week periods ended August 3, 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 of our Annual Report on Form 10-K for the fiscal year ended February 2, 2013 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.