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 OCTOBER 31, 2015

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-51217, 001-36693

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 November 27, 2015, the registrant had 106,689,188 common shares, $0.01 par value, outstanding.

SEARS HOLDINGS CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 39 Weeks Ended October 31, 2015 and November 1, 2014	3
	Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the 13 and 39 Weeks Ended October 31, 2015 and November 1, 2014	4
	Condensed Consolidated Balance Sheets (Unaudited) at October 31, 2015, November 1, 2014 and January 31, 2015	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the 39 Weeks Ended October 31, 2015 and November 1, 2014	6
	Condensed Consolidated Statements of Equity (Deficit) (Unaudited) for the 39 Weeks Ended October 31, 2015 and November 1, 2014	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 4.	Controls and Procedures	76
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 4.	Mine Safety Disclosures	77
Item 6.	Exhibits	78

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Operations

(Unaudited)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

	13 Weeks Ended						39 Weeks Ended
millions, except per share data	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
REVENUES
Merchandise sales and services(1)(2)	$	5,750		$	7,207		$	17,843		$	23,099
COSTS AND EXPENSES
Cost of sales, buying and occupancy(1)(3)	4,488			5,606			13,628			17,928
Selling and administrative	1,630			2,011			5,005			6,218
Depreciation and amortization	94			148			330			455
Impairment charges	17			—			71			25
Gain on sales of assets	(97		)	(68		)	(730		)	(148		)
Total costs and expenses	6,132			7,697			18,304			24,478
Operating loss	(382		)	(490		)	(461		)	(1,379		)
Interest expense	(74		)	(78		)	(249		)	(221		)
Interest and investment income (loss)	17			97			(27		)	133
Other income	—			2			—			4
Loss before income taxes	(439		)	(469		)	(737		)	(1,463		)
Income tax (expense) benefit	(14		)	(159		)	189			(188		)
Net loss	(453		)	(628		)	(548		)	(1,651		)
(Income) loss attributable to noncontrolling interests	(1		)	80			(1		)	128
NET LOSS ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(454	)	$	(548	)	$	(549	)	$	(1,523	)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS
Basic loss per share	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Diluted loss per share	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Basic weighted average common shares outstanding	106.6			106.4			106.5			106.3
Diluted weighted average common shares outstanding	106.6			106.4			106.5			106.3

⁽¹⁾  Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $315 million and $329 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $1.0 billion and $1.1 billion for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

⁽²⁾ Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at owned Sears locations, participation in the Shop Your Way^® program and corporate shared services of $14 million and $18 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $45 million and $41 million for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively.

⁽³⁾ Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $22 million and $27 million for the 13- and 39-weeks ended October 31, 2015, respectively, and installment expenses of $17 million and $22 million for the 13- and 39-weeks ended October 31, 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage"). There was no such rent or installment expenses incurred for the 13- and 39-weeks ended November 1, 2014.

See accompanying notes.

3

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

	13 Weeks Ended						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Net loss	$	(453	)	$	(628	)	$	(548	)	$	(1,651	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	65			30			196			95
Deferred loss on derivatives, net of tax	—			—			—			(2		)
Currency translation adjustments, net of tax	—			(11		)	—			3
Sears Canada de-consolidation	—			(186		)	—			(186		)
Total other comprehensive income (loss)	65			(167		)	196			(90		)
Comprehensive loss	(388		)	(795		)	(352		)	(1,741		)
Comprehensive income (loss) attributable to noncontrolling interests	(1		)	401			(1		)	438
Comprehensive loss attributable to Holdings' shareholders	$	(389	)	$	(394	)	$	(353	)	$	(1,303	)

See accompanying notes.

4

SEARS HOLDINGS CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

millions	October 31, 2015			November 1, 2014		January 31, 2015
ASSETS
Current assets
Cash and cash equivalents	$	294		$	326	$	250
Accounts receivable(1)	475			546		429
Merchandise inventories	6,208			6,464		4,943
Prepaid expenses and other current assets	242			255		241
Total current assets	7,219			7,591		5,863
Property and equipment (net of accumulated depreciation and amortization of $2,925, $4,001 and $3,864)	2,668			4,561		4,449
Goodwill	269			269		269
Trade names and other intangible assets	2,090			2,104		2,097
Other assets	523			644		531
TOTAL ASSETS	$	12,769		$	15,169	$	13,209
LIABILITIES
Current liabilities
Short-term borrowings(2)	$	686		$	2,096	$	615
Current portion of long-term debt and capitalized lease obligations	71			75		75
Merchandise payables	2,295			2,431		1,621
Other current liabilities	1,927			2,100		2,087
Unearned revenues	793			825		818
Other taxes	324			406		380
Short-term deferred tax liabilities	422			481		480
Total current liabilities	6,518			8,414		6,076
Long-term debt and capitalized lease obligations(3)	2,124			2,769		3,110
Pension and postretirement benefits	2,133			1,320		2,404
Deferred gain on sale-leaseback	775			—		—
Sale-leaseback financing obligation	164			—		—
Other long-term liabilities	1,811			1,830		1,849
Long-term deferred tax liabilities	537			710		715
Total Liabilities	14,062			15,043		14,154
Commitments and contingencies
EQUITY (DEFICIT)
Total Equity (Deficit)	(1,293		)	126		(945		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	12,769		$	15,169	$	13,209

⁽¹⁾  Includes $85 million, $80 million and $61 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively, of net amounts receivable from SHO, and a net amount receivable from Lands' End of $4 million, $5 million and $5 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively. Also, includes $8 million of net amounts receivable from Seritage at October 31, 2015.

⁽²⁾ Includes a $400 million secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, at November 1, 2014 and January 31, 2015.

⁽³⁾  Includes $11 million of Senior Secured Notes and $3 million of Subsidiary Notes held by ESL and its affiliates at October 31, 2015. Includes $205 million of Senior Secured Notes and $3 million of Subsidiary Notes held by ESL and its affiliates at November 1, 2014 and January 31, 2015. Also includes $201 million and $299 million of Senior Unsecured Notes held by ESL and its affiliates at October 31, 2015 and January 31, 2015, respectively.

See accompanying notes.

5

SEARS HOLDINGS CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	39 Weeks Ended
millions	October 31, 2015			November 1, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(548	)	$	(1,651	)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred tax valuation allowance	(500		)	152
Depreciation and amortization	330			455
Impairment charges	71			25
Gain on sales of assets	(730		)	(148		)
Gain on sales of investments	—			(105		)
Pension and postretirement plan contributions	(246		)	(366		)
Mark-to-market adjustments of financial instruments	33			(9		)
Amortization of deferred gain on sale-leaseback	(30		)	—
Settlement of Canadian dollar hedges	—			8
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes	213			(40		)
Merchandise inventories	(1,265		)	(430		)
Merchandise payables	674			282
Income and other taxes	(40		)	(48		)
Other operating assets	7			(58		)
Other operating liabilities	(23		)	(9		)
Net cash used in operating activities	(2,054		)	(1,942		)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments(1)(2)	2,708			316
Purchases of property and equipment	(152		)	(202		)
De-consolidation of Sears Canada cash	—			(207		)
Proceeds from Sears Canada rights offering(3)	—			169
Net cash provided by investing activities	2,556			76
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt issuances(3)	—			400
Repayments of debt(4)	(1,387		)	(61		)
Increase in short-term borrowings, primarily 90 days or less	471			364
Proceeds from sale-leaseback financing(2)	508			—
Lands' End, Inc. pre-separation funding	—			515
Separation of Lands' End, Inc.	—			(31		)
Debt issuance costs	(50		)	(20		)
Net cash provided by (used in) financing activities	(458		)	1,167
Effect of exchange rate changes on cash and cash equivalents	—			(3		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	44			(702		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	250			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	294		$	326
Supplemental Cash Flow Data:
Income taxes paid, net of refunds	$	36		$	94
Cash interest paid	191			193
Unpaid liability to acquire equipment and software	11			20
Receivable related to Sears Canada rights offering	—			103

⁽¹⁾The Seritage transaction was partially financed through the sale of common shares and limited partnership units (the "rights offering"), totaling $1.6 billion, including $745 million received from ESL and its affiliates.

⁽²⁾ Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in Proceeds from sales of property and investments ($2.6 billion), and Proceeds from sale-leaseback financing ($82 million) for the 39 weeks ended October 31, 2015. Proceeds from the JV transactions are included in Proceeds from sale-leaseback financing ($426 million) for the 39 weeks ended October 31, 2015.

⁽³⁾ All proceeds were received from ESL and its affiliates.

⁽⁴⁾ Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

See accompanying notes.

6

SEARS HOLDINGS CORPORATION

Consolidated Statements of Equity (Deficit)

(Unaudited)

	Equity (Deficit) Attributable to Holdings' Shareholders
dollars and shares in millions	Number of Shares	Common Stock		Treasury Stock			Capital in Excess of Par Value			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at February 1, 2014	106	$	1	$	(5,963	)	$	9,298		$	(480	)	$	(1,117	)	$	444		$	2,183
Comprehensive loss
Net loss	—	—		—			—			(1,523		)	—			(128		)	(1,651		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			90			5			95
Deferred loss on derivatives, net of tax	—	—		—			—			—			(2		)	—			(2		)
Currency translation adjustments, net of tax	—	—		—			—			—			4			(1		)	3
Sears Canada de-consolidation	—	—		—			—			—			128			(314		)	(186		)
Total Comprehensive Loss																			(1,741		)
Stock awards	—	—		5			(4		)	—			—			—			1
Separation of Lands' End, Inc.	—	—		—			(323		)	—			2			—			(321		)
Associate stock purchase	—	—		4			—			—			—			—			4
Balance at November 1, 2014	106	$	1	$	(5,954	)	$	8,971		$	(2,003	)	$	(895	)	$	6		$	126
Balance at January 31, 2015	107	$	1	$	(5,949	)	$	9,189		$	(2,162	)	$	(2,030	)	$	6		$	(945	)
Comprehensive loss
Net loss	—	—		—			—			(549		)	—			1			(548		)
Pension and postretirement adjustments, net of tax	—	—		—			—			—			196			—			196
Total Comprehensive Loss																			(352		)
Stock awards	—	—		11			(11		)	—			—			—			—
Associate stock purchase	—	—		4			—			—			—			—			4
Balance at October 31, 2015	107	$	1	$	(5,934	)	$	9,178		$	(2,711	)	$	(1,834	)	$	7		$	(1,293	)

See accompanying notes.

7

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 1,687 full-line and specialty retail stores in the United States, operating through Kmart and Sears. Through the third quarter of 2014, we conducted our operations under three reportable segments: Kmart, Sears Domestic and Sears Canada. Following the de-consolidation of Sears Canada in the third quarter of 2014 discussed below, we have operated under two reportable segments: Kmart and Sears Domestic.

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 January 31, 2015.

Depreciation Expense

Depreciation expense included within depreciation and amortization expense reported on the Condensed Consolidated Statements of Operations was $93 million, $325 million, $144 million and $441 million for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014, respectively.

Vendor Credits

During the 39-week period ended October 31, 2015, the Company received $126 million related to one-time credits from vendors associated with prior supply arrangements, which have been reflected as a credit within cost of sales, buying and occupancy on the Condensed Consolidated Statement of Operations.

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 and pension plan contributions. We have incurred losses and experienced negative operating cash flows for the past several years; accordingly, the Company has taken a number of actions to enhance its financial flexibility and fund its continued transformation, support its operations and meet its obligations.

As we progress in our transformation, we are primarily focusing on profitability instead of revenues, market share and other metrics which relate to, but do not necessarily drive profit. This approach may negatively impact our sales, however, it should also reduce the risk of material profit declines. We believe that our focus on profitability will contribute to a meaningful performance in 2015 and beyond. If we continue to experience operating losses, and we are not able to generate sufficient liquidity through some combination of actions, the availability under our Domestic Credit Facility might be fully utilized and we would need to secure additional sources of funds. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency.

We also continue to take action to evolve and transition our capital structure toward a structure that is more flexible, long-term oriented and less dependent on inventory and receivables. During the 39-week period ended October 31,

8

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

2015, the Company completed its previously announced rights offering and sale-leaseback transaction with Seritage Growth Properties and received aggregate gross proceeds from the transaction of $2.7 billion. In addition, as discussed in Note 2, the Company completed an amendment and extension of its existing domestic credit facility in which the maturity date for $1.971 billion of the domestic credit facility has been extended to July 2020, while $1.304 billion retains the existing maturity date of April 2016. Finally, as also discussed in Note 2, the Company completed a tender offer for $936 millionprincipal amount of its outstanding 6 5/8% Senior Secured Notes Due 2018.These actions have substantially enhanced our liquidity and achieved our objective of reducing our reliance on inventory as a source of financing. We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt.

Sears Canada Rights Offering

On October 2, 2014, the Company announced that its board of directors had approved a rights offering of up to 40 million shares of Sears Canada Inc. ("Sears Canada"). In connection with the rights offering, each holder of Holdings' common stock received one subscription right for each share of common stock held at the close of business on October 16, 2014, the record date for the rights offering. On October 16, 2014, ESL Partners, L.P. and Edward S. Lampert, our Chairman and Chief Executive Officer and Chairman and Chief Executive Officer of ESL Investments Inc. and related entities (collectively "ESL") exercised a portion of its pro rata portion of the basic subscription rights to the offering, resulting in the sale of approximately 18 million common shares of Sears Canada to ESL. After the sale of Sears Canada shares to ESL on October 16, 2014, the Company was the beneficial holder of approximately 34 million shares, or 34%, of the common shares of Sears Canada. As such, the Company no longer maintained control of Sears Canada resulting in the de-consolidation of Sears Canada. The Sears Canada rights offering closed on November 7, 2014 and was oversubscribed. Accordingly, the Company sold a total of 40 million common shares of Sears Canada and received total aggregate proceeds of $380 million for the rights offering by the closing date.

We accounted for the de-consolidation of Sears Canada in accordance with accounting standards applicable to consolidation and de-recognized the assets, liabilities, accumulated other comprehensive income and non-controlling interest related to Sears Canada and recognized a gain of approximately $70 million recorded within Interest and investment income on the Consolidated Statement of Operations and within gain on sales of investments on the Consolidated Statements of Cash Flows for the year ended January 31, 2015, of which $42 million relates to the remeasurement of our retained equity interest to its fair value.

Also, we determined that we have the ability to exercise significant influence over Sears Canada as a result of our ownership interest in Sears Canada and as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL. Accordingly, we accounted for our retained investment in the common shares of Sears Canada as an equity method investment in accordance with accounting standards applicable to investments. We elected the fair value option for the equity method investment in Sears Canada in accordance with accounting standards applicable to financial instruments. The fair value of our equity method investment is recorded in Other assets on the Condensed Consolidated Balance Sheet and is disclosed in Note 4, and the change in fair value is recorded in Interest and investment income (loss) on the Condensed Consolidated Statement of Operations.

In addition, since the Company has retained an equity interest in Sears Canada, the operating results for Sears Canada through October 16, 2014 are presented within the consolidated operations of Holdings and the Sears Canada segment in the accompanying Condensed Consolidated Financial Statements in accordance with accounting standards applicable to presentation of financial statements.

At both October 31, 2015 and January 31, 2015, the Company was the beneficial holder of approximately 12 million, or 12%, of the common shares of Sears Canada. At November 1, 2014, Sears Holdings was the beneficial holder of approximately 23 million, or 23%, of the common shares of Sears Canada.

9

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Separation of Lands' End, Inc.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The separation was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes. Prior to the separation, Lands' End, Inc. ("Lands' End") entered into an asset-based senior secured revolving credit facility, which provided for maximum borrowings of approximately $175 million with a letter of credit sub-limit, and a senior secured term loan facility of approximately $515 million. The proceeds of the term loan facility were used to fund a $500 million dividend to Holdings and pay fees and expenses associated with the foregoing facilities. We accounted for this spin-off in accordance with accounting standards applicable to spin-off transactions. Accordingly, we classified the carrying value of net assets of $323 million contributed to Lands' End as a reduction of capital in excess of par value in the Consolidated Statement of Equity (Deficit) for the year ended January 31, 2015.

Additionally, as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL, and the continuing arrangements between Holdings and Lands' End (as further described in Note 13), Holdings has determined that it has significant influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with Lands' End under the terms described in Note 13.

NOTE 2—BORROWINGS

Total borrowings were as follows:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Short-term borrowings:
Unsecured commercial paper	$	9	$	91	$	2
Secured short-term loan	—		400		400
Secured borrowings	677		1,605		213
Long-term debt, including current portion:
Notes and debentures outstanding	1,989		2,564		2,913
Capitalized lease obligations	206		280		272
Total borrowings	$	2,881	$	4,940	$	3,800

The fair value of long-term debt, excluding capitalized lease obligations, was $2.2 billion at October 31, 2015, $2.3 billion at November 1, 2014 and $2.9 billion at January 31, 2015. 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.

Debt Repurchase Authorization

During the second quarter of 2015, the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $1.0 billion of our outstanding indebtedness in open market or privately negotiated transactions, superseding the previously disclosed debt repurchase authorization from 2005.

On August 3, 2015, the Company commenced a tender offer (the "Offer") to purchase for cash up to$1.0 billion principal amount of its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Senior Secured Notes"), which expired on August 28, 2015. Approximately $936 million principal amount of the Senior Secured Notes were validly tendered and not validly withdrawn in the Offer, including $165 million by ESL and $110 million by the Company's domestic pension plan. Holders who validly tendered and did not validly withdraw Senior Secured Notes at or prior to the early tender date of August 14, 2015 received total consideration of $990 per $1,000 principal amount of Senior Secured Notes that were accepted for purchase, which included an early tender payment of $30 per

10

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

$1,000 principal amount of Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date. Holders who validly tendered and did not validly withdraw Senior Secured Notes after the early tender date but at or prior to the expiration date of August 28, 2015 received total consideration of $960 per $1,000 principal amount of Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date.

We accounted for the Offer in accordance with accounting standards applicable to extinguishment of liabilities and debt modifications and extinguishments. Accordingly, we de-recognized the net carrying amount of Senior Secured Notes of$929 million(comprised of the principal amount of$936 million, offset by unamortized debt issuance costs and discount of$7 million), and the reacquisition cost was$929 million.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At October 31, 2015, November 1, 2014 and January 31, 2015, we had outstanding commercial paper borrowings of $9 million, $91 million and $2 million, respectively.

Secured Short-Term Loan

On September 15, 2014, the Company, through Sears, Sears Development Co. and Kmart Corporation ("Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Loan'") with JPP II, LLC and JPP, LLC (together, the "Lender"), entities affiliated with ESL. The first $200 million of the Loan was funded at the closing on September 15, 2014 and the remaining $200 million was funded on September 30, 2014. Proceeds of the Loan were used for general corporate purposes.

The Loan was originally scheduled to mature on December 31, 2014. As permitted by the Loan agreement, the Company paid an extension fee equal to 0.5% of the principal amount to extend the maturity date to February 28, 2015. The Loan had an annual base interest rate of 5%. The Borrowers paid an upfront fee of 1.75% of the full principal amount. The Loan was guaranteed by the Company and was secured by a first priority lien on certain real properties owned by the Borrowers.

On February 25, 2015, we entered into an agreement effective February 28, 2015, to amend and extend the $400 million secured short-term loan. Under the terms of the amendment, we repaid $200 million of the $400 million on March 2, 2015 and the remaining $200 million on June 1, 2015, resulting in no balance outstanding at October 31, 2015. At January 31, 2015, the outstanding balance of the Loan was $400 million.

Domestic Credit Agreement

During the first quarter of 2011, SRAC, Kmart Corporation (together with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the "Domestic Credit Agreement"). On October 2, 2013, Holdings and the Borrowers entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders. Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a new senior secured term loan facility (the "Term Loan"). On July 21, 2015, the Borrowers and Holdings entered into an amended and restated credit agreement (the "Amended Domestic Credit Agreement") with a syndicate of lenders that amended and restated the then-existing Domestic Credit Agreement. The Amended Domestic Credit Agreement provides a $3.275 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.0 billion letter of credit sub-facility. The maturity date for $1.971 billion of the Revolving Facility has been extended to July 20, 2020, while $1.304 billion retains the existing maturity date of April 8, 2016. The Amended Domestic Credit Agreement also governs the existing Term Loan, which retains its maturity date of June 30, 2018. The Amended Domestic Credit Agreement includes an accordion feature that allows the Borrowers to use existing collateral for the facility to obtain up to $1.0 billion of additional borrowing capacity, subject to borrowing base requirements, as well as a "FILO" ("first in last out") tranche feature that allows an additional $500 million of borrowing capacity. The Amended Domestic Credit Agreement also increases Holdings' ability to undertake short-term borrowings from $500 million to $750 million.

Revolving advances under the Amended 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

11

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

applicable margin dependent on Holdings' consolidated leverage ratio (as measured under the Amended Domestic Credit Agreement). The margin with respect to borrowings under the extended commitments ranges from 3.25% to 3.75% for LIBOR loans and from 2.25% to 2.75% for base rate loans. The margin with respect to borrowings under the non-extended commitments remains 2.00% to 2.50% for LIBOR loans and 1.00% to 1.50% for base rate loans. The Amended Domestic Credit Agreement also provides for the payment of fees with respect to issued and undrawn letters of credit at a rate equal to the margin applicable to LIBOR loans and a commitment fee with respect to unused amounts of the Revolving Facility at a rate, depending on facility usage, between 0.375% to 0.625%, per annum, with a minimum of 0.50% applicable to commitments under the extended tranche. From and after April 8, 2016, such commitment fees with respect to the extended tranche will change to a flat 0.50%.

The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on substantially all of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Revolving Facility is guaranteed by all domestic subsidiaries of Holdings that own inventory or credit card or pharmacy receivables. The Revolving Facility also permits aggregate second lien indebtedness of up to $2.0 billion, of which $304 million in second lien notes were outstanding at October 31, 2015, resulting in $1.7 billion of permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the indenture that governs our 6 5/8% senior secured notes due 2018.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a 1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z), the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Currently, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing June 30, 2018. Additionally, the Borrowers are required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Amended Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility. At October 31, 2015, November 1, 2014 and January 31, 2015, respectively, we had borrowings of $983 million, $993 million and $990 million under the Term Loan, and carrying value, net of the remaining discount, of $977 million, $985 million and $983 million.

The Amended 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 least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt, and make investments, subject, in each case, to various exceptions. The Amended 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.

At October 31, 2015, November 1, 2014 and January 31, 2015, we had $677 million, $1.6 billion and $213 million, respectively, of Revolving Facility borrowings and $654 million, $671 million and $667 million, respectively, of letters of credit outstanding under the Revolving Facility. At October 31, 2015, November 1, 2014 and January 31, 2015, the amount available to borrow under the Revolving Facility was $963 million, $234 million and $808 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. 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 $1.0 billion aggregate principal amount of senior secured notes (the "Senior Secured Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Senior Secured Notes, the Company sold $250 million aggregate principal amount of Senior Secured Notes to the Company's domestic pension plan in a private placement, none of which remain in the domestic pension plan as a result of the Offer discussed above. The Senior Secured Notes are guaranteed by certain

12

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

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 Senior Secured Notes is junior in priority to the lien on such assets that secures obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Senior Secured 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 Senior Secured Notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Senior Secured Notes at a purchase price equal to 101% of the principal amount if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the Senior Secured 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 Senior Secured Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Senior Secured Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended. As discussed above, the Company completed the Offer for $936 millionprincipal amount of its outstanding Senior Secured Notes. The carrying value of Senior Secured Notes, net of the remaining discount, was$304 million,$1.2 billion, and$1.2 billionatOctober 31, 2015,November 1, 2014, andJanuary 31, 2015, respectively.

Senior Unsecured Notes

On October 20, 2014, the Company announced its board of directors had approved a rights offering allowing its stockholders to purchase up to $625 million in aggregate principal amount of 8% senior unsecured notes due 2019 and warrants to purchase shares of its common stock. The subscription rights were distributed to all stockholders of the Company as of October 30, 2014, the record date for this rights offering, and every stockholder had the right to participate on the same terms in accordance with its pro rata ownership of the Company's common stock, except that holders of the Company's restricted stock that was unvested as of the record date received cash awards in lieu of subscription rights. This rights offering closed on November 18, 2014 and was oversubscribed.

Accordingly, on November 21, 2014, the Company issued $625 million aggregate original principal amount of 8% senior unsecured notes due 2019 (the "Senior Unsecured Notes") and received proceeds of $625 million which were used for general corporate purposes. The Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year. The Senior Unsecured Notes are not guaranteed.

We accounted for the Senior Unsecured Notes in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, we allocated the proceeds received for the Senior Unsecured Notes based on the relative fair values of the Senior Unsecured Notes and warrants, which resulted in a discount to the notes of approximately $278 million. The fair value of the Senior Unsecured Notes and warrants was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 4. The discount is being amortized over the life of the Senior Unsecured Notes using the effective interest method with an effective interest rate of 11.55%. Approximately $5 million of the discount was amortized during 2014, resulting in a remaining discount of approximately $273 million at January 31, 2015. The carrying value of the Senior Unsecured Notes net of the remaining discount was approximately $352 million at January 31, 2015. Approximately $25 million of the discount was amortized during the 39-week period ended October 31, 2015, resulting in a remaining discount of approximately $248 million at October 31, 2015. The book value of the Senior Unsecured Notes net of the remaining discount was approximately $377 million at October 31, 2015.

13

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 has utilized two securitization structures to issue specific securities in which Sears Re has invested its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit ("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 to wholly owned subsidiaries of Sears (including Sears Re) $1.3 billion (par value) of securities (the "REMIC Securities") that are secured by the mortgages and collateral assignments of the store leases. Payments to the holders on the REMIC 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 (the "KCD Securities") 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 the holders on the KCD Securities are funded by the royalty payments. The issuers of the REMIC Securities and KCD 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. In the fourth quarter of fiscal 2013, Holdings contributed all of the outstanding capital stock of Sears Re to SRe Holding Corporation, a direct wholly owned subsidiary of Holdings. Sears Re thereafter reduced its excess statutory capital through the distribution of all REMIC Securities held by it to SRe Holding Corporation. Since the inception of the REMIC and KCD IP, LLC, the REMIC Securities and the KCD Securities have been entirely held by our wholly owned consolidated subsidiaries. At October 31, 2015, November 1, 2014 and January 31, 2015, 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 $0.6 billion at October 31, 2015, and approximately $0.7 billion at both November 1, 2014 and January 31, 2015.

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 used 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. Prior to de-consolidation, we were exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada was exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. We had no material outstanding derivatives at October 31, 2015, November 1, 2014 or January 31, 2015. The gains on hedging activity were not material for the 13-and 39-week periods ended November 1, 2014.

Hedges of Net Investment in Sears Canada

During the 13-week period ended November 1, 2014, we entered into foreign currency forward contracts with a total Canadian notional value of $300 million. These contracts were designated and qualify as hedges of the foreign currency exposure of our net investment in Sears Canada. On October 16, 2014, we settled foreign currency forward

14

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

contracts with a total Canadian notional value of $187 million and de-designated the remaining contracts with a total Canadian notional value of $113 million as hedges, which were settled on October 27, 2014.

For derivatives that were designated as hedges of our net investment in Sears Canada, we assessed effectiveness based on changes in forward currency exchange rates. Changes in forward rates on the derivatives were recorded in the currency translation adjustments line in accumulated other comprehensive loss prior to the de-consolidation of Sears Canada on October 16, 2014. Subsequent to that date, the change in forward rates on the remaining derivative contracts that were no longer designated as hedges was recorded in Interest and investment income in the Condensed Consolidated Statements of Operations.

We settled foreign currency forward contracts during the 13-week and 39-week periods ended November 1, 2014 and received a net amount of $8 million relative to these contract settlements.

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.

15

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Accounts receivable, merchandise payables, short-term borrowings, accrued liabilities, cash and domestic 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 long-term debt is disclosed in Note 2. 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 October 31, 2015, November 1, 2014 and January 31, 2015:

millions	Total Fair Value Amounts at October 31, 2015		Level 1		Level 2		Level 3
Equity method investments(1)	$	86	$	86	$	—	$	—

millions	Total Fair Value Amounts at November 1, 2014		Level 1		Level 2		Level 3
Equity method investments(1)	$	225	$	225	$	—	$	—

millions	Total Fair Value Amounts at January 31, 2015		Level 1		Level 2		Level 3
Equity method investments(1)	$	111	$	111	$	—	$	—

__________________

⁽¹⁾  Included within Other assets on the Condensed Consolidated Balance Sheets.

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

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value. With the exception of the fixed asset impairments described in Note 5, we had no significant remeasurements of such assets or liabilities to fair value during the 13- and 39-week periods ended October 31, 2015 and November 1, 2014.

NOTE 5—STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

Store Closings and Severance

During the 13-week period ended October 31, 2015, we closed 11 stores in our Kmart segment and three stores in our Sears Domestic segment we previously announced would close. During the 39-week period ended October 31, 2015, we closed 27 stores in our Kmart segment and nine stores in our Sears Domestic segment we previously announced would close. We made the decision to close nine stores in our Kmart segment and two stores in our Sears Domestic segment during the 13-week period ended October 31, 2015, and 31 stores in our Kmart segment and nine stores in our Sears Domestic segment during the 39-week period ended October 31, 2015.

During the 13-week period ended November 1, 2014, we closed 27 stores in our Kmart segment and six stores in our Sears Domestic segment we previously announced would close. During the 39-week period ended November 1, 2014, we closed 102 stores in our Kmart segment and 27 stores in our Sears Domestic segment we previously announced would close. We made the decision to close 73 stores in our Kmart segment and 37 stores in our Sears Domestic segment during the 13-week period ended November 1, 2014, and 113 stores in our Kmart segment and 43 stores in our Sears Domestic segment during the 39-week period ended November 1, 2014.

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.

16

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Store closing costs and severance recorded for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014 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	$	5	$	—	$	(5	)	$	1	$	—	$	1
Sears Domestic	1		—		(3		)	—		—		(2		)
Total for the 13-week period ended October 31, 2015	$	6	$	—	$	(8	)	$	1	$	—	$	(1	)
Kmart	$	31	$	6	$	—		$	11	$	2	$	50
Sears Domestic	10		3		1			6		4		24
Sears Canada	—		1		—			—		—		1
Total for the 13-week period ended November 1, 2014	$	41	$	10	$	1		$	17	$	6	$	75
Kmart	$	14	$	2	$	22		$	4	$	—	$	42
Sears Domestic	3		2		(12		)	1		2		(4		)
Total for the 39-week period ended October 31, 2015	$	17	$	4	$	10		$	5	$	2	$	38
Kmart	$	46	$	10	$	11		$	17	$	5	$	89
Sears Domestic	12		5		3			7		12		39
Sears Canada	1		10		5			—		—		16
Total for the 39-week period ended November 1, 2014	$	59	$	25	$	19		$	24	$	17	$	144

_____________

⁽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 13- and 39-week periods ended October 31, 2015, and the 13-week period ended November 1, 2014 are recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 39-week period ended November 1, 2014 include $10 million recorded within Impairment charges and $7 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations.

17

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Store closing cost accruals of $158 million, $153 million and $207 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at November 1, 2014	$	22		$	112		$	19		$	153
Store closing costs	31			55			(4		)	82
Payments/utilizations	(10		)	(11		)	(7		)	(28		)
Balance at January 31, 2015	43			156			8			207
Store closing costs	4			12			5			21
Payments/utilizations	(19		)	(42		)	(9		)	(70		)
Balance at October 31, 2015	$	28		$	126		$	4		$	158

Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, we performed an impairment test of certain of our long-lived assets due to events and changes in circumstances during the 13- and 39-week periods ended October 31, 2015 that indicated an impairment might have occurred. As a result of impairment testing, the Company recorded impairment charges of $17 million, of which $7 million and $10 million were recorded within the Sears Domestic and Kmart segments, respectively, during the 13-week period ended October 31, 2015, and $71 million, of which $59 million and $12 million were recorded within the Sears Domestic and Kmart segments, respectively, during the 39-week period ended October 31, 2015.

As a result of impairment testing, triggered by a decline in operating performance at certain locations within the Sears Canada segment, the Company recorded impairment charges of $15 million during the 39-week period ended November 1, 2014 within the Sears Canada segment.

Real Estate Transactions

On April 1, 2015, April 13, 2015, and April 30, 2015, Holdings and General Growth Properties, Inc. ("GGP"), Simon Property Group, Inc. ("Simon") and The Macerich Company ("Macerich"), respectively, announced that they entered into three distinct real estate joint ventures (collectively, the "JVs"). Holdings contributed 31 properties to the JVs where Holdings currently operates stores (the "JV properties"), in exchange for a 50% interest in the JVs and $429 million in cash ($426 million, net of closing costs) (the "JV transactions"). The JV transactions valued the JV properties at $858 million in the aggregate.

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction (the "Seritage transaction") with Seritage Growth Properties ("Seritage"), a recently formed, independent publicly traded real estate investment trust ("REIT"). As part of the Seritage transaction, Holdings sold 235 properties to Seritage (the "REIT properties") along with Holdings' 50% interest in the JVs. Holdings received aggregate gross proceeds from the Seritage transaction of $2.7 billion ($2.6 billion, net of closing costs). The Seritage transaction was partially financed through the sale of common shares and limited partnership units, totaling $1.6 billion, including $745 million received from ESL and its affiliates as further described in Note 13. The Seritage transaction was also partially financed by Seritage through mortgage and mezzanine loan proceeds totaling $1.2 billion. Immediately prior to completing the Seritage transaction, subsidiaries of Kmart and Sears obtained mortgage and mezzanine financing for the REIT properties. Upon completion of the Seritage transaction, all obligations with respect to such financing were assumed by Seritage. The Seritage transaction valued the REIT properties at $2.3 billion in the aggregate.

In connection with the Seritage transaction and JV transactions, Holdings has entered into agreements with Seritage and the JVs under which Holdings leases 255 of the properties (the "Master Leases"), with the remaining properties being leased by Seritage to third parties. The Master Leases generally are triple net leases with respect to the space occupied by Holdings, and Holdings has the obligation to pay rent, costs and expenses of operation, repair, and maintenance of the space occupied. The Master Leases have an initial term of 10 years. The master lease for the REIT properties provides Holdings three options for five-year renewals of the term and a final option for a four-year

18

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

renewal. The Master Leases for the JV properties provide Holdings two options for five-year renewals of the term. Seritage and the JVs have a recapture right with respect to approximately 50% of the space within the stores at the REIT properties and JV properties (subject to certain exceptions), in addition to all of the automotive care centers which are free-standing or attached as “appendages”, and all outparcels or outlots, as well as certain portions of parking areas and common areas, except as set forth in the Master Leases, for no additional consideration. With respect to 21 stores identified in the Master Leases, Seritage has the further additional right to recapture 100% of the space within the Holdings’ main store, effectively terminating the Master Leases with respect to such properties. The Master Leases also provide Holdings certain rights to terminate the Master Leases with respect to REIT properties or JV properties that cease to be profitable for operation by Holdings. In order to terminate the Master Lease with respect to a certain property, Holdings must make a payment to Seritage or the JV of an amount equal to one year of rent (together with taxes and other expenses) with respect to such property. Such termination right, however, is limited so that it will not have the effect of reducing the fixed rent under the Master Lease for the REIT properties by more than 20% per annum.

Also, in connection with the Seritage transaction and JV transactions, Holdings assigned its lease agreements with third party tenants for REIT properties and JV properties to Seritage and each of the JVs, respectively, and also assigned rental income from Lands' End for REIT properties and JV properties to Seritage and each of the JVs, respectively.

The initial amount of aggregate annual base rent under the Master Leases is $134 million for the REIT properties and $42 million for the JV properties, with increases of 2% per year beginning in the second lease year for the REIT properties and in the fourth lease year for the JV properties. Holdings recorded rent expense of $27 million and $43 million, respectively, in Cost of sales, buying and occupancy for the 13- and 39-week periods ended October 31, 2015. Rent expense consists of straight-line rent expense of $50 million and $73 million, respectively, offset by amortization of a deferred gain on sale-leaseback of $23 million and $30 million, respectively, for the 13- and 39-week periods ended October 31, 2015. For the 13- and 39-week periods ended October 31, 2015, rent expense of $23 million and $38 million, respectively, (consisting of straight-line rent expense of $41 million and $62 million, respectively, offset by amortization of a deferred gain on sale-leaseback of $18 million and $24 million, respectively) was recorded in our Sears Domestic segment, and rent expense of $4 million and $5 million, respectively (consisting of straight-line rent expense of $9 million and $11 million, respectively, offset by amortization of a deferred gain on sale-leaseback of $5 million and $6 million, respectively), was recorded in our Kmart segment.

We accounted for the Seritage transaction and JV transactions in accordance with accounting standards applicable to real estate sales and sale-leaseback transactions. We determined that the Seritage transaction qualifies for sales recognition and sale-leaseback accounting. Because of our initial ownership interest in the JVs and continuing involvement in the properties, we determined that the JV transactions, which occurred in the first quarter of 2015, did not initially qualify for sale-leaseback accounting and, therefore, accounted for the JV transactions as financing transactions and, accordingly, recorded a sale-leaseback financing obligation of $426 million and continued to report the real property assets on our Condensed Consolidated Balance Sheets at May 2, 2015. Upon the sale of our 50% interest in the JVs to Seritage, the continuing involvement through an ownership interest in the buyer-lessor no longer exists, and Holdings determined that the JV transactions then qualified for sales recognition and sale-leaseback accounting, with the exception of four properties for which we still have continuing involvement as a result of an obligation to redevelop the stores for a third-party tenant and pay rent on behalf of the third-party tenant until it commences rent payments to the JVs.

With the exception of the four properties that have continuing involvement, in accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. Holdings received aggregate net proceeds of $3.1 billion for the Seritage transaction and JV transactions. The carrying amount of Property and equipment, net and lease balances related to third-party leases that were assigned to Seritage and the JVs was $1.5 billion at July 7, 2015, of which $1.3 billion was recorded in our Sears Domestic segment and $175 million in our Kmart segment. Accordingly, during the second quarter of 2015, Holdings recognized an immediate net gain of $508 million within Gain on sales of assets on the Condensed Consolidated Statement of Operations for the 39-week period ended October 31, 2015, comprised of a gain of $625 million for the amount of gain on sale in excess of the present value

19

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

of minimum lease payments, offset by a loss of $117 million for properties where the fair value was less than the carrying value and the write-off of lease balances related to third-party leases that were assigned to Seritage and the JVs. For the 39-week period ended October 31, 2015, an immediate net gain of $371 million (comprised of a gain of $471 million and loss of $100 million) was recorded in our Sears Domestic segment, and an immediate net gain of $137 million (comprised of a gain of $154 million and loss of $17 million) was recorded in our Kmart segment. The remaining gain of $894 million was deferred and will be recognized in proportion to the related rent expense, which is a component of Cost of sales, buying and occupancy, on the Condensed Consolidated Statement of Operations, over the lease term. At October 31, 2015, $89 million of the deferred gain on sale-leaseback is classified as current within Other current liabilities and $775 million is classified as long-term as Deferred gain on sale-leaseback on the Condensed Consolidated Balance Sheets.

Holdings accounted for the four properties that have continuing involvement as a financing transaction in accordance with accounting standards related to sale-leaseback transactions. Accordingly, Holdings recorded a sale-leaseback financing obligation of $164 million, which is classified as long-term as Sale-leaseback financing obligation on the Condensed Consolidated Balance Sheet at October 31, 2015. The decrease in the sale-leaseback financing obligation from $426 million at May 2, 2015 to $164 million at October 31, 2015 represents a noncash change. We continued to report the real property assets of $51 million at October 31, 2015 on our Condensed Consolidated Balance Sheets, which are included in our Sears Domestic segment.

The obligation for future minimum lease payments at October 31, 2015 for the four properties that have continuing involvement is $105 million over the 10 year lease term, and is $10 million for each of 2016, 2017, 2018, and 2019, respectively, and $11 million for 2020. This obligation for future minimum lease payments includes $60 million of rent on behalf of a third-party tenant over the 10 year lease term. We will no longer have the obligation to pay rent on behalf of the third-party tenant when it commences rent payments to the JVs, which we expect to occur within one to two years.

During the 13-week period ended October 31, 2015, we recorded gains on the sales of assets of $83 million recognized on the sale of one Sears Full-line store for which we received $102 million of cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during the 13-week period ended October 31, 2015, we recognized the gain that had previously been deferred. During the 39-week period ended October 31, 2015, we also recorded gains on the sales of assets of $86 million recognized on the sale of two Sears Full-line stores for which we received $96 million of cash proceeds, and $10 million recognized on the surrender and early termination of one Kmart store lease. In connection with one of the Sears Full-line stores, we entered into a leaseback agreement for up to six months. We determined that we have surrendered substantially all of our rights and obligations, and, therefore, immediate gain recognition is appropriate on these transactions.

During the 39-week period ended November 1, 2014, we recorded gains on the sales of assets of $148 million in connection with real estate transactions, which included a gain of $42 million recognized on the sale of two Sears Full-line stores for which we received $64 million of cash proceeds, a gain of $13 million recognized on the sale of a distribution facility in our Sears Domestic segment for which we received $16 million of cash proceeds and a gain of $10 million recognized on sale of a Kmart store for which we received $10 million of cash proceeds.

Additionally, during the 39-week period ended November 1, 2014, we recorded investment income of $35 million related to the sale of joint venture interests for which Sears Canada received $65 million ($71 million Canadian) in cash proceeds.

20

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

NOTE 6—EQUITY

Earnings per Share

The following table sets forth the components used to calculate basic and diluted loss per share attributable to Holdings' shareholders. During the 13- and 39-week period ended October 31, 2015, warrants, restricted stock awards and restricted stock units, totaling 1.4 million shares and 6.7 million shares, respectively, were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive. During both the 13- and 39-week periods ended November 1, 2014, restricted stock awards and restricted stock units, totaling 0.1 million shares, were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive.

	13 Weeks Ended						39 Weeks Ended
millions, except earnings per share	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Basic weighted average shares	106.6			106.4			106.5			106.3
Diluted weighted average shares	106.6			106.4			106.5			106.3
Net loss attributable to Holdings' shareholders	$	(454	)	$	(548	)	$	(549	)	$	(1,523	)
Loss per share attributable to Holdings' shareholders:
Basic	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Diluted	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)

Accumulated Other Comprehensive Loss

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

millions	October 31, 2015			November 1, 2014			January 31, 2015
Pension and postretirement adjustments (net of tax of $(296) for all periods presented)	$	(1,832	)	$	(893	)	$	(2,028	)
Currency translation adjustments (net of tax of $0 for all periods presented)	(2		)	(2		)	(2		)
Accumulated other comprehensive loss	$	(1,834	)	$	(895	)	$	(2,030	)

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.

21

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Income Tax Expense Allocated to Each Component of Other Comprehensive Income

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

	13 Weeks Ended October 31, 2015						13 Weeks Ended November 1, 2014
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)	$	65	$	—	$	65	$	30		$	—	$	30
Currency translation adjustments	—		—		—		(11		)	—		(11		)
Sears Canada de-consolidation	—		—		—		(186		)	—		(186		)
Total other comprehensive income (loss)	$	65	$	—	$	65	$	(167	)	$	—	$	(167	)

	39 Weeks Ended October 31, 2015						39 Weeks Ended November 1, 2014
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)	$	196	$	—	$	196	$	98		$	(3	)	$	95
Deferred loss on derivatives	—		—		—		(2		)	—			(2		)
Currency translation adjustments	—		—		—		4			(1		)	3
Sears Canada de-consolidation	—		—		—		(186		)	—			(186		)
Total other comprehensive income (loss)	$	196	$	—	$	196	$	(86	)	$	(4	)	$	(90	)

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

Common Share Repurchase Program

During the 13- and 39-week periods ended October 31, 2015 and November 1, 2014, we did not repurchase any shares of our common stock under our common share repurchase program. At October 31, 2015, 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.

Issuance of Warrants to Purchase Common Stock

On November 21, 2014, the Company issued an aggregate of approximately 22 million warrants pursuant to the exercise of rights in the rights offering for $625 million in aggregate principal amount of 8% Senior Unsecured Notes due 2019 and warrants to purchase shares of its common stock. The exercise price and the number of shares of common stock issuable upon exercise of a warrant are both subject to adjustment in certain circumstances. As of October 31, 2015, each warrant, when exercised, will entitle the holder thereof to purchase 1.11 shares of the Company's common stock at an exercise price of $25.686 per share under the terms of the warrant agreement, adjusted from the previously disclosed one share of Company common stock at an exercise price of $28.41 per share. The exercise price is payable in cash or by surrendering 8% Senior Unsecured Notes due 2019 with a principal amount at least equal to the exercise price. The warrants may be exercised at any time after November 24, 2014. Unless earlier exercised, the warrants will expire on December 15, 2019.

We accounted for the warrants in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, the warrants have been classified as Capital in excess of par value on the Condensed Consolidated Balance Sheet based on the relative fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 at the time of issuance. The fair value of the warrants and the

22

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

related 8% Senior Unsecured Notes due 2019 was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 4.

NOTE 7—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						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Components of net periodic expense:
Interest cost	$	54		$	68		$	162		$	219
Expected return on plan assets	(62		)	(75		)	(187		)	(244		)
Amortization of experience losses	65			30			196			92
Net periodic expense	$	57		$	23		$	171		$	67

Contributions

During the 13- and 39-week periods ended October 31, 2015, we made total contributions of $117 million and $246 million, respectively, to our pension and postretirement plans. During the 13- and 39-week periods ended November 1, 2014, we made total contributions of $161 million and $366 million, respectively, to our pension and postretirement plans. We anticipate making aggregate contributions to our defined benefit and postretirement plans of approximately $71 million over the remainder of 2015.

NOTE 8—INCOME TAXES

We had gross unrecognized tax benefits of $142 million at October 31, 2015, $120 million at November 1, 2014 and $131 million at January 31, 2015. Of the amount at October 31, 2015, $92 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-week period ended October 31, 2015, gross unrecognized tax benefits increased by $4 million due to state activity. During the 39-week period ended October 31, 2015, gross unrecognized tax benefits increased by $11 million. During the 13-week period ended November 1, 2014, gross unrecognized tax benefits decreased by $21 million. During the 39-week period ended November 1, 2014, gross unrecognized tax benefits decreased by $29 million due to the Lands' End spin-off and Sears Canada's de-consolidation. We expect that our unrecognized tax benefits could decrease by as much as $6 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 October 31, 2015, November 1, 2014 and January 31, 2015, the total amount of interest and penalties included in our tax accounts in our Condensed Consolidated Balance Sheet was $56 million ($37 million net of federal benefit), $48 million ($31 million net of federal benefit), and $49 million ($32 million net of federal benefit), respectively. The total amount of net interest expense recognized as part of Income tax expense in our Condensed Consolidated Statements of Operations was $2 million (net of federal benefit) and $5 million (net of federal benefit), respectively, for the 13- and 39-week periods ended October 31, 2015. We recognized a negligible net interest benefit (net of federal benefit) and $3 million net interest expense (net of federal benefit), respectively, for the 13- and 39-week periods ended November 1, 2014.

We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal Revenue Service ("IRS") has completed its examination of all federal tax returns of Holdings through the 2009 return, and all

23

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2013, and Kmart is under examination by such jurisdictions for the years 2006 through 2013.

At the end of 2014, we had a federal and state net operating loss ("NOL") deferred tax asset of $1.8 billion, which will expire predominately between 2019 and 2035. We have credit carryforwards of $791 million, which will expire between 2015 and 2035.

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction with Seritage, a recently formed independent publicly traded REIT. As part of the transaction, Holdings sold 235 properties to Seritage along with Holdings' 50% interests in joint ventures with each of Simon Property Group, Inc., General Growth Properties, Inc., and The Macerich Company, which together hold an additional 31 properties (See Note 5).

In connection with the sale-leaseback transaction with Seritage in the second quarter of 2015, along with the Simon Property Group, Inc., General Growth Properties, Inc., and The Macerich Company joint venture transactions in the first quarter of 2015, the Company realized a tax benefit of $229 million on the deferred taxes related to the indefinite-life assets associated with the property sold in the transaction with Seritage and respective joint venture transactions. In addition, the Company incurred a taxable gain of approximately $2.2 billion, taking into account any related party loss disallowance, on these transactions. There was no federal income tax payable resulting from the taxable gain due to the utilization of NOL tax attributes of approximately $856 million with a valuation allowance release of the same amount. However, there was a minor amount of state and city income tax payable of $5 million after the utilization of state and city tax attributes.  As a result of all the effects from these transactions, the net valuation allowance release was approximately $500 million.

At January 31, 2015, we had a valuation allowance of $4.5 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.

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. As such, for the 13-week period ended October 31, 2015, our effective income tax rate was an expense of 3.2%. Our tax rate continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the 13-week period ended October 31, 2015 was negatively impacted by foreign branch taxes and state income taxes.

24

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

NOTE 9—SUMMARY OF SEGMENT DATA

These reportable segment classifications are based on our business formats, as described in Note 1. The Kmart format represents both an operating and reportable segment. As a result of the de-consolidation of Sears Canada as described in Note 1, Sears Canada is no longer an operating or 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 home 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;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as credit revenues and licensed business revenues.

	13 Weeks Ended October 31, 2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales and services
Hardlines	$	620		$	1,832		$	2,452
Apparel and Soft Home	701			639			1,340
Food and Drug	915			1			916
Service	3			538			541
Other	8			493			501
Total merchandise sales and services	2,247			3,503			5,750
Costs and expenses
Cost of sales, buying and occupancy	1,774			2,714			4,488
Selling and administrative	585			1,045			1,630
Depreciation and amortization	17			77			94
Impairment charges	10			7			17
Gain on sales of assets	(12		)	(85		)	(97		)
Total costs and expenses	2,374			3,758			6,132
Operating loss	$	(127	)	$	(255	)	$	(382	)
Total assets	$	3,655		$	9,114		$	12,769
Capital expenditures	$	10		$	56		$	66

25

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

	13 Weeks Ended November 1, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	793		$	2,029		$	327		$	3,149
Apparel and Soft Home	842			770			255			1,867
Food and Drug	1,050			2			—			1,052
Service	5			574			20			599
Other	17			514			9			540
Total merchandise sales and services	2,707			3,889			611			7,207
Costs and expenses
Cost of sales, buying and occupancy	2,147			3,002			457			5,606
Selling and administrative	708			1,131			172			2,011
Depreciation and amortization	25			110			13			148
Gain on sales of assets	(24		)	(44		)	—			(68		)
Total costs and expenses	2,856			4,199			642			7,697
Operating loss	$	(149	)	$	(310	)	$	(31	)	$	(490	)
Total assets	$	4,259		$	10,910		$	—		$	15,169
Capital expenditures	$	11		$	52		$	13		$	76

	39 Weeks Ended October 31, 2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales and services
Hardlines	$	1,986		$	5,704		$	7,690
Apparel and Soft Home	2,274			1,917			4,191
Food and Drug	2,749			5			2,754
Service	10			1,619			1,629
Other	43			1,536			1,579
Total merchandise sales and services	7,062			10,781			17,843
Costs and expenses
Cost of sales, buying and occupancy	5,562			8,066			13,628
Selling and administrative	1,802			3,203			5,005
Depreciation and amortization	56			274			330
Impairment charges	12			59			71
Gain on sales of assets	(173		)	(557		)	(730		)
Total costs and expenses	7,259			11,045			18,304
Operating loss	$	(197	)	$	(264	)	$	(461	)
Total assets	$	3,655		$	9,114		$	12,769
Capital expenditures	$	21		$	131		$	152

26

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

	39 Weeks Ended November 1, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	2,502		$	6,542		$	1,100		$	10,144
Apparel and Soft Home	2,728			2,562			880			6,170
Food and Drug	3,234			6			—			3,240
Service	13			1,770			77			1,860
Other	50			1,604			31			1,685
Total merchandise sales and services	8,527			12,484			2,088			23,099
Costs and expenses
Cost of sales, buying and occupancy	6,790			9,552			1,586			17,928
Selling and administrative	2,128			3,487			603			6,218
Depreciation and amortization	72			334			49			455
Impairment charges	2			8			15			25
(Gain) loss on sales of assets	(76		)	(73		)	1			(148		)
Total costs and expenses	8,916			13,308			2,254			24,478
Operating loss	$	(389	)	$	(824	)	$	(166	)	$	(1,379	)
Total assets	$	4,259		$	10,910		$	—		$	15,169
Capital expenditures	$	31		$	139		$	32		$	202

NOTE 10—SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at October 31, 2015, November 1, 2014 and January 31, 2015 consisted of the following:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Unearned revenues	$	703	$	754	$	739
Self-insurance reserves	604		688		611
Other	504		388		499
Total	$	1,811	$	1,830	$	1,849

NOTE 11—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, pricing 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. 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

27

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

types of relief. Additionally, some of these claims or actions, such as the qui tam claims, have the potential for significant statutory penalties.

In May and June of 2015, four shareholder lawsuits were filed in the Delaware Chancery Court, which have since been consolidated into a single action. A consolidated complaint has been filed, naming Holdings, the members of our Board of Directors, ESL Investments, Inc., Seritage, our CEO, and another large shareholder of Holdings, alleging, among other things, breaches of fiduciary duties in connection with the Seritage transaction. Among other forms of relief, the plaintiffs are currently seeking damages in unspecified amounts and equitable relief related to the Seritage transaction. The Company believes that the Seritage transaction has provided substantial benefits to Holdings and its shareholders and believes further that the plaintiffs' claims are legally without merit. Holdings intends to contest these lawsuits vigorously.

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 12—RECENT ACCOUNTING PRONOUNCEMENTS

Presentation of Debt Issuance Costs

In April 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standards update which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with discounts or premiums. In August 2015, the FASB issued an accounting standards update which adds paragraphs about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements, and allows for the presentation of debt issuance costs as an asset regardless of whether or not there is an outstanding balance on the line-of-credit arrangement. These updates will be effective for the Company in the first quarter of 2016, and early adoption of the updates is permitted. The adoption of the new standards is not expected to have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Consolidation

In February 2015, the FASB issued an accounting standards update which revises the consolidation model. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. This update was effective and adopted by the Company in the first quarter

28

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Extraordinary and Unusual Items

In January 2015, the FASB issued an accounting standards update which eliminates the concept of an extraordinary item. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity

In November 2014, the FASB issued an accounting standards update which clarifies how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features-including the embedded derivative feature being evaluated for bifurcation-in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued an accounting standards update which requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This update will be effective for the Company in the first quarter of 2017, and early application is permitted. The adoption of the new standard is not expected to have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update which replaces the current revenue recognition standards. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was initially released as effective for fiscal years beginning after December 15, 2016, however, the FASB has decided to defer the effective date of this accounting standard update for one year. The update may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. The Company is evaluating the effect of adopting this new standard.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the FASB issued an accounting standards update which modifies the requirements for disposals to qualify as discontinued operations and expands related disclosure requirements. The update was effective and adopted by the Company in the first quarter of 2015 and did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures. The adoption of the update may impact whether future disposals qualify as discontinued operations and therefore could impact the Company's financial statement presentation and disclosures.

29

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

NOTE 13—RELATED PARTY DISCLOSURE

Investment of Surplus Cash

Our Board has delegated authority to direct investment of our surplus cash to Mr. 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 owned approximately 49% of our outstanding common stock at October 31, 2015 (excluding shares of common stock that ESL may acquire within 60 days upon the exercise of warrants to purchase shares of our common stock).

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 39-week periods ended October 31, 2015 and November 1, 2014, ESL and its affiliates held unsecured commercial paper issued by SRAC, an indirect wholly owned subsidiary of Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 32.0 days, 4.55% and $12 million and 18.8 days, 3.68% and $33 million, respectively, during the 39-week periods ended October 31, 2015 and November 1, 2014. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2015 was $100 million and $0.4 million of interest was paid by SRAC to ESL during the 39-week period ended October 31, 2015. 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.

Secured Short-Term Loan

In September 2014, the Company, through Sears, Sears Development Co., and Kmart Corporation ("Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Loan") with JPP II, LLC and JPP, LLC (together, the "Lender"), entities affiliated with ESL. The Loan was originally scheduled to mature on December 31, 2014. As permitted by the Loan agreement, the Company paid an extension fee equal to 0.5% of the principal amount to extend the maturity date of the loan to February 28, 2015. The Loan had an annual base interest rate of 5%. The Loan was guaranteed by the Company and was secured by a first priority lien on certain real properties owned by the Borrowers.

During 2014, the Borrowers paid an upfront fee of $7 million, an extension fee of $2 million and interest of $5.6 million to the Lender. On February 25, 2015, we entered into an agreement effective February 28, 2015, to amend and extend the $400 million secured short-term loan. Under the terms of the amendment, we repaid $200 million of the $400 million on March 2, 2015 and the remaining $200 million on June 1, 2015. At November 1, 2014 and January 31, 2015, the outstanding balance of the Loan was $400 million. During the 39-week period ended

30

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

October 31, 2015, the Borrowers paid interest of $5.9 million to the Lender. See Note 2 for additional information regarding the Loan.

Senior Secured Notes and Subsidiary Notes

At October 31, 2015, Mr. Lampert and ESL held an aggregate of approximately $11 million of principal of the Company's Senior Secured Notes. Mr. Lampert and ESL tendered approximately $165 million of the Company's Senior Secured Notes in the Offer, which is further discussed in Note 2. At each of November 1, 2014 and January 31, 2015, Mr. Lampert and ESL held an aggregate of $205 million of principal amount of the Company's Senior Secured Notes. At each of October 31, 2015, November 1, 2014 and January 31, 2015, Mr. Lampert and ESL held an aggregate of $3 million of principal amount of unsecured notes issued by SRAC (the "Subsidiary Notes").

Senior Unsecured Notes and Warrants

At October 31, 2015 and January 31, 2015, respectively, Mr. Lampert and ESL held an aggregate of $201 million and $299 million of principal amount of the Company's Senior Unsecured Notes, and 10,529,740 and 10,530,633 warrants to purchase shares of Holdings common stock.

Sears Canada

ESL owns approximately 48% of the outstanding common shares of Sears Canada (based on publicly available information as of April 7, 2015).

Lands' End

ESL owns approximately 50% of the outstanding common stock of Lands' End (based on publicly available information as of September 30, 2015). Holdings and certain of its subsidiaries entered into a transition services agreement in connection with the spin-off pursuant to which Lands' End and Holdings will provide to each other, on an interim, transitional basis, various services, which may include, but are not limited to, tax services, logistics services, auditing and compliance services, inventory management services, information technology services and continued participation in certain contracts shared with Holdings and its subsidiaries, as well as agreements related to Lands' End Shops at Sears and participation in the Shop Your Way^® program.

Amounts due to or from Lands' End are non-interest bearing, and generally settled on a net basis. Holdings invoices Lands' End on at least a monthly basis. At October 31, 2015, November 1, 2014 and January 31, 2015, Holdings reported a net amount receivable from Lands' End of $4 million, $5 million and $5 million, respectively, in the Accounts receivable line of the Condensed Consolidated Balance Sheet. Amounts related to revenue from retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way^® program and corporate shared services were $18 million and $20 million, respectively, for the 13-week periods ended October 31, 2015 and November 1, 2014, and $52 million and $44 million, respectively, for the 39-week periods ended October 31, 2015 and November 1, 2014. The amounts Lands' End earned related to call center services and commissions were $2 million for each of the 13-week periods ended October 31, 2015 and November 1, 2014, and $6 million for each of the 39-week periods ended October 31, 2015 and November 1, 2014.

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 46% of the outstanding common stock of SHO (based on publicly available information as of April 7, 2015).

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:

31

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

• 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 October 31, 2015, November 1, 2014 and January 31, 2015, Holdings reported a net amount receivable from SHO of $85 million, $80 million and $61 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 $359 million and $376 million, respectively, for the 13-week periods ended October 31, 2015 and November 1, 2014, and $1.1 billion and $1.2 billion, respectively, for the 39-week periods ended October 31, 2015 and November 1, 2014. The net amounts SHO earned related to commissions were $22 million for each of the 13-week periods ended October 31, 2015 and November 1, 2014, and $71 million and $77 million, respectively, for the 39-week periods ended October 31, 2015 and November 1, 2014. 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 January 31, 2015 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.

Seritage

ESL owns approximately 9.8% of the total voting power of Seritage, and approximately 43.5% of the limited partnership units of Seritage Growth Properties, L.P. (the “Operating Partnership”), the entity that now owns the properties sold by the Company in the Seritage transaction and through which Seritage conducts its operations (based on publicly available information as of August 14, 2015). Mr. Lampert is also currently the Chairman of the Board of Trustees of Seritage.

In connection with the Seritage transaction as described in Note 5, Holdings entered into a master lease agreement with Seritage. The initial amount of aggregate annual base rent under the master lease is $134 million for the REIT properties, with increases of 2% per year beginning in the second lease year. Holdings recorded rent expense of $22 million and $27 million, respectively, in Cost of sales, buying and occupancy for the 13- and 39-week periods ended October 31, 2015. Rent expense consists of straight-line rent expense of $37 million and $47 million, respectively, offset by amortization of a deferred gain recognized pursuant to the sale and leaseback of properties from Seritage of $15 million and $20 million, respectively, for the 13- and 39-week periods ended October 31, 2015.

In addition to base rent under the Master Lease, Holdings pays monthly installment expenses for property taxes and insurance at all REIT properties where Holdings is a tenant and installment expenses for common area maintenance, utilities and other operating expenses at REIT properties that are multi-tenant locations where Holdings and other third parties are tenants. The initial amount of aggregate installment expenses under the Master Lease is $70 million, based on estimated installment expenses, and will be reconciled annually based on actual installment expenses. Holdings paid $17 million and $22 million for the 13- and 39-week periods ended October 31, 2015, respectively, recorded in Cost of sales, buying and occupancy.

32

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Holdings and Seritage entered into a transition services agreement pursuant to which Holdings will provide certain limited services to Seritage for up to 18 months. The services include specified facilities management, accounting, treasury, tax, information technology, risk management, human resources, and related support services. Under the terms of the transition services agreement, the scope and level of the facilities management services will be substantially consistent with the scope and level of the services provided in connection with the operation of the transferred properties held by Holdings prior to the closing of the Seritage transaction. Amounts due from Seritage are generally settled on a net basis. Holdings invoices Seritage on at least a monthly basis. Revenues recognized related to the transition services agreement were not material for the 13- or 39-week period ended October 31, 2015. At October 31, 2015, Holdings reported a net amount receivable from Seritage of $8 million in the Accounts receivable line of the Condensed Consolidated Balance Sheets.

NOTE 14—GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At October 31, 2015, the principal amount outstanding of the Company's 65/8% Senior Secured Notes due 2018 was $304 million. The Senior Secured Notes were issued in 2010 by Sears Holdings Corporation ("Parent"). The Senior Secured 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 October 31, 2015, November 1, 2014 and January 31, 2015, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014, and the Condensed Consolidating Statements of Cash flows for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. Merchandise sales and services included revenues of approximately $185 million from the Lands' End domestic business for the 39-week period ended November 1, 2014. Net loss attributable to Holdings' shareholders included net income of approximately $5 million from the Lands' End domestic business for the 39-week period ended November 1, 2014. The financial information for the domestic portion of Lands' End business is reflected within the guarantor subsidiaries balances for this period, while the international portion is reflected within the non-guarantor subsidiaries balances for this period.

On October 16, 2014, we de-consolidated Sears Canada pursuant to a rights offering transaction. Merchandise sales and services in the following condensed consolidated financial statements included revenues of approximately $611 million and $2.1 billion, respectively, for the 13- and 39-week periods ended November 1, 2014. Net loss attributable to Holdings' shareholders included net loss of approximately $86 million and $137 million, respectively, for the 13- and 39-week periods ended November 1, 2014. The financial information for Sears Canada is reflected within the non-guarantor subsidiaries balances for these periods.

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.

33

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

October 31, 2015

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	256	$	38	$	—		$	294
Intercompany receivables	—			—		27,181		(27,181		)	—
Accounts receivable	9			441		25		—			475
Merchandise inventories	—			6,208		—		—			6,208
Prepaid expenses and other current assets	39			611		269		(677		)	242
Total current assets	48			7,516		27,513		(27,858		)	7,219
Total property and equipment, net	—			1,852		816		—			2,668
Goodwill and intangible assets	—			270		2,089		—			2,359
Other assets	6			700		2,129		(2,312		)	523
Investment in subsidiaries	11,328			25,701		—		(37,029		)	—
TOTAL ASSETS	$	11,382		$	36,039	$	32,547	$	(67,199	)	$	12,769
Current liabilities
Short-term borrowings	$	—		$	686	$	—	$	—		$	686
Current portion of long-term debt and capitalized lease obligations	—			69		2		—			71
Merchandise payables	—			2,295		—		—			2,295
Intercompany payables	11,987			15,194		—		(27,181		)	—
Short-term deferred tax liabilities	3			427		—		(8		)	422
Other current liabilities	28			2,215		1,470		(669		)	3,044
Total current liabilities	12,018			20,886		1,472		(27,858		)	6,518
Long-term debt and capitalized lease obligations	681			3,058		39		(1,654		)	2,124
Pension and postretirement benefits	—			2,128		5		—			2,133
Deferred gain on sale-leaseback	—			775		—		—			775
Sale-leaseback financing obligation	—			164		—		—			164
Long-term deferred tax liabilities	56			—		976		(495		)	537
Other long-term liabilities	—			865		1,181		(235		)	1,811
Total Liabilities	12,755			27,876		3,673		(30,242		)	14,062
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(1,373		)	8,163		28,874		(36,964		)	(1,300		)
Noncontrolling interest	—			—		—		7			7
Total Equity (Deficit)	(1,373		)	8,163		28,874		(36,957		)	(1,293		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	11,382		$	36,039	$	32,547	$	(67,199	)	$	12,769

34

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

November 1, 2014

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	296	$	30	$	—		$	326
Intercompany receivables	—			—		26,681		(26,681		)	—
Accounts receivable	103			409		34		—			546
Merchandise inventories	—			6,464		—		—			6,464
Prepaid expenses and other current assets	43			796		288		(872		)	255
Total current assets	146			7,965		27,033		(27,553		)	7,591
Total property and equipment, net	—			3,610		951		—			4,561
Goodwill and intangible assets	—			284		2,089		—			2,373
Other assets	117			433		2,535		(2,441		)	644
Investment in subsidiaries	13,013			25,589		—		(38,602		)	—
TOTAL ASSETS	$	13,276		$	37,881	$	32,608	$	(68,596	)	$	15,169
Current liabilities
Short-term borrowings	$	—		$	2,096	$	—	$	—		$	2,096
Current portion of long-term debt and capitalized lease obligations	—			71		4		—			75
Merchandise payables	—			2,431		—		—			2,431
Intercompany payables	12,101			14,579		—		(26,680		)	—
Short-term deferred tax liabilities	1			501		—		(21		)	481
Other current liabilities	4			2,355		1,823		(851		)	3,331
Total current liabilities	12,106			22,033		1,827		(27,552		)	8,414
Long-term debt and capitalized lease obligations	1,238			3,668		36		(2,173		)	2,769
Pension and postretirement benefits	—			1,316		4		—			1,320
Long-term deferred tax liabilities	—			—		917		(207		)	710
Other long-term liabilities	—			774		1,305		(249		)	1,830
Total Liabilities	13,344			27,791		4,089		(30,181		)	15,043
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(68		)	10,090		28,519		(38,421		)	120
Noncontrolling interest	—			—		—		6			6
Total Equity (Deficit)	(68		)	10,090		28,519		(38,415		)	126
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	13,276		$	37,881	$	32,608	$	(68,596	)	$	15,169

35

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Balance Sheet

January 31, 2015

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	219	$	31	$	—		$	250
Intercompany receivables	—			—		26,291		(26,291		)	—
Accounts receivable	—			390		39		—			429
Merchandise inventories	—			4,943		—		—			4,943
Prepaid expenses and other current assets	38			797		274		(868		)	241
Total current assets	38			6,349		26,635		(27,159		)	5,863
Total property and equipment, net	—			3,524		925		—			4,449
Goodwill and intangible assets	—			277		2,089		—			2,366
Other assets	13			494		2,763		(2,739		)	531
Investment in subsidiaries	11,700			25,350		—		(37,050		)	—
TOTAL ASSETS	$	11,751		$	35,994	$	32,412	$	(66,948	)	$	13,209
Current liabilities
Short-term borrowings	$	—		$	615	$	—	$	—		$	615
Current portion of long-term debt and capitalized lease obligations	—			72		3		—			75
Merchandise payables	—			1,621		—		—			1,621
Intercompany payables	11,103			15,188		—		(26,291		)	—
Short-term deferred tax liabilities	3			485		—		(8		)	480
Other current liabilities	34			2,395		1,716		(860		)	3,285
Total current liabilities	11,140			20,376		1,719		(27,159		)	6,076
Long-term debt and capitalized lease obligations	1,590			3,736		40		(2,256		)	3,110
Pension and postretirement benefits	—			2,400		4		—			2,404
Long-term deferred tax liabilities	56			—		981		(322		)	715
Other long-term liabilities	—			889		1,205		(245		)	1,849
Total Liabilities	12,786			27,401		3,949		(29,982		)	14,154
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(1,035		)	8,593		28,463		(36,972		)	(951		)
Noncontrolling interest	—			—		—		6			6
Total Equity (Deficit)	(1,035		)	8,593		28,463		(36,966		)	(945		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	11,751		$	35,994	$	32,412	$	(66,948	)	$	13,209

36

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	5,766		$	725		$	(741	)	$	5,750
Cost of sales, buying and occupancy	—			4,616			291			(419		)	4,488
Selling and administrative	1			1,706			245			(322		)	1,630
Depreciation and amortization	—			76			18			—			94
Impairment charges	—			17			—			—			17
Gain on sales of assets	—			(97		)	—			—			(97		)
Total costs and expenses	1			6,318			554			(741		)	6,132
Operating income (loss)	(1		)	(552		)	171			—			(382		)
Interest expense	(60		)	(117		)	(21		)	124			(74		)
Interest and investment income (loss)	(3		)	8			136			(124		)	17
Income (loss) before income taxes	(64		)	(661		)	286			—			(439		)
Income tax (expense) benefit	—			33			(47		)	—			(14		)
Equity (deficit) in earnings in subsidiaries	(390		)	138			—			252			—
Net income (loss)	(454		)	(490		)	239			252			(453		)
Income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(454	)	$	(490	)	$	238		$	252		$	(454	)

37

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	6,638		$	1,186		$	(617	)	$	7,207
Cost of sales, buying and occupancy	—			5,272			767			(433		)	5,606
Selling and administrative	—			1,958			237			(184		)	2,011
Depreciation and amortization	—			116			32			—			148
Gain on sales of assets	—			(66		)	(2		)	—			(68		)
Total costs and expenses	—			7,280			1,034			(617		)	7,697
Operating income (loss)	—			(642		)	152			—			(490		)
Interest expense	(52		)	(123		)	(23		)	120			(78		)
Interest and investment income	91			—			126			(120		)	97
Other income	—			—			2			—			2
Income (loss) before income taxes	39			(765		)	257			—			(469		)
Income tax (expense) benefit	—			31			(190		)	—			(159		)
Equity (deficit) in earnings in subsidiaries	(667		)	(29		)	—			696			—
Net income (loss)	(628		)	(763		)	67			696			(628		)
Loss attributable to noncontrolling interests	—			—			—			80			80
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(628	)	$	(763	)	$	67		$	776		$	(548	)

38

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	17,954		$	2,160		$	(2,271	)	$	17,843
Cost of sales, buying and occupancy	—			13,997			838			(1,207		)	13,628
Selling and administrative	2			5,326			741			(1,064		)	5,005
Depreciation and amortization	—			276			54			—			330
Impairment charges	—			71			—			—			71
Gain on sales of assets	—			(722		)	(8		)	—			(730		)
Total costs and expenses	2			18,948			1,625			(2,271		)	18,304
Operating income (loss)	(2		)	(994		)	535			—			(461		)
Interest expense	(204		)	(355		)	(63		)	373			(249		)
Interest and investment income (loss)	(14		)	28			332			(373		)	(27		)
Income (loss) before income taxes	(220		)	(1,321		)	804			—			(737		)
Income tax (expense) benefit	—			332			(143		)	—			189
Equity (deficit) in earnings in subsidiaries	(329		)	342			—			(13		)	—
Net income (loss)	(549		)	(647		)	661			(13		)	(548		)
Income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(549	)	$	(647	)	$	660		$	(13	)	$	(549	)

39

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Operations

For the 39 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	21,154		$	4,238		$	(2,293	)	$	23,099
Cost of sales, buying and occupancy	—			16,679			2,527			(1,278		)	17,928
Selling and administrative	1			6,028			1,204			(1,015		)	6,218
Depreciation and amortization	—			347			108			—			455
Impairment charges	—			10			15			—			25
Gain on sales of assets	—			(133		)	(15		)	—			(148		)
Total costs and expenses	1			22,931			3,839			(2,293		)	24,478
Operating income (loss)	(1		)	(1,777		)	399			—			(1,379		)
Interest expense	(156		)	(344		)	(70		)	349			(221		)
Interest and investment income	91			18			373			(349		)	133
Other income	—			—			4			—			4
Income (loss) before income taxes	(66		)	(2,103		)	706			—			(1,463		)
Income tax (expense) benefit	—			78			(266		)	—			(188		)
Equity (deficit) in earnings in subsidiaries	(1,585		)	145			—			1,440			—
Net income (loss)	(1,651		)	(1,880		)	440			1,440			(1,651		)
Loss attributable to noncontrolling interests	—			—			—			128			128
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(1,651	)	$	(1,880	)	$	440		$	1,568		$	(1,523	)

40

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(454	)	$	(490	)	$	239	$	252		$	(453	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			65			—		—			65
Unrealized net gain, net of tax	—			—			27		(27		)	—
Total other comprehensive income	—			65			27		(27		)	65
Comprehensive income (loss)	(454		)	(425		)	266		225			(388		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(454	)	$	(425	)	$	266	$	224		$	(389	)

41

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Loss

For the 13 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(628	)	$	(763	)	$	67		$	696		$	(628	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			28			2			—			30
Currency translation adjustments, net of tax	5			—			(16		)	—			(11		)
Sears Canada de-consolidation	54			10			(250		)	—			(186		)
Unrealized net gain, net of tax	—			—			8			(8		)	—
Total other comprehensive income (loss)	59			38			(256		)	(8		)	(167		)
Comprehensive loss	(569		)	(725		)	(189		)	688			(795		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			401			401
Comprehensive loss attributable to Holdings' shareholders	$	(569	)	$	(725	)	$	(189	)	$	1,089		$	(394	)

42

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(549	)	$	(647	)	$	661	$	(13	)	$	(548	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			196			—		—			196
Unrealized net loss, net of tax	—			—			11		(11		)	—
Total other comprehensive income	—			196			11		(11		)	196
Comprehensive income (loss)	(549		)	(451		)	672		(24		)	(352		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(549	)	$	(451	)	$	672	$	(25	)	$	(353	)

43

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 39 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(1,651	)	$	(1,880	)	$	440		$	1,440		$	(1,651	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			85			10			—			95
Deferred loss on derivatives, net of tax	(2		)	—			—			—			(2		)
Currency translation adjustments, net of tax	5			—			(2		)	—			3
Sears Canada de-consolidation	54			10			(250		)	—			(186		)
Unrealized net gain, net of tax	—			—			120			(120		)	—
Total other comprehensive income (loss)	57			95			(122		)	(120		)	(90		)
Comprehensive income (loss)	(1,594		)	(1,785		)	318			1,320			(1,741		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			438			438
Comprehensive income (loss) attributable to Holdings' shareholders	$	(1,594	)	$	(1,785	)	$	318		$	1,758		$	(1,303	)

44

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	249		$	(2,691	)	$	642		$	(254	)	$	(2,054	)
Proceeds from sales of property and investments				2,703			5			—			2,708
Purchases of property and equipment				(146		)	(6		)	—			(152		)
Net investing with Affiliates	(249		)	—			(378		)	627			—
Net cash provided by (used in) investing activities	(249		)	2,557			(379		)	627			2,556
Repayments of long-term debt	—			(1,385		)	(2		)	—			(1,387		)
Increase in short-term borrowings, primarily 90 days or less	—			471			—			—			471
Proceeds from sale-leaseback financing	—			508			—			—			508
Debt issuance costs	—			(50		)	—			—			(50		)
Intercompany dividend	—						(254		)	254			—
Net borrowing with Affiliates	—			627			—			(627		)	—
Net cash provided by (used in) financing activities	—			171			(256		)	(373		)	(458		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	—			37			7			—			44
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			219			31			—			250
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	256		$	38		$	—		$	294

45

SEARS HOLDINGS CORPORATION

Notes to Condensed Consolidated Financial Statements—(Continued)

(Unaudited)

Condensed Consolidating Statement of Cash Flows

For the 39 Weeks EndedNovember 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	233		$	(2,473	)	$	539		$	(241	)	$	(1,942	)
Proceeds from sales of property and investments	—			250			66			—			316
Purchases of property and equipment	—			(170		)	(32		)	—			(202		)
Sears Canada de-consolidation	—			—			(207		)	—			(207		)
Proceeds from Sears Canada rights offering	169			—			—			—			169
Net investing with Affiliates	(402		)	—			(573		)	975			—
Net cash provided by (used in) investing activities	(233		)	80			(746		)	975			76
Proceeds from debt issuances	—			400			—			—			400
Repayments of long-term debt	—			(51		)	(10		)	—			(61		)
Increase in short-term borrowings, primarily 90 days or less	—			364			—			—			364
Lands' End, Inc. pre-separation funding	—			515			—			—			515
Separation of Lands' End, Inc.	—			(31		)	—			—			(31		)
Debt issuance costs	—			(20		)	—			—			(20		)
Intercompany dividend	—			—			(241		)	241			—
Net borrowing with Affiliates	—			975			—			(975		)	—
Net cash provided by (used in) financing activities	—			2,152			(251		)	(734		)	1,167
Effect of exchange rate changes on cash and cash equivalents	—			—			(3		)	—			(3		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			(241		)	(461		)	—			(702		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			537			491			—			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	296		$	30		$	—		$	326

46

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

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 January 31, 2015.

OVERVIEW OF HOLDINGS

Holdings, the parent company of Kmart and Sears, was formed in connection with the March 24, 2005 Merger of these two companies. We are an integrated retailer with significant physical and intangible assets, as well as virtual capabilities enabled through technology. We currently operate a national network of stores with 1,687 full-line and specialty retail stores in the United States, operating through Kmart and Sears. Further, we operate a number of websites under the Sears.com and Kmart.com banners which offer millions of products and provide the capability for our members and customers to engage in cross-channel transactions such as free store pickup; buy in store/ship to home; and buy online, return in store. We are also the home of Shop Your Way^®, a free member-based social shopping platform that offers rewards, personalized services and a unique experience. Shop Your Way^® connects all of the ways members shop - in store, at home, online and by phone.

Through the third quarter of 2014, we conducted our operations in three business segments: Kmart, Sears Domestic and Sears Canada. As a result of the de-consolidation of Sears Canada as described in Note 1 of Notes to Condensed Consolidated Financial Statements, Sears Canada is no longer an operating or reportable segment. We now conduct our operations in two business segments: Kmart and Sears Domestic. The nature of operations conducted within each of these segments is discussed within the "Business Segments" section of Item 1 of our Annual Report on Form 10-K for the year ended January 31, 2015. Our business segments have been determined in accordance with accounting standards regarding the determination, and reporting, of business segments.

Sale-leaseback Transaction with Seritage Growth Properties and Joint Ventures

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction (the "Seritage transaction") with Seritage Growth Properties ("Seritage"), a recently formed, independent publicly traded real estate investment trust ("REIT"). As part of the Seritage transaction, Holdings sold 235 properties to Seritage (the "REIT properties") along with Holdings' 50% interest in three distinct real estate joint ventures (collectively, the "JVs") entered into during the first quarter of 2015 with General Growth Properties, Inc., Simon Property Group, Inc. and The Macerich Company. Holdings contributed 31 properties to the JVs where Holdings currently operates stores (the "JV properties"), in exchange for a 50% interest in the JVs and $429 million in cash ($426 million, net of closing costs) (the "JV transactions"). Holdings received aggregate gross proceeds from the transaction with Seritage of $2.7 billion ($2.6 billion, net of closing costs).

In connection with the Seritage transaction and JV transactions, Holdings has entered into agreements with Seritage and the JVs under which Holdings leases 255 of the properties (the "Master Leases"), with the remaining properties being leased by Seritage to third parties. The Master Leases generally are triple net leases with respect to the space occupied by Holdings, and Holdings has the obligation to pay rent, costs and expenses of operation, repair, and maintenance of the space occupied. The Master Leases have an initial term of ten years. The master lease for the REIT properties provides Holdings three options for five-year renewals of the term and a final option for a four-year renewal. The Master Leases for the JV properties provide Holdings two options for five-year renewals of the term. Pursuant to the Master Leases, Seritage and the JVs have the right to recapture space from Holdings, allowing them to reconfigure and rent the recaptured space to third-party tenants over time. In addition, Holdings has certain rights to terminate the Master Leases with respect to properties that cease to be profitable for operation by Holdings.

Also, in connection with the Seritage transaction and JV transactions, Holdings assigned its lease agreements with third party tenants at REIT properties and JV properties to Seritage and each of the JVs, respectively, and also assigned rental income from Lands' End at REIT properties and JV properties to Seritage and each of the JVs, respectively.

The initial amount of aggregate base rent under the Master Leases is $134 million for the REIT properties and $42 million for the JV properties, with increases of 2% per year beginning in the second lease year for the REIT properties and in the fourth lease year for the JV properties.

47

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

We accounted for the Seritage transaction and JV transactions in accordance with accounting standards applicable to real estate sales and sale-leaseback transactions. We determined that the Seritage transaction qualifies for sales recognition and sale-leaseback accounting. Because of our initial ownership interest in the JVs and continuing involvement in the properties, we determined that the JV transactions, which occurred in the first quarter of 2015, did not initially qualify for sale-leaseback accounting and, therefore, accounted for the JV transactions as financing transactions and, accordingly, recorded a sale-leaseback financing obligation of $426 million and continued to report the real property assets on our Condensed Consolidated Balance Sheets at May 2, 2015. Upon the sale of our 50% interest in the JVs to Seritage, the continuing involvement through an ownership interest in the buyer-lessor no longer exists, and Holdings determined that the JV transactions then qualified for sales recognition and sale-leaseback accounting, with the exception of four properties for which we still have continuing involvement as a result of an obligation to redevelop the stores for a third-party tenant and pay rent on behalf of the third-party tenant until it commences rent payments to the JVs.

With the exception of the four properties that have continuing involvement, in accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. Holdings received aggregate net proceeds of $3.1 billion for the sale-leaseback transaction and JV transactions. The carrying amount of Property and equipment, net and lease balances related to third-party leases that were assigned to Seritage and the JVs was $1.5 billion at July 7, 2015, of which $1.3 billion was recorded in our Sears Domestic segment and $175 million in our Kmart segment. Accordingly, Holdings recognized an immediate net gain of $508 million within Gain on sales of assets on the Condensed Consolidated Statement of Operations in the second quarter of 2015, comprised of a gain of $625 million for the amount of gain on sale in excess of the present value of minimum lease payments, offset by a loss of $117 million for properties where the fair value was less than the carrying value and the write-off of lease balances related to third-party leases that were assigned to Seritage and the JVs. The remaining gain of $894 million was deferred and will be recognized in proportion to the related rent expense over the lease term.

Sears Canada Rights Offering

On October 2, 2014, the Company announced that its board of directors had approved a rights offering of up to 40 million shares of Sears Canada Inc. ("Sears Canada"). In connection with the rights offering, each holder of Holdings' common stock received one subscription right for each share of common stock held at the close of business on October 16, 2014, the record date for the rights offering. On October 16, 2014, ESL Partners, L.P. and Edward S. Lampert, our Chairman and Chief Executive Officer and Chairman and Chief Executive Officer of ESL Investments Inc. and related entities (collectively "ESL") exercised a portion of its pro rata portion of the basic subscription rights to the offering, resulting in the sale of approximately 18 million common shares of Sears Canada to ESL. After the sale of Sears Canada shares to ESL, the Company was the beneficial holder of approximately 34 million shares, or 34%, of the common shares of Sears Canada. As such, the Company no longer maintained control of Sears Canada resulting in the de-consolidation of Sears Canada. The Sears Canada rights offering closed on November 7, 2014 and was oversubscribed. Accordingly, the Company sold a total of 40 million common shares of Sears Canada and received total aggregate proceeds of $380 million for the rights offering by the closing date.

We accounted for our retained investment in the common shares of Sears Canada and elected the fair value option for the equity method investment in Sears Canada in accordance with accounting standards applicable to financial instruments. The fair value of our equity method investment is recorded in Other assets on the Condensed Consolidated Balance Sheet and is disclosed in Note 4 of the Notes to Condensed Consolidated Financial Statements, and the change in fair value is recorded in Interest and investment income on the Condensed Consolidated Statement of Operations.

In addition, since the Company has retained an equity interest in Sears Canada, the operating results for Sears Canada through October 16, 2014 are presented within the consolidated operations of Holdings and the Sears Canada segment in the accompanying Consolidated Financial Statements in accordance with accounting standards applicable to presentation of financial statements.

48

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Lands' End Separation

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. As a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL, and the continuing arrangements between Holdings and Lands' End (as further described in Note 13 of the Notes to Condensed Consolidated Financial Statements), Holdings has determined that it has significant influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements. Also, in connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with Lands' End under the terms described in Note 13 of the Notes to Condensed Consolidated Financial Statement.

CONSOLIDATED RESULTS OF OPERATIONS

	13 Weeks Ended						39 Weeks Ended
millions, except per share data	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
REVENUES
Merchandise sales and services	$	5,750		$	7,207		$	17,843		$	23,099
COSTS AND EXPENSES
Cost of sales, buying and occupancy	4,488			5,606			13,628			17,928
Gross margin dollars	1,262			1,601			4,215			5,171
Gross margin rate	21.9		%	22.2		%	23.6		%	22.4		%
Selling and administrative	1,630			2,011			5,005			6,218
Selling and administrative expense as a percentage of total revenues	28.3		%	27.9		%	28.1		%	26.9		%
Depreciation and amortization	94			148			330			455
Impairment charges	17			—			71			25
Gain on sales of assets	(97		)	(68		)	(730		)	(148		)
Total costs and expenses	6,132			7,697			18,304			24,478
Operating loss	(382		)	(490		)	(461		)	(1,379		)
Interest expense	(74		)	(78		)	(249		)	(221		)
Interest and investment income (loss)	17			97			(27		)	133
Other income	—			2			—			4
Loss before income taxes	(439		)	(469		)	(737		)	(1,463		)
Income tax (expense) benefit	(14		)	(159		)	189			(188		)
Net loss	(453		)	(628		)	(548		)	(1,651		)
(Income) loss attributable to noncontrolling interests	(1		)	80			(1		)	128
NET LOSS ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(454	)	$	(548	)	$	(549	)	$	(1,523	)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS
Basic loss per share	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Diluted loss per share	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Basic weighted average common shares outstanding	106.6			106.4			106.5			106.3
Diluted weighted average common shares outstanding	106.6			106.4			106.5			106.3

49

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

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. Domestic comparable store sales amounts include sales from sears.com and kmart.com shipped directly to customers. These online sales resulted in a benefit of approximately 30 basis points and a negative impact of approximately 40 basis points, respectively, for the 13- and 39-week periods ended October 31, 2015, and a benefit of approximately 80 basis points and 150 basis points, respectively, for the 13- and 39-week periods ended November 1, 2014. In addition, domestic 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 30 basis points and a benefit of approximately 10 basis points, respectively, for the 13- and 39-week periods ended October 31, 2015, and a benefit of approximately 80 basis points and 10 basis points for the 13- and 39-week periods ended November 1, 2014.

Net Loss Attributable to Holdings' Shareholders, Adjusted EBITDA and Adjusted Loss per Share

We recorded a net loss attributable to Holdings' shareholders for the third quarter of $454 million, or $4.26 loss per diluted share, and $548 million, or $5.15 loss per diluted share, for 2015 and 2014, respectively. We recorded a net loss attributable to Holdings' shareholders of $549 million, or $5.15 loss per diluted share, and $1.5 billion, or $14.33 loss per diluted share, for the first nine months of 2015 and 2014, respectively.

In addition to our net loss determined in accordance with Generally Accepted Accounting Principles ("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 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 (loss), other income, 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, Domestic Adjusted EBITDA and Domestic Adjusted EBITDA excluding Seritage/JV rent are non-GAAP measurements, management believes that they are an important indicator of 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, one-time credits from vendors, expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses, amortization of deferred Seritage gain, the Lands' End separation and the Sears Canada de-consolidation. 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.

50

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Adjusted EBITDA was determined as follows:

	13 Weeks Ended						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Net loss attributable to Holdings per statement of operations	$	(454	)	$	(548	)	$	(549	)	$	(1,523	)
Income (loss) attributable to noncontrolling interests	1			(80		)	1			(128		)
Income tax expense (benefit)	14			159			(189		)	188
Interest expense	74			78			249			221
Interest and investment (income) loss	(17		)	(97		)	27			(133		)
Other income	—			(2		)	—			(4		)
Operating loss	(382		)	(490		)	(461		)	(1,379		)
Depreciation and amortization	94			148			330			455
Gain on sales of assets	(97		)	(68		)	(730		)	(148		)
Before excluded items	(385		)	(410		)	(861		)	(1,072		)
Closed store reserve and severance	(1		)	70			36			138
Domestic pension expense	58			22			172			67
Other(1)	2			9			(87		)	9
Amortization of deferred Seritage gain	(23		)	—			(30		)	—
Impairment charges	17			—			71			25
Adjusted EBITDA	(332		)	(309		)	(699		)	(833		)
Lands' End separation	—			—			—			(10		)
Adjusted EBITDA as defined(2)	$	(332	)	$	(309	)	$	(699	)	$	(843	)
Sears Canada segment	—			13			—			71
Domestic Adjusted EBITDA as defined(2)	$	(332	)	$	(296	)	$	(699	)	$	(772	)
Seritage/JV rent	52			—			78			—
Domestic Adjusted EBITDA as defined(2) excluding Seritage/JV rent	$	(280	)	$	(296	)	$	(621	)	$	(772	)

⁽¹⁾ Consists of one-time credits from vendors, expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses.

⁽²⁾ Adjusted to reflect the results of the Lands' End and Sears Canada businesses that were included in our results of operations prior to the separation/disposition.

51

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Adjusted EBITDA for our segments was as follows:

	13 Weeks Ended
	October 31, 2015									November 1, 2014
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating loss per statement of operations	$	(127	)	$	(255	)	$	(382	)	$	(149	)	$	(310	)	$	(31	)	$	(490	)
Depreciation and amortization	17			77			94			25			110			13			148
Gain on sales of assets	(12		)	(85		)	(97		)	(24		)	(44		)	—			(68		)
Before excluded items	(122		)	(263		)	(385		)	(148		)	(244		)	(18		)	(410		)
Domestic pension expense	—			58			58			—			22			—			22
Closed store reserve and severance	1			(2		)	(1		)	48			20			2			70
Other(1)	1			1			2			3			3			3			9
Amortization of deferred Seritage gain	(5		)	(18		)	(23		)	—			—			—			—
Impairment charges	10			7			17			—			—			—			—
Adjusted EBITDA	$	(115	)	$	(217	)	$	(332	)	$	(97	)	$	(199	)	$	(13	)	$	(309	)
% to revenues	(5.1		)%	(6.2		)%	(5.8		)%	(3.6		)%	(5.1		)%	(2.1		)%	(4.3		)%
	39 Weeks Ended
	October 31, 2015									November 1, 2014
millions	Kmart			Sears Domestic			Sears Holdings			Kmart			Sears Domestic			Sears Canada			Sears Holdings
Operating loss per statement of operations	$	(197	)	$	(264	)	$	(461	)	$	(389	)	$	(824	)	$	(166	)	$	(1,379	)
Depreciation and amortization	56			274			330			72			334			49			455
(Gain) loss on sales of assets	(173		)	(557		)	(730		)	(76		)	(73		)	1			(148		)
Before excluded items	(314		)	(547		)	(861		)	(393		)	(563		)	(116		)	(1,072		)
Domestic pension expense	—			172			172			—			67			—			67
Closed store reserve and severance	42			(6		)	36			84			27			27			138
Other(1)	9			(96		)	(87		)	3			3			3			9
Amortization of deferred Seritage gain	(6		)	(24		)	(30		)	—			—			—			—
Impairment charges	12			59			71			2			8			15			25
Adjusted EBITDA	(257		)	(442		)	(699		)	(304		)	(458		)	(71		)	(833		)
Lands' End separation	—			—			—			—			(10		)	—			(10		)
Adjusted EBITDA as defined(2)	$	(257	)	$	(442	)	$	(699	)	$	(304	)	$	(468	)	$	(71	)	$	(843	)
% to revenues(3)	(3.6		)%	(4.1		)%	(3.9		)%	(3.6		)%	(3.8		)%	(3.4		)%	(3.7		)%

⁽¹⁾ Consists of one-time credits from vendors, expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses.

⁽²⁾ Adjusted to reflect the results of the Lands' End business that were included in our results of operations prior to the separation.

⁽³⁾ Excludes revenues of the Lands' End business that were included in our results of operations prior to the separation.

52

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

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 asset 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 $89 million in 2014, $162 million in 2013 and $165 million in 2012. 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						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Components of net periodic expense:
Interest cost	$	53		$	55		$	158		$	166
Expected return on plan assets	(62		)	(62		)	(187		)	(185		)
Amortization of experience losses	67			29			201			86
Net periodic expense	$	58		$	22		$	172		$	67

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 Management's Discussion & Analysis of Financial Condition and Results of Operations - Application of Critical Accounting Policies and Estimates - Defined Benefit Pension Plans and Note 7 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

53

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

• Lands' End separation – The results of the Lands' End business that were included in our results of operations prior to the separation.

In addition, Domestic Adjusted EBITDA, excluding Seritage/JV rent, reflects the impact of the additional rent expense and assigned sub-tenant rental income as a result of the Seritage and joint venture transactions. The terms of our leases with Seritage and the joint venture partners provide us with the ability to accelerate the transformation of our physical stores. We expect that our cash rent obligations will decrease significantly as space in these stores is recaptured.

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 13- and 39-week periods ended October 31, 2015 and November 1, 2014.

	13 Weeks Ended October 31, 2015
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Domestic Closed Store Reserve, Store Impairments and Severance			Domestic Gain on Sales of Assets			Mark-to-Market Adjustments			Amortization of Deferred Seritage Gain			Other(1)			Domestic Tax Matters		As Adjusted
Gross margin impact	$	1,262		$	—		$	6		$	—		$	—		$	(23	)	$	—		$	—	$	1,245
Selling and administrative impact	1,630			(58		)	7			—			—			—			(2		)	—		1,577
Depreciation and amortization impact	94			—			—			—			—			—			—			—		94
Impairment charges impact	17			—			(17		)	—			—			—			—			—		—
Gain on sales of assets impact	(97		)	—			—			83			—			—			—			—		(14		)
Operating loss impact	(382		)	58			16			(83		)	—			(23		)	2			—		(412		)
Interest and investment income impact	17			—			—			—			(17		)	—			—			—		—
Income tax expense impact	(14		)	(22		)	(6		)	31			6			9			(1		)	179		182
After tax and noncontrolling interests impact	(454		)	36			10			(52		)	(11		)	(14		)	1			179		(305		)
Diluted loss per share impact	$	(4.26	)	$	0.34		$	0.09		$	(0.49	)	$	(0.10	)	$	(0.13	)	$	0.01		$	1.68	$	(2.86	)

⁽¹⁾ Consists of transaction costs associated with strategic initiatives, expenses associated with legal matters and other expenses.

54

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

	13 Weeks Ended November 1, 2014
.				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Domestic Closed Store Reserve and Severance			Domestic Gain on Sales of Assets			Other Expenses(1)			Gain on Sears Canada Disposition			Domestic Tax Matters		Sears Canada Segment			As Adjusted(2)
Gross margin impact	$	1,601		$	—		$	41		$	—		$	—		$	—		$	—	$	(154	)	$	1,488
Selling and administrative impact	2,011			(22		)	(27		)	—			(6		)	—			—		(172		)	1,784
Depreciation and amortization impact	148			—			(6		)	—			—			—			—		(13		)	129
Gain on sales of assets impact	(68		)	—			—			42			—			—			—		—			(26		)
Operating loss impact	(490		)	22			74			(42		)	6			—			—		31			(399		)
Interest expense impact	(78		)	—			—			—			—			—			—		1			(77		)
Interest and investment income impact	97			—			—			—			—			(70		)	—		(12		)	15
Other income impact	2			—			—			—			—			—			—		(2		)	—
Income tax expense impact	(159		)	(8		)	(28		)	16			(2		)	26			180		148			173
Loss attributable to noncontrolling interests impact	80			—			—			—			—			—			—		(80		)	—
After tax and noncontrolling interests impact	(548		)	14			46			(26		)	4			(44		)	180		86			(288		)
Diluted loss per share impact	$	(5.15	)	$	0.13		$	0.43		$	(0.25	)	$	0.04		$	(0.41	)	$	1.69	$	0.81		$	(2.71	)

⁽¹⁾ Consists of transaction costs associated with strategic initiatives and other expenses.

⁽²⁾ Adjusted to reflect the results of the Sears Canada business that were included in our results of operations prior to the disposition.

	39 Weeks Ended October 31, 2015
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Domestic Closed Store Reserve, Store Impairments and Severance			Domestic Gain on Sales of Assets			Mark-to-Market Adjustments			Amortization of Deferred Seritage Gain			Other(1)			Domestic Tax Matters		As Adjusted
Gross margin impact	$	4,215		$	—		$	17		$	—		$	—		$	(30	)	$	(126	)	$	—	$	4,076
Selling and administrative impact	5,005			(172		)	(19		)	—			—			—			(39		)	—		4,775
Depreciation and amortization impact	330			—			(2		)	—			—			—			—			—		328
Impairment charges	71			—			(71		)	—			—			—			—			—		—
Gain on sales of assets impact	(730		)	—			—			687			—			—			—			—		(43		)
Operating loss impact	(461		)	172			109			(687		)	—			(30		)	(87		)	—		(984		)
Interest and investment loss impact	(27		)	—			—			—			25			—			—			—		(2		)
Income tax benefit impact	189			(65		)	(41		)	258			(9		)	11			33			87		463
After tax and noncontrolling interests impact	(549		)	107			68			(429		)	16			(19		)	(54		)	87		(773		)
Diluted loss per share impact	$	(5.15	)	$	1.00		$	0.64		$	(4.03	)	$	0.15		$	(0.18	)	$	(0.51	)	$	0.82	$	(7.26	)

⁽¹⁾ Consists of one-time credits from vendors, transaction costs associated with strategic initiatives, expenses associated with legal matters and other expenses.

55

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

	39 Weeks Ended November 1, 2014
				Adjustments
millions, except per share data	GAAP			Domestic Pension Expense			Domestic Closed Store Reserve, Store Impairments and Severance			Domestic Gain on Sales of Assets			Other Expenses(1)			Gain on Sears Canada Disposition			Domestic Tax Matters		Sears Canada Segment			Lands' End Separation			As Adjusted(2)
Gross margin impact	$	5,171		$	—		$	58		$	—		$	—		$	—		$	—	$	(502	)	$	(87	)	$	4,640
Selling and administrative impact	6,218			(67		)	(53		)	—			(6		)	—			—		(603		)	(77		)	5,412
Depreciation and amortization impact	455			—			(7		)	—			—			—			—		(49		)	(3		)	396
Impairment charges impact	25			—			(10		)	—			—			—			—		(15		)	—			—
Gain on sales of assets impact	(148		)	—			—			65			—			—			—		(1		)	—			(84		)
Operating loss impact	(1,379		)	67			128			(65		)	6			—			—		166			(7		)	(1,084		)
Interest expense impact	(221		)	—			—			—			—			—			—		5			—			(216		)
Interest and investment income impact	133			—			—			—			—			(70		)	—		(38		)	—			25
Other income impact	4			—			—			—			—			—			—		(4		)	—			—
Income tax expense impact	(188		)	(25		)	(48		)	25			(2		)	26			554		136			3			481
Loss attributable to noncontrolling interest impact	128			—			—			—			—			—			—		(128		)	—			—
After tax and noncontrolling interest impact	(1,523		)	42			80			(40		)	4			(44		)	554		137			(4		)	(794		)
Diluted loss per share impact	$	(14.33	)	$	0.40		$	0.75		$	(0.38	)	$	0.04		$	(0.41	)	$	5.21	$	1.29		$	(0.04	)	$	(7.47	)

⁽¹⁾ Consists of transaction costs associated with strategic initiatives and other expenses.

⁽²⁾ Adjusted to reflect the results of the Lands' End and Sears Canada businesses that were included in our results of operations prior to the separation/disposition.

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 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 which, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, and affects comparability of results.

• Domestic 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, and again in 2013, 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 beginning in fiscal 2011 when the valuation allowance was first established.

56

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

• Sears Canada Segment - The results of the Sears Canada business that were included in our results of operations prior to the disposition. The adjustment also includes the valuation allowance that was recorded in the third quarter of 2014 prior to the de-consolidation of Sears Canada.

13-week period ended October 31, 2015 compared to the 13-week period ended November 1, 2014

Revenues and Comparable Store Sales

Revenues decreased $1.5 billion to $5.8 billion for 13-week period ended October 31, 2015, as compared to revenues of $7.2 billion for the 13-week period ended November 1, 2014, with a significant portion of the decline related to actions taken by the Company in 2014 to streamline our operations and focus on our transformation into a member-centric retailer. The decrease in revenue included a decrease of $611 million associated with Sears Canada, which was de-consolidated in October 2014, and $358 million in less revenue as a result of fewer Kmart and Sears Full-line stores. For the quarter, domestic comparable store sales declined 8.6%, with more than half of the decline attributable to declines in apparel and consumer electronics, a low margin category. The decline in comparable store sales contributed to $417 million of the revenue decline.

Kmart comparable store sales declined 7.5% with increases experienced in the home appliances and mattresses categories, offset by declines in apparel, consumer electronics, grocery & household and drugstore. Excluding the impact of the consumer electronics business, which is a business we continue to alter to meet our members' needs, Kmart comparable store sales would have decreased 6.4%. Sears Domestic comparable store sales decreased 9.6%, and were also negatively impacted by consumer electronics. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 8.2%, primarily driven by decreases in apparel, lawn & garden, tools, footwear and Sears Auto Centers, which were partially offset by an increase in the mattresses category.

Gross Margin

Gross margin decreased $339 million to $1.3 billion for the third quarter of 2015, as compared to the prior year third quarter due to the above noted decline in sales, as well as a decline in gross margin rate. The decline in margin rate is primarily attributed to a decrease in occupancy leverage, partially offset by an improvement in overall product margin. Gross margin for the third quarter of 2015 included a credit of $23 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, as well as charges of $6 million related to store closures. The third quarter of 2014 included gross margin of $154 million from Sears Canada, as well as charges of $41 million related to store closures.

As compared to the prior year, Kmart's gross margin rate for the third quarter improved40 basis points, with increases experienced in several categories, particularly drugstore, toys, electronics and apparel, driven by less clearance and promotional activity. Sears Domestic's gross margin rate decreased 30 basis points for the quarter, with decreases experienced in home appliances and apparel primarily as a result of increased promotional activity, including an increase in Shop Your Way expense.

In addition, as a result of the Seritage and JV transactions, the third quarter of 2015 included additional rent expense and assigned sub-tenant rental income of approximately $52 million.

Selling and Administrative Expenses

Selling and administrative expenses decreased$381 million in the third quarter of 2015 compared to the prior year quarter and included significant items such as expenses related to our domestic pension plan, store closings and severance of $51 million and $49 million for 2015 and 2014, respectively, as well as transaction costs associated with strategic initiatives and other expenses of $2 million and $6 million for 2015 and 2014, respectively. In addition, the third quarter 2014 included expenses of $172 million from Sears Canada. Excluding these items, selling and administrative expenses declined $207 million primarily due to decreases in payroll and advertising expenses.

57

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Our selling and administrative expenses as a percentage of total revenues ("selling and administrative expense rate") was 28.3% for the third quarter of 2015, compared to 27.9% in the prior year, and increased as the decrease in overall selling and administrative expenses was 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 $97 million in 2015 and $68 million in 2014. The gains recorded in the third quarter of 2015 included a gain of $83 million related to the sale of a Sears Full-line store for which we received $102 million in cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during the third quarter of 2015, we recognized the gain that had previously been deferred. The gains recorded during the third quarter of 2014 included a gain of $42 million related to the sale of two Sears Full-line stores for which we received $64 million cash proceeds.

Operating Loss

The Company reported an operating loss of $382 million and $490 million in the third quarter of 2015 and 2014, respectively. Operating loss for the third quarter of 2015 included significant items which aggregated to operating income of $30 million, while operating loss for the third quarter of 2014 included significant items which aggregated to operating expense of $91 million. Excluding these items, we would have reported an operating loss of $412 million and $399 million for the third quarter of 2015 and 2014, respectively. The increase in operating loss in 2015 was primarily driven by the decline in gross margin, partially offset by the decline in selling and administrative expenses.

Interest and Investment Income

We recorded interest and investment income of $17 million during the third quarter of 2015 compared to $97 million during the third quarter of 2014. The third quarter of 2015 included a gain of $17 million related to our equity investment in Sears Canada, while the third quarter of 2014 included a gain of $70 million on the de-consolidation of Sears Canada as a result of the rights offering, as well as a $12 million gain related to the sale of joint venture interests, for which Sears Canada received $35 million ($38 million Canadian) in cash proceeds.

Income Taxes

Our effective tax rate for the third quarter of 2015 was an expense rate of 3.2% compared to an expense rate of 33.9% in the prior year quarter. 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 income. Our tax rate in 2015 continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic and foreign jurisdictions where it is not more likely than not that such benefits would be realized. The third quarters of 2015 and 2014 were negatively impacted by foreign branch taxes and state income taxes. In addition, 2014 was negatively impacted by a valuation allowance established on Sears Canada's deferred tax assets in the third quarter, prior to de-consolidation.

39-week period ended October 31, 2015 compared to the 39-week period ended November 1, 2014

Revenues and Comparable Store Sales

For the first nine months of 2015, revenues decreased$5.3 billion to $17.8 billion as compared to revenues of $23.1 billion for the first nine months of 2014, with a significant portion of the decline related to actions taken by the Company in 2014 to streamline our operations and focus on our transformation into a member-centric retailer. The decrease in revenue included a decrease of $2.1 billion associated with Sears Canada, which was de-consolidated in October 2014, $222 million from the separation of the Lands' End business, which occurred in the first quarter of 2014 and $1.2 billion in less revenue as a result of fewer Kmart and Sears Full-line stores. In addition, domestic comparable store sales declined 10.1% for the first nine months of 2015, which contributed to $1.6 billion of the decline. The decline in comparable store sales was driven by highly targeted promotional and marketing spend to better align with member needs, and a shift away from low margin categories, such as consumer electronics.

58

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Kmart comparable store sales declined 7.3% with increases in the home appliances and mattresses categories, which were offset by declines in consumer electronics, apparel, grocery & household and drugstore. Excluding the impact of the consumer electronics business, which is a business we continue to alter to meet our members' needs, Kmart comparable store sales would have decreased 5.8%. Sears Domestic comparable store sales decreased 12.8%, and were also negatively impacted by consumer electronics. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 11.3%, primarily driven by decreases in apparel, home appliances, lawn & garden and Sears Auto Centers, which were partially offset by an increase in the mattresses category.

Gross Margin

For the first nine months of 2015, our gross margin decreased$956 million to $4.2 billion as the above noted decline in sales was partially offset by an improvement in gross margin rate. Gross margin for the first nine months of 2015 included one-time vendor credits of $126 million, as well as a credit of $30 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, while the first nine months of 2014 also included gross margin of $502 million from Sears Canada and $87 million from the Lands' End business. Gross margin for the first nine months of 2015 and 2014 also included charges of $17 million and $58 million, respectively, related to store closures.

As compared to the prior year, Kmart's gross margin rate for the first nine months of 2015improved80 basis points, with increases experienced in a majority of categories, particularly grocery & household, toys, consumer electronics and apparel. Sears Domestic's gross margin rate improved170 basis points for the first nine months of the year. Excluding the impact of significant items recorded in gross margin during the first nine months, which aggregated to a benefit of $147 million and $75 million in 2015 and 2014, respectively, Sears Domestic's gross margin rate improved 50 basis points, with the most notable increases experienced in the apparel and tools categories. The improvement in gross margin rate in both formats was primarily driven by less clearance and promotional activity.

In addition, as a result of the Seritage and JV transactions, the first nine months of 2015 included additional rent expense of approximately $78 million.

Selling and Administrative Expenses

Selling and administrative expenses decreased$1.2 billion in the first nine months of 2015 compared to the first nine months of 2014 and included significant items such as expenses related to our domestic pension plan, store closings and severance of $191 million and $120 million for 2015 and 2014, respectively. In addition, the first nine months of 2015 included expense of $39 million consisting of expenses related to legal matters, transaction costs associated with strategic initiatives and other expenses, while the first nine months of 2014 included expenses of $6 million for transactions costs associated with strategic initiatives and other expenses, as well as expenses of $603 million from Sears Canada and $77 million from the Lands' End business. Excluding these items, selling and administrative expenses declined $637 million primarily due to decreases in payroll and advertising expenses.

Our selling and administrative rate was 28.1% for the first nine months of 2015, compared to 26.9% in the prior year, as the decreases in overall selling and administrative expenses were more than offset by the above noted decline in revenues.

Gain on Sales of Assets

We recorded total gains on sales of assets of $730 million and $148 million for the first nine months of 2015 and 2014, respectively. The gains included $508 million (comprised of a gain of $625 million and loss of $117 million) recognized in connection with the first quarter 2015 JV transactions and the transaction with Seritage. (See Note 5 of Notes to Condensed Consolidated Financial Statements for further discussion of the gain on sales of assets). The gains also included a gain of $83 million related to the sale of a Sears Full-line store for which we received $102 million in cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during the third quarter of 2015, we recognized the gain that had previously been deferred. Gains on sales of assets in the first nine months of 2015 also included gains of $86 million recognized on the sale of two Sears Full-line stores for which we received $96 million of cash proceeds, and $10 million recognized on the surrender and early termination of one Kmart store lease.

59

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

The gains recorded during the first nine months of 2014 included a gain of $42 million recognized on the sale of two Sears Full-line stores for which we received $64 million of cash proceeds, a gain of $13 million recognized on the sale of a distribution facility in our Sears Domestic segment for which we received $16 million of cash proceeds and a gain of $10 million recognized on the sale of a Kmart store for which we received $10 million of cash proceeds.

Operating Loss

The Company reported an operating loss of $461 million and $1.4 billion in the first nine months of 2015 and 2014, respectively. Operating loss for the first nine months of 2015 included significant items which aggregated to operating income of $523 million. Operating loss for the first nine months of 2014 also included significant items which aggregated to operating expense of $295 million. Excluding these items, we would have reported an operating loss of $984 million and $1.1 billion in the first nine months of 2015 and 2014, respectively. The decrease in operating loss in 2015 was primarily driven by the increase in gross margin rate and decline in selling and administrative expenses, partially offset by a decline in revenues.

Interest and Investment Income (Loss)

The Company reported an interest and investment loss of $27 million in the first nine months of 2015 compared to interest and investment income of $133 million in the first nine months of 2014. The first nine months of 2015 included a loss of $25 million related to our equity investment in Sears Canada. During 2014, investment income included a gain of $70 million on the de-consolidation of Sears Canada as a result of the rights offering, as well as gains of $35 million related to the sale of joint venture interests for which Sears Canada received $65 million ($71 million Canadian) in cash proceeds.

Income Taxes

During the first nine months of 2015, the Company realized a significant tax benefit on the deferred taxes related to indefinite-life assets associated with the property sold in the transaction with Seritage. As a result, our effective tax rate for the first nine months of 2015 was a benefit of 25.6% compared to expense 12.9% for the first nine months of 2014. Also, 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 income. Our tax rate in 2015 continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic and foreign jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the first nine months of 2015 was negatively impacted by foreign branch taxes, and state income taxes.

60

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

SEGMENT OPERATIONS

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

Kmart

Kmart results and key statistics were as follows:

	13 Weeks Ended						39 Weeks Ended
millions, except number of stores	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Merchandise sales and services	$	2,247		$	2,707		$	7,062		$	8,527
Cost of sales, buying and occupancy	1,774			2,147			5,562			6,790
Gross margin dollars	473			560			1,500			1,737
Gross margin rate	21.1		%	20.7		%	21.2		%	20.4		%
Selling and administrative	585			708			1,802			2,128
Selling and administrative expense as a percentage of total revenues	26.0		%	26.2		%	25.5		%	25.0		%
Depreciation and amortization	17			25			56			72
Impairment charges	10			—			12			2
Gain on sales of assets	(12		)	(24		)	(173		)	(76		)
Total costs and expenses	2,374			2,856			7,259			8,916
Operating loss	$	(127	)	$	(149	)	$	(197	)	$	(389	)
Adjusted EBITDA	$	(115	)	$	(97	)	$	(257	)	$	(304	)
Number of stores							952			1,050

13-week period ended October 31, 2015 compared to the 13-week period ended November 1, 2014

Revenues and Comparable Store Sales

For the quarter, Kmart's revenues decreased by $460 million to $2.2 billion in 2015 primarily due to the effect of having fewer stores in operation, which accounted for approximately $272 million of the decline. Revenues were also impacted by a decrease in comparable store sales of 7.5%, which accounted for approximately $179 million of the decline. Approximately half of the decline in comparable store sales was driven by declines in the apparel category, as well as a decline in consumer electronics, a low margin category.

Comparable store sales declined primarily due to declines in apparel, consumer electronics, grocery & household and drugstore, partially offset by increases in appliances and mattresses. Excluding the impact of the consumer electronics business, which is a business we continue to alter to meet our members' needs, Kmart comparable store sales would have decreased 6.4%.

Gross Margin

For the quarter, Kmart generated gross margin dollars of $473 million in 2015 compared to $560 million in 2014. The decrease in Kmart's gross margin is due to the decrease in sales, partially offset by an increase in gross margin rate. Gross margin for the third quarter of 2015 included a credit of $5 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction. Gross margin for the third quarter also included charges of $5 million and $31 million in 2015 and 2014, respectively, related to store closures.

61

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Kmart's gross margin rate for the quarter improved40 basis points to 21.1% in 2015 from 20.7% in 2014, with increases experienced in several categories, particularly drugstore, toys, electronics and apparel, driven by less clearance and promotional activity.

In addition, as a result of the Seritage and JV transactions, the third quarter of 2015 included additional rent expense and assigned sub-tenant rental income of approximately $10 million.

Selling and Administrative Expenses

For the quarter, Kmart's selling and administrative expenses decreased$123 million in 2015 as compared to the third quarter in 2014. Selling and administrative expenses for the third quarter of 2015 and 2014 were impacted by a credit of $4 million and expenses of $17 million, respectively, related to store closings and severance. In addition, the third quarter of 2015 included $1 million of expense related to legal matters, while the prior year third quarter was impacted by other expenses of $3 million. Excluding these items, selling and administrative expenses decreased $100 million primarily due to decreases in payroll and advertising expenses.

Kmart's selling and administrative expense rate for the quarter was 26.0% in 2015 and 26.2% in 2014 and decreased primarily as a result of the decreased expenses noted above.

Operating Loss

For the quarter, Kmart recorded an operating loss of $127 million in 2015 compared to an operating loss of $149 million in 2014. Operating loss for the third quarter of 2015 and 2014 included significant items which aggregated to operating expense of $7 million and $53 million, respectively. Excluding these items, Kmart would have reported an operating loss of $120 million and $96 million for the third quarter of 2015 and 2014, respectively. The increase in Kmart's operating loss was primarily driven by the decline in revenues, partially offset by the improvement in gross margin rate and the decrease in selling and administrative expenses.

39-week period ended October 31, 2015 compared to the 39-week period ended November 1, 2014

Revenues and Comparable Store Sales

For the first nine months of 2015, Kmart's revenues decreased by $1.5 billion to $7.1 billion in 2015, primarily due to the effect of having fewer stores in operation, which accounted for $910 million of the decline. Revenues were also impacted by a decrease in comparable store sales of 7.3%, which accounted for $548 million of the decline. The decline in comparable store sales was driven by highly targeted promotional and marketing spend to better align with member needs, and a shift away from low margin categories, such as consumer electronics.

The decline in comparable store sales was primarily driven by declines in consumer electronics, apparel, grocery & household and drugstore, partially offset by increases in appliances and mattresses. Excluding the impact of the consumer electronics business, which is a business we continue to alter to meet our members' needs, Kmart comparable store sales would have decreased 5.8%.

Gross Margin

For the first nine months of 2015, Kmart generated $1.5 billion in gross margin compared to $1.7 billion in the first nine months of 2014. The decrease in Kmart's gross margin is due to the decrease in sales, partially offset by an increase in gross margin rate. Gross margin for the first nine months 2015 and 2014 included charges of $14 million and $46 million, respectively, related to store closures.

Kmart's gross margin rate for the first nine months of the year improved 80 basis points to 21.2% in 2015 from 20.4% in 2014, with increases experienced in a majority of categories, particularly grocery & household, toys, consumer electronics and apparel, primarily due to less clearance and promotional activity.

In addition, as a result of the Seritage and JV transactions, the first nine months of 2015 included additional rent expense and assigned sub-tenant rental income of approximately $14 million.

62

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Selling and Administrative Expenses

For the first nine months of 2015, Kmart's selling and administrative expenses decreased$326 million as compared to the first nine months of 2014. Selling and administrative expenses for the first nine months of 2015 and 2014 were impacted by expenses of $37 million and $41 million related to store closures and severance, expenses related to legal matters and other expenses. Excluding these items, selling and administrative expenses decreased $322 million primarily due to decreases in payroll and advertising expenses.

Kmart's selling and administrative expense rate for the first nine months was 25.5% in 2015 and 25.0% in 2014 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 nine months of $173 million in 2015 and $76 million in 2014. Gains recorded during the first nine months of 2015 included gains of $137 million (comprised of a gain of $154 million and loss of $17 million) recognized in connection with the transaction with Seritage. (See Note 5 of Notes to Condensed Consolidated Financial Statements for further discussion of the gain on sales of assets). The first nine months of 2015 also included a gain of $10 million recognized on the surrender and early termination of one Kmart store lease. The gains recorded during the first nine months of 2014 included a gain of $10 million related to the sale of one Kmart store for which we received $10 million cash proceeds.

Operating Loss

For the first nine months of the year, Kmart recorded an operating loss of $197 million and $389 million in 2015 and 2014, respectively. Operating loss for the first nine months of 2015 included significant items which aggregated to operating income of $90 million, while operating loss for the first nine months of 2014 included significant items which aggregated to operating expense of $82 million. Excluding these items, Kmart would have reported an operating loss of $287 million and $307 million for the first nine months of 2015 and 2014, respectively. The decrease in Kmart's operating loss was primarily driven by the improvement in gross margin rate and the decrease in selling and administrative expenses, partially offset by the decline in revenues.

63

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Sears Domestic

Sears Domestic results and key statistics were as follows:

	13 Weeks Ended						39 Weeks Ended
millions, except number of stores	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Merchandise sales and services	$	3,503		$	3,889		$	10,781		$	12,484
Cost of sales, buying and occupancy	2,714			3,002			8,066			9,552
Gross margin dollars	789			887			2,715			2,932
Gross margin rate	22.5		%	22.8		%	25.2		%	23.5		%
Selling and administrative	1,045			1,131			3,203			3,487
Selling and administrative expense as a percentage of total revenues	29.8		%	29.1		%	29.7		%	27.9		%
Depreciation and amortization	77			110			274			334
Impairment charges	7			—			59			8
Gain on sales of assets	(85		)	(44		)	(557		)	(73		)
Total costs and expenses	3,758			4,199			11,045			13,308
Operating loss	$	(255	)	$	(310	)	$	(264	)	$	(824	)
Adjusted EBITDA	$	(217	)	$	(199	)	$	(442	)	$	(458	)
Lands' End separation	—			—			—			(10		)
Adjusted EBITDA(1)	$	(217	)	$	(199	)	$	(442	)	$	(468	)
Number of:
Full-line stores							708			751
Specialty stores							27			30
Total Domestic Sears Stores							735			781

__________________

⁽¹⁾ Adjusted to reflect the results of the Lands' End business that were included in our results of operations prior to the separation.

13-week period ended October 31, 2015 compared to the 13-week period ended November 1, 2014

Revenues and Comparable Store Sales

For the quarter, Sears Domestic's revenues decreased by $386 million to $3.5 billion. The decline in revenue was primarily driven by a decrease in comparable store sales of 9.6%, which accounted for $238 million, and the effect of having fewer Full-line stores in operation, which accounted for $86 million of the decline. Approximately half of the decline in comparable store sales was driven by declines in the apparel category, as well as a decline in consumer electronics, a low margin category.

Comparable store sales for the quarter were negatively impacted by consumer electronics, which is a business we continue to alter to meet our members' needs. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 8.2%, primarily driven by decreases in apparel, lawn & garden, tools, footwear and Sears Auto Centers, which were partially offset by an increase in the mattresses category.

64

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Gross Margin

For the quarter, Sears Domestic generated gross margin dollars of $789 million in 2015, compared to $887 million in 2014. Gross margin for the third quarter of 2015 included a credit of $18 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction. Gross margin for the third quarter also included charges of $1 million and $10 million in 2015 and 2014, respectively, related to store closures.

Sears Domestic's gross margin rate for the quarter declined30 basis points to 22.5% in 2015 from 22.8% in 2014, with decreases experienced in home appliances and apparel primarily as a result of increased promotional activity, including an increase in Shop Your Way expense.

In addition, as a result of the Seritage and JV transactions, the third quarter of 2015 included additional rent expense and assigned sub-tenant rental income of approximately $42 million.

Selling and Administrative Expenses

For the quarter, Sears Domestic's selling and administrative expenses decreased $86 million in 2015 as compared to the prior year. Selling and administrative expenses for the third quarter of 2015 and 2014 were impacted by expenses of $55 million and $32 million, respectively, related to store closings and severance, as well as expenses of $1 million and $3 million for transactions costs incurred in connection with strategic initiatives. Excluding these items, selling and administrative expenses decreased $107 million primarily due to a decrease in payroll expense.

Sears Domestic's selling and administrative expense rate for the quarter was 29.8% in 2015 and 29.1% in 2014 and increased primarily as a result of lower expense leverage due to the sales decline noted above.

Gain on Sales of Assets

Sears Domestic recorded a total gain on sales of assets for the quarter of $85 million and $44 million in 2015 and 2014, respectively. The gains recorded during the third quarter of 2015 included $83 million recognized on the sale of one Sears Full-line store for which we received $102 million of cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during the third quarter of 2015, we recognized the gain that had previously been deferred. The gains recorded in the third quarter of 2014 included a gain of $42 million related to the sale of two Sears Full-Line stores for which we received $64 million in cash proceeds.

Operating Loss

For the quarter, Sears Domestic reported an operating loss of $255 million and $310 million in 2015 and 2014, respectively. Sears Domestic's operating loss for the third quarter of 2015 included significant items which aggregated to operating income of $37 million, while Sears Domestic's operating loss for the prior year quarter included significant items which aggregated to operating expense of $7 million. Excluding these items, we would have reported an operating loss of $292 million and $303 million for the third quarter of 2015 and 2014, respectively. The decrease in operating loss in 2015 was driven by the above noted decline in selling and administrative expenses, partially offset by the decline in revenues and gross margin rate.

39-week period ended October 31, 2015 compared to the 39-week period ended November 1, 2014

Revenues and Comparable Store Sales

For the first nine months of 2015, Sears Domestic's revenues decreased by $1.7 billion to $10.8 billion. The decline in revenue was primarily driven by a decrease in comparable store sales of 12.8%, which accounted for $1.0 billion of the decline, the effect of having fewer Full-line stores in operation, which accounted for $336 million of the decline, as well as the separation of the Lands' End business, which was completed on April 4, 2014 and accounted for $222 million of the decline. The decline in comparable store sales was driven by highly targeted promotional and marketing spend to better align with member needs, and a shift away from low margin categories, such as consumer electronics.

65

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

Sears Domestic comparable store sales were also negatively impacted by consumer electronics. Excluding the impact of consumer electronics, Sears Domestic comparable store sales would have decreased 11.3%, primarily driven by decreases in apparel, home appliances, lawn & garden and Sears Auto Centers, which were partially offset by an increase in the mattresses category.

Gross Margin

For the first nine months of the year, Sears Domestic generated gross margin dollars of $2.7 billion and $2.9 billion in 2015 and 2014, respectively. Gross margin for the first nine months of 2015 included one-time credits from vendors of $126 million, as well as a credit of $24 million related to the amortization of the deferred gain on sale of assets associated with the Seritage transaction, while the first nine months of 2014 included gross margin of $87 million from the Lands' End business. Gross margin also included charges of $3 million and $12 million, respectively, in the first nine months of 2015 and 2014 related to store closures.

Sears Domestic's gross margin rate for the first nine months of the year improved170 basis points to 25.2% in 2015 from 23.5% in 2014. Excluding the impact of significant items recorded in gross margin during the first nine months, which aggregated to a benefit of $147 million and $75 million in 2015 and 2014, respectively, Sears Domestic's gross margin rate improved 50 basis points, with the most notable increases experienced in the apparel and tools categories primarily due to less clearance and promotional activity.

In addition, as a result of the Seritage and JV transactions, the first nine months of 2015 includes additional rent expense and assigned sub-tenant rental income of approximately $64 million.

Selling and Administrative Expenses

For the first nine months of the year, Sears Domestic's selling and administrative expenses decreased $284 million in 2015 as compared to 2014 and included expenses related to our domestic pension plan, store closings and severance of $163 million and $82 million, respectively. The first nine months of 2015 and 2014 also included transaction costs associated with strategic initiatives of $30 million and $3 million, while the first nine months of 2014 also included selling and administrative expenses related to the Lands' End business of $77 million. Excluding these items, selling and administrative expenses decreased $315 million primarily due to a decrease in payroll expense.

Sears Domestic's selling and administrative expense rate for the first nine months of the year was 29.7% and 27.9% in 2015 and 2014, respectively and increased as the above noted expense reduction was offset by the above noted decline in revenues.

Gain on Sales of Assets

Sears Domestic recorded a total gain on sales of assets of $557 million and $73 million for the first nine months of 2015 and 2014, respectively. The gains recorded during the first nine months of 2015 included $371 million (comprised of a gain of $471 million and loss of $100 million) recognized in connection with the first quarter 2015 JV transactions and the transaction with Seritage (See Note 5 of Notes to Condensed Consolidated Financial Statements for further discussion of the gain on sales of assets). The gains also included a gain of $83 million related to the sale of a Sears Full-line store for which we received $102 million in cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during the third quarter of 2015, we recognized the gain that had previously been deferred. Gains on sales of assets also included gains of $86 million recognized on the sale of two Sears Full-line stores for which we received $96 million of cash proceeds.

The gains recorded during the first nine months of 2014 included a gain of $42 million recognized on the sale of two Sears Full-line stores for which we received $64 million of cash proceeds, and a gain of $13 million recognized on the sale of a distribution facility for which we received $16 million cash proceeds.

Operating Loss

For the first nine months of the year, Sears Domestic reported an operating loss of $264 million and $824 million in 2015 and 2014, respectively. Sears Domestic's operating loss for the first nine months of 2015 included significant items which aggregated to operating income of $433 million, while Sears Domestic's operating loss for the first nine

66

SEARS HOLDINGS CORPORATION

13 and 39 Weeks Ended October 31, 2015 and November 1, 2014

months of 2014 included significant items which aggregated to operating expense of $47 million. Excluding these items, we would have reported an operating loss of $697 million and $777 million for the first nine months of 2015 and 2014, respectively. The decrease in operating loss in 2015 was driven by the above noted increase in gross margin rate and decline in selling and administrative expenses, partially offset by the decline in revenues.

Sears Canada

Sears Canada conducts similar retail operations as Sears Domestic. As previously noted, the Company completed a rights offering for a portion of its interest in Sears Canada in the third quarter of 2014. As such, the Company no longer maintained control of Sears Canada resulting in the de-consolidation of Sears Canada on October 16, 2014.

Sears Canada results and key statistics for the 13- and 39-week periods ended November 1, 2014 were as follows:

millions, except number of stores	13 Weeks Ended November 1, 2014			39 Weeks Ended November 1, 2014
Merchandise sales and services	$	611		$	2,088
Cost of sales, buying and occupancy	457			1,586
Gross margin dollars	154			502
Gross margin rate	25.2		%	24.0		%
Selling and administrative	172			603
Selling and administrative expense as a percentage of total revenues	28.2		%	28.9		%
Depreciation and amortization	13			49
Impairment charges	—			15
Loss on sales of assets	—			1
Total costs and expenses	642			2,254
Operating loss	$	(31	)	$	(166	)
Adjusted EBITDA	$	(13	)	$	(71	)
Number of:
Full-line stores				113
Specialty stores				305
Total Sears Canada Stores				418

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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 October 31, 2015, November 1, 2014 and January 31, 2015 are detailed in the following table.

millions	October 31, 2015		November 1, 2014		January 31, 2015
Cash and equivalents	$	159	$	173	$	143
Cash posted as collateral	1		3		2
Credit card deposits in transit	134		150		105
Total cash balances	$	294	$	326	$	250

We had total cash balances of $294 million at October 31, 2015, compared to $326 million at November 1, 2014 and $250 million at January 31, 2015. During the first nine months of 2015, the Company received gross cash proceeds of $2.7 billion ($2.6 billion net of closing costs) from the Seritage transaction, as well as $429 million of cash proceeds ($426 million net of closing costs) in connection with three different real estate joint venture agreements entered into during the first quarter of 2015, and $148 million of cash proceeds from other domestic real estate transactions. A portion of these proceeds were used to pay back revolver borrowings, as well as for the purchase of our Senior Secured Notes in connection with the tender offer conducted during the third quarter of 2015.

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.

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 $57 million, $45 million and $85 million as of October 31, 2015, November 1, 2014 and January 31, 2015, respectively.

Operating Activities

During the first nine months of 2015, we used net cash in operating activities of $2.1 billion compared to $1.9 billion in the first nine months of 2014. 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 nine months of 2015 compared to the prior year primarily due to an increase in cash being used for merchandise inventory purchases, partially offset by decreases in operating loss and pension contributions.

Merchandise inventories were $6.2 billion and $6.5 billion at October 31, 2015 and November 1, 2014, respectively, while merchandise payables were $2.3 billion and $2.4 billion at October 31, 2015 and November 1, 2014. Our inventory balances decreased approximately $256 million primarily due to store closures. Sears Domestic inventory decreased in several categories, with the most notable decreases in the consumer electronics, automotive and tools categories. These decreases were partially offset by an increase in inventory levels in the apparel, home appliances and mattresses categories. Kmart inventory decreased in virtually all categories with the most notable decreases in the consumer electronics, drugstore, home and grocery & household categories.

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Investing Activities

During the first nine months of 2015, we generated net cash flows from investing activities of $2.6 billion, which consisted of cash proceeds from the sale of properties and investments of $2.7 billion, partially offset by cash used for capital expenditures of $152 million. Proceeds from the sales of properties and investments includes $2.6 billion of proceeds from the Seritage transaction. During the first nine months of 2014, we generated net cash flows from investing activities of $76 million, which consisted of cash proceeds from the sale of properties and investments of $316 million, partially offset by cash used for capital expenditures of $202 million. The first nine months of 2014 also included proceeds from the Sears Canada rights offering of $169 million, which were offset by $207 million due to the de-consolidation of Sears Canada.

Financing Activities

For the first nine months of 2015, we used net cash flows in financing activities of $458 million, which consisted of debt repayments of $1.4 billion, of which $927 million was the purchase of Senior Secured Notes pursuant to the Offer, and $400 million was the repayment of the secured short-term loan, the payment of debt issuance costs of $50 million related to the amendment and extension of our Domestic Credit Facility and fees related to the Offer, partially offset by an increase in short-term borrowings of $471 million, and $508 million of net cash proceeds from sale-leaseback financing, which consists of $426 million of proceeds from the JV transactions received during the first quarter of 2015 and $82 million of proceeds from the four joint venture properties that have continuing involvement received during the second quarter of 2015. This compares to net cash flows from financing activities of $1.2 billion in the first nine months of 2014, which primarily consisted of Lands' End pre-separation funding of $515 million, proceeds from a secured short-term loan of $400 million and an increase in short-term borrowings of $364 million, partially offset by repayments of long-term debt of $61 million.

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 and pension plan contributions. We have incurred losses and experienced negative operating cash flows for the past several years; accordingly, the Company has taken a number of actions to enhance its financial flexibility and fund its continued transformation, support its operations and meet its obligations. During 2014, the Company raised approximately $2.3 billion in cash, which included the $500 million dividend the Company received in connection with the Lands' End separation, $400 million from the secured short-term loan, $380 million from the Sears Canada rights offering, $625 million from the rights offering for the senior unsecured notes with warrants and $358 million in additional proceeds from domestic real estate transactions.

During the first nine months of 2015, we continued to demonstrate our ability to unlock the value of our assets and our commitment to creating shareholder value. As previously disclosed, Holdings entered into three different real estate joint ventures with General Growth Properties, Inc., Simon Property Group, Inc. and The Macerich Company, in which we contributed a total of 31 properties to the joint ventures in exchange for a 50% interest in the each of the joint ventures and $429 million in cash proceeds ($426 million net of closing costs). During the second quarter of 2015, the Company completed the previously announced rights offering and sale-leaseback transaction with Seritage and received aggregate gross proceeds from the transaction of $2.7 billion, of which a portion were used to pay down existing revolver borrowings. Holdings' lease payments to the Seritage and real estate joint ventures, respectively, will be approximately $134 million and $42 million annually, with increases of 2% per year beginning in the second lease year for the REIT properties and in the fourth lease year for the joint venture properties.

Also during the second quarter of 2015, we completed an amendment and extension of our $3.275 billion Domestic Credit Facility with approximately $2.0 billion maturing in 2020 and the remaining approximately $1.3 billion of the existing credit facility in place until April of 2016.

These actions taken during 2015 and 2014, demonstrate the Company's financial flexibility and provides us with the means to fund our transformation and meet our obligations. As we leverage Shop Your Way^® and Integrated Retail, we will continue to right-size, redeploy and highlight the value of our assets, including our substantial real estate portfolio, in our transition from an asset intensive, historically "store-only" based retailer to a more asset light, integrated membership-focused company. With the successful completion of the Seritage transaction and the

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amendment and extension of our Domestic Credit Facility, we have substantially enhanced our financial flexibility and achieved our objective of reducing our reliance on inventory as a source of financing. We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Sears Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt.

On August 3, 2015, the Company commenced a tender offer (the "Offer") to purchase for cash up to$1.0 billion principal amount of its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Senior Secured Notes"), which expired on August 28, 2015. Approximately $936 million principal amount of the Senior Secured Notes were validly tendered and not validly withdrawn in the Offer. The reacquisition cost was$929 million.As a result of the Senior Secured Notes validly tendered in the Offer, we have mitigated our annualized cash interest expense by approximately $62 million. The Company may consider repurchasing other outstanding debt securities in order to further mitigate our interest expense.

As we progress in our transformation, we are primarily focusing on profitability instead of revenues, market share and other metrics which relate to, but do not necessarily drive profit. This approach may negatively impact our sales, however, it should also reduce the risk of material profit declines. We believe that our focus on profitability will contribute to a meaningful performance in 2015 and beyond. If we continue to experience operating losses, and we are not able to generate enough funds from some combination of actions, the availability under our Domestic Credit Facility might be fully utilized and we would need to secure additional sources of funds. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency.

Our outstanding borrowings at October 31, 2015, November 1, 2014 and January 31, 2015 were as follows:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Short-term borrowings:
Unsecured commercial paper	$	9	$	91	$	2
Secured short-term loan	—		400		400
Secured borrowings	677		1,605		213
Long-term debt, including current portion:
Notes and debentures outstanding	1,989		2,564		2,913
Capitalized lease obligations	206		280		272
Total borrowings	$	2,881	$	4,940	$	3,800

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We fund our peak sales season working capital needs through our domestic revolving credit facility and commercial paper markets and secured short-term debt.

	13 Weeks Ended						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Secured borrowings:
Maximum daily amount outstanding during the period	$	677		$	1,605		$	799		$	1,605
Average amount outstanding during the period	135			1,350			367			1,282
Amount outstanding at period-end	677			1,605			677			1,605
Weighted average interest rate	3.5		%	2.7		%	3.0		%	2.8		%
Unsecured commercial paper:
Maximum daily amount outstanding during the period	$	9		$	107		$	104		$	159
Average amount outstanding during the period	5			53			18			42
Amount outstanding at period-end	9			91			9			91
Weighted average interest rate	4.3		%	4.1		%	4.1		%	3.2		%
Secured short-term loan:
Maximum daily amount outstanding during the period	$	—		$	400		$	400		$	400
Average amount outstanding during the period	—			181			112			60
Amount outstanding at period-end	—			400			—			400
Weighted average interest rate	—		%	5.0		%	5.0		%	5.0		%

Domestic Credit Agreement

During the first quarter of 2011, SRAC, Kmart Corporation (together with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the "Domestic Credit Agreement"). On October 2, 2013, Holdings and the Borrowers entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders. Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a new senior secured term loan facility (the "Term Loan"). On July 21, 2015, the Borrowers and Holdings entered into an amended and restated credit agreement (the "Amended Domestic Credit Agreement") with a syndicate of lenders that amended and restated the then-existing Domestic Credit Agreement. The Amended Domestic Credit Agreement provides a $3.275 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.0 billion letter of credit sub-facility. The maturity date for $1.971 billion of the Revolving Facility has been extended to July 20, 2020, while $1.304 billion retains the existing maturity date of April 8, 2016. The Amended Domestic Credit Agreement also governs the existing Term Loan, which retains its maturity date of June 30, 2018. The Amended Domestic Credit Agreement includes an accordion feature that allows the Borrowers to use existing collateral for the facility to obtain up to $1.0 billion of additional borrowing capacity, subject to borrowing base requirements, as well as a "FILO" ("first in last out") tranche feature that allows an additional $500 million of borrowing capacity. The Amended Domestic Credit Agreement also increases Holdings' ability to undertake short-term borrowings from $500 million to $750 million.

Revolving advances under the Amended 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 dependent on Holdings' consolidated leverage ratio (as measured under the Amended Domestic Credit Agreement). The margin with respect to borrowings under the extended commitments ranges from 3.25% to 3.75% for LIBOR loans and from 2.25% to 2.75% for base rate loans. The margin with respect to borrowings under the non-extended commitments remains 2.00% to 2.50% for LIBOR loans and 1.00% to 1.50% for base rate loans. The Amended Domestic Credit Agreement also provides for the payment of fees with respect to issued and undrawn

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letters of credit at a rate equal to the margin applicable to LIBOR loans and a commitment fee with respect to unused amounts of the Revolving Facility at a rate, depending on facility usage, between 0.375% to 0.625%, per annum, with a minimum of 0.50% applicable to commitments under the extended tranche. From and after April 8, 2016, such commitment fees with respect to the extended tranche will change to a flat 0.50%.

The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on substantially all of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Revolving Facility is guaranteed by all domestic subsidiaries of Holdings that own inventory or credit card or pharmacy receivables. The Revolving Facility also permits aggregate second lien indebtedness of up to $2.0 billion, of which $304 million in second lien notes were outstanding at October 31, 2015, resulting in $1.7 billion of permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the indenture that governs our 6 5/8% senior secured notes due 2018.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a 1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z), the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Currently, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing June 30, 2018. Additionally, the Borrowers are required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Amended Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility. At October 31, 2015, November 1, 2014 and January 31, 2015, respectively, we had borrowings of $983 million, $993 million and $990 million under the Term Loan, and carrying value, net of the remaining discount, of $977 million, $985 million and $983 million.

The Amended 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 least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt, and make investments, subject, in each case, to various exceptions. The Amended 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.

At October 31, 2015, November 1, 2014 and January 31, 2015, we had $677 million, $1.605 billion and $213 million, respectively, of Revolving Facility borrowings and $654 million, $671 million and $667 million, respectively, of letters of credit outstanding under the Revolving Facility. At October 31, 2015, November 1, 2014 and January 31, 2015, the amount available to borrow under the Revolving Facility was $963 million, $234 million and $808 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. 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 $1.0 billion aggregate principal amount of senior secured notes (the "Senior Secured Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Senior Secured Notes, the Company sold $250 million aggregate principal amount of Senior Secured Notes to the Company's domestic pension plan in a private placement, none of which remain in the domestic pension plan as a result of the Offer discussed above. The Senior Secured 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 Senior Secured Notes is junior in priority to the lien on such assets that secures obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital

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requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Senior Secured 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 Senior Secured Notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Senior Secured Notes at a purchase price equal to 101% of the principal amount if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the Senior Secured 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 Senior Secured Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Senior Secured Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended. As discussed above, the Company completed the Offer for $936 millionprincipal amount of its outstanding Senior Secured Notes. The carrying value of Senior Secured Notes, net of the remaining discount, was $304 million, $1.2 billion, and $1.2 billion atOctober 31, 2015,November 1, 2014, andJanuary 31, 2015, respectively.

Senior Unsecured Notes

On October 20, 2014, the Company announced its board of directors had approved a rights offering allowing its stockholders to purchase up to $625 million in aggregate principal amount of 8% senior unsecured notes due 2019 and warrants to purchase shares of its common stock. The subscription rights were distributed to all stockholders of the Company as of October 30, 2014, the record date for this rights offering, and every stockholder had the right to participate on the same terms in accordance with its pro rata ownership of the Company's common stock, except that holders of the Company's restricted stock that was unvested as of the record date received cash awards in lieu of subscription rights. This rights offering closed on November 18, 2014 and was oversubscribed.

Accordingly, on November 21, 2014, the Company issued $625 million aggregate original principal amount of 8% senior unsecured notes due 2019 (the "Senior Unsecured Notes") and received proceeds of $625 million which were used for general corporate purposes. The Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year. The Senior Unsecured Notes are not guaranteed.

We accounted for the Senior Unsecured Notes in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, we allocated the proceeds received for the Senior Unsecured Notes based on the relative fair values of the Senior Unsecured Notes and warrants, which resulted in a discount to the notes of approximately $278 million. The fair value of the Senior Unsecured Notes and warrants was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 4. The discount is being amortized over the life of the Senior Unsecured Notes using the effective interest method with an effective interest rate of 11.55%. Approximately $5 million of the discount was amortized during 2014, resulting in a remaining discount of approximately $273 million at January 31, 2015. The carrying value of the Senior Unsecured Notes net of the remaining discount was approximately $352 million at January 31, 2015. Approximately $25 million of the discount was amortized during the 39-week period ended October 31, 2015, resulting in a remaining discount of approximately $248 million at October 31, 2015. The book value of the Senior Unsecured Notes net of the remaining discount was approximately $377 million at October 31, 2015.

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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Unsecured Commercial Paper

We borrow through the commercial paper markets. At October 31, 2015, November 1, 2014 and January 31, 2015, we had outstanding commercial paper borrowings of $9 million, $91 million and $2 million, respectively.

Secured Short-Term Loan

On September 15, 2014, the Company, through Sears, Sears Development Co. and Kmart Corporation ("Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Loan'") with JPP II, LLC and JPP, LLC (together, the "Lender"), entities affiliated with ESL. The first $200 million of the Loan was funded at the closing on September 15, 2014 and the remaining $200 million was funded on September 30, 2014. Proceeds of the Loan were used for general corporate purposes.

The Loan was originally scheduled to mature on December 31, 2014. As permitted by the Loan agreement, the Company paid an extension fee equal to 0.5% of the principal amount to extend the maturity date to February 28, 2015. The Loan had an annual base interest rate of 5%. The Borrowers paid an upfront fee of 1.75% of the full principal amount. The Loan was guaranteed by the Company and was secured by a first priority lien on certain real properties owned by the Borrowers.

On February 25, 2015, we entered into an agreement effective February 28, 2015, to amend and extend the $400 million secured short-term loan. Under the terms of the amendment, we repaid $200 million of the $400 million on March 2, 2015 and the remaining $200 million on June 1, 2015. At January 31, 2015, the outstanding balance of the Loan was $400 million.

Debt Ratings

Our corporate family debt ratings at October 31, 2015 appear in the table below:

Moody's Investors Service	Standard & Poor's Ratings Services	Fitch Ratings
Caa1	CCC+	CC

Intangible Asset Impairment Assessment

We continue to monitor our performance and do not believe an event has occurred that would result in an indefinite-lived intangible asset impairment at quarter end. However, if results do not improve, it could result in revisions in management's estimates of the fair value of the Company's trade names and may result in future impairment charges.

Domestic Pension Plan Funding

In our Annual Report on Form 10-K for the fiscal year ended January 31, 2015, we disclosed that we expected our contributions to our domestic pension plans to be approximately $279 million in 2015 and $286 million in 2016. We now expect contributions to our domestic pension plans to be $298 million in 2015 and $313 million in 2016. The ultimate amount of pension contributions and timing could be affected by changes in the applicable regulations, or other regulatory actions, 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 12 – "Recent Accounting Pronouncements," for information regarding new accounting pronouncements.

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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 Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information concerning our future financial performance, business strategy, plans, goals and objectives. Statements preceded or followed by, or that otherwise include, the words "believes," "expects," "anticipates," "intends," "estimates," "plans," "forecast," "is likely to" and similar expressions or future or conditional verbs such as "will," "may" and "could" are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties, many of which are beyond the Company's control, 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. 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 successfully implement our integrated retail strategy to transform our business; our ability to successfully manage our inventory levels; initiatives to improve our liquidity through inventory management and other actions; vendors' lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; possible limits on our access to our domestic credit facility, which is subject to a borrowing base limitation and a springing fixed charge coverage ratio covenant, capital markets and other financing sources, including additional second lien financings, with respect to which we do not have commitments from lenders; our ability to successfully achieve our plans to generate liquidity through potential transactions or otherwise; potential liabilities in connection with the separation of Lands' End and disposition of a portion of our ownership interest in Sears Canada; risks and uncertainties related to the Seritage transaction and the amendment and extension of our credit facility, such as the impact of the evaluation of any such transaction on our other businesses; our dependence on sources outside the United States for significant amounts of our merchandise; our reliance on third parties to provide us with services in connection with the administration of certain aspects of our business and the transfer of significant internal historical knowledge to such parties; impairment charges for goodwill and intangible assets or fixed-asset impairment for long-lived assets; our ability to attract, motivate and retain key executives and other associates; our ability to protect or preserve the image of our brands; the outcome of pending and/or future legal proceedings, including shareholder litigation, product liability, patent infringement and qui tam claims and proceedings with respect to which the parties have reached a preliminary settlement; and the timing, amount of and other risks related to required pension plan funding.

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 January 31, 2015, 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, except as required by law.

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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. All debt securities are considered non-trading. At October 31, 2015, 58% of our debt portfolio was variable rate. Based on the size of this variable rate debt portfolio at October 31, 2015, which totaled approximately $1.7 billion, an immediate 100 basis point change in interest rates would have affected annual pretax funding costs by $17 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.

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 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

See Part I, Item 1, "Financial Statements—Notes to Condensed Consolidated Financial Statements," Note 11—"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 third quarter of 2015. During the 13-week period ended October 31, 2015, we did not repurchase any shares of our common stock under our common share repurchase program. At October 31, 2015, 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
August 2, 2015 to August 29, 2015	3,777	$	25.18	—	$	—
August 30, 2015 to October 3, 2015	293	27.20		—	—
October 4, 2015 to October 31, 2015	—	—		—	—
Total	4,070	$	25.33	—	$	—	$	503,907,832

⁽¹⁾ Consists entirely of 4,070 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 Amended 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 least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt, and make investments, subject, in each case, to various exceptions. The Amended 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.

Item 4. Mine Safety Disclosures

Not applicable.

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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.

(b) Exhibits

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

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SEARS HOLDINGS CORPORATION

SIGNATURES

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
Date: December 3, 2015	By:	/s/    ROBERT A. RIECKER
	Name:	Robert A. Riecker
	Title:	Vice President, Controller and Chief  Accounting Officer*

^*Mr. Riecker is signing this report both as a duly authorized officer and as the principal accounting officer.

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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 January 22, 2014, filed on January 24, 2014 (File No. 000-51217)).
†*10.1	Summary of Proposed Terms Regarding the Pension Plan Protection and Forbearance Agreement Between PBGC and Sears, dated September 4, 2015, by and between Sears Holdings Corporation and the Pension Benefit Guaranty Corporation.
*31.1	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of 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 October 31, 2015, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Statements of Operations (Unaudited) for the 13 and 39 Weeks Ended October 31, 2015 and November 1, 2014; (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the 13 and 39 Weeks Ended October 31, 2015 and November 1, 2014; (iii) the Condensed Consolidated Balance Sheets (Unaudited) as of October 31, 2015, November 1, 2014 and January 31, 2015; (iv) the Condensed Consolidated Statements of Cash Flows (Unaudited) for the 39 Weeks Ended October 31, 2015 and November 1, 2014; (v) the Condensed Consolidated Statements of Equity (Unaudited) for the 39 Weeks Ended October 31, 2015 and November 1, 2014; and (vi) the Notes to the Condensed Consolidated Financial Statements (Unaudited).

__________________

* Filed herewith.

† Portions of Exhibit 10.1 have been omitted pursuant to a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

E-1

EX-10.1

Portions of this document have been redacted pursuant to a Request for Confidential Treatment filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Redacted portions are indicated with the notation “[**]”.

Exhibit 10.1

EXECUTION VERSION

Summary of Proposed Terms Regarding the Pension Plan Protection and Forbearance Agreement Between PBGC and Sears

The terms set forth in this Summary of Proposed Terms are being provided as part of a comprehensive compromise, each element of which is consideration for the other elements. This Summary of Proposed Terms is proffered in the nature of a comprehensive settlement proposal in furtherance of settlement discussions, and is entitled to the protections of Federal Rule of Evidence 408 and any other applicable statutes or doctrines protecting the use or disclosure of confidential information and information exchanged in the context of settlement discussions. The transactions described herein are subject in all respects to, among other things, negotiation of definitive documentation, all of which documentation shall be in form and substance satisfactory to each of the Company and PBGC (each as defined below), and obtaining of all necessary corporate and other approvals by the Company and PBGC. Prior to satisfaction of all such conditions, nothing in this Summary of Proposed Terms shall be binding on any party; provided however, that notwithstanding anything herein to the contrary, the provisions set forth in the section entitled “Binding Term Sheet Provisions” shall be binding upon the Company and PBGC according to the terms thereof upon mutual execution and delivery of the signature pages hereto.

I.RELEVANT ENTITIES

The Company and Its Subsidiaries

Company: Sears Holdings Corporation, a Delaware corporation (the “Company”). Pension Plan: Sears Holdings Pension Plan, as amended and restated effective January 1, 2014 (the “Pension Plan”) Real Estate Subsidiaries: SRC Depositor Corporation, a Delaware corporation (the “Depositor”). The following indirect wholly-owned subsidiaries of the Company are collectively referred to as the “RE Subsidiaries”: •SRC O.P. Corporation, a Delaware corporation, which holds title to the Maryland properties and is the owner participant (beneficiary) of SRC Facilities Statutory Trust

	No. 2003-A; •SRC Real Estate (TX), LP, a Delaware limited partnership, which holds title to the Texas properties; and •SRC Facilities Statutory Trust No. 2003-A, a Delaware statutory trust, which holds title to the remaining properties and directly and indirectly owns all interests in SRC Real Estate (TX), LP. Attached as Exhibit 1 hereto is an ownership chart relating to the Depositor and the RE Subsidiaries. Intellectual Property Subsidiary: KCD IP, LLC, a Delaware limited liability company (the “IP Subsidiary”), which holds certain trademarks, intellectual property licenses (including, without limitation, those related to Kenmore, Craftsman and Diehard) and various ancillary agreements (collectively, the “IP Assets”). Other Company Subsidiaries: Attached as Exhibit 2 hereto is a list of all of the direct or indirect subsidiaries of the Company (the “Other Company Subsidiaries” and the entirety of which, whether or not included on such list, and with the RE Subsidiaries, IP Subsidiary, Depositor and Company, collectively, “Sears”).1A “subsidiary” of the Company shall mean any entity that is in the Company’s “controlled group” as defined in Section 4001(a)(14) of the Employee Retirement Security Act of 1974 (as amended from time to time, together with any final regulations promulgated thereunder, “ERISA”).
PBGC	The Pension Benefit Guaranty Corporation as established by ERISA (“PBGC”).
II. CURRENT CAPITAL STRUCTURE
REMIC Securitization	The Company shall represent, warrant and covenant, interalia,that: 1. The Depositor has made loans (the “Mortgage Loans”) to the RE Subsidiaries secured by, inter alia, mortgages on, and assignments of leases pertaining to, the properties held by the RE Subsidiaries. 2. The Depositor’s interests in the Mortgage Loans have been assigned to Wells Fargo Bank Minnesota, N.A., now known

¹ All such entities are acknowledged by the Company to be in the Company's "controlled group" as defined in ERISA Section 4001(a)(14).

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as Wells Fargo Bank, N.A., as trustee for SRC Commercial Mortgage Trust 2003-1 (the “REMIC Issuer”), which has in turn issued SRC Commercial Mortgage Trust 2003-1 Mortgage Pass-Through Certificates in the aggregate face amount of $1,312,416,000 (as amended, supplemented or otherwise modified, but only to the extent such amendments, supplements or other modifications (i) occur on or prior to the date of the Closing (and are disclosed to PBGC as set forth herein) or (ii) are permitted by the REMIC Amendment Covenant, the “REMIC Certificates”) backed by the pool of Mortgage Loans pursuant to a Pooling and Servicing Agreement, dated as of November 24, 2003 (as amended, supplemented or otherwise modified, but only to the extent such amendments, supplements or other modifications (i) occur on or prior to the date of the Closing (and are disclosed to PBGC as set forth herein) or (ii) are permitted by the REMIC Amendment Covenant, the “Pooling and Servicing Agreement”). The REMIC Certificates, the agreements underlying the Mortgage Loans, the Master Lease (defined below), the Pooling and Servicing Agreement, and the agreements and other documents related thereto (each, as amended, supplemented or otherwise modified, but only to the extent such amendments, supplements or other modifications (i) occur on or prior to the date of the Closing (and are disclosed to PBGC as set forth herein) or (ii) are permitted by the REMIC Amendment Covenant) shall be referred to herein as the “REMIC Transactional Documents”.

3. The regular interest REMIC Certificates are held by certain Other Company Subsidiaries (identified in Exhibit 3 attached hereto). The residual interest REMIC Certificate (which is a non‑economic residual interest) is held by the Depositor.

4. Sears will continue to pay all rents as and when due (subject to any applicable grace periods) with respect to the real estate assets and mortgage loans related to the REMIC Certificates.

5. The properties held by the RE Subsidiaries are subject to a master lease with Sears, Roebuck and Co. (as amended, supplemented or otherwise modified, but only to the extent such amendments, supplements or other modifications (i) occur on or prior to the date of the Closing (and are disclosed to PBGC as set forth herein) or (ii) are permitted by the REMIC Amendment Covenant, the “Master Lease”).

6. As of the Closing: (i) all of the RE Subsidiaries and the Depositor are in material compliance with their respective organizational documents; and (ii) to the Company’s knowledge, none of the parties to the REMIC Transactional Documents are in default thereunder nor does an event of default exist thereunder.

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The Company shall promptly inform PBGC prior to Closing of any defaults or default waivers under the REMIC Transactional Documents or any material non-compliance with the organizational documents of any of the RE Subsidiaries or the Depositor. PBGC acknowledges that to its knowledge none of the parties to the REMIC Transactional Documents is in default thereunder and no event of default exists thereunder. PBGC agrees that if the Closing occurs it shall not assert that anything disclosed to it by the Company in connection with, or during the course of, the negotiation and entry into this term sheet or the definitive documentation prior to the date of Closing constitutes a breach of the representations set forth in this paragraph 6. 7. Prior to the Closing, the Company shall provide to PBGC a list of all of the sales, substitutions or transfers out of the REMIC structure of any Designated Assets (as defined below) from and after October 1, 2014 until the Closing.

IP Securitization

The Company shall further represent, warrant and covenant, inter alia, that: 1. The IP Subsidiary has issued KCD IP, LLC Asset-Backed Notes in the aggregate face amount of $1,800,000,000 (the “IP Notes” and the indenture governing such IP Notes, as amended, supplemented or otherwise modified, but only to the extent such amendments, supplements or other modifications (i) occur on or prior to the date of the Closing (and are disclosed to PBGC as set forth herein) or (ii) are permitted by the Indenture Amendment Covenant), the “IP Notes Indenture”) secured by liens (the “IP Note Liens”) on the IP Assets. 2. All IP Notes are held by Sears Reinsurance Company Ltd. (“Sears Re”), a Bermuda Class 3 insurer and a subsidiary of the Company. 3. Sears shall continue to pay all royalties as and when due (subject to any applicable grace periods) with respect to the IP Assets and the IP Notes. 4. As of the Closing: (i) the IP Subsidiary is in material compliance with its organizational documents, and (ii) to the Company’s knowledge, none of the parties to the IP Notes or the IP Notes Indenture are in default thereunder nor does an event of default exist thereunder. The Company shall promptly inform PBGC prior to Closing of any defaults or default waivers under the IP Notes or IP Notes Indenture or any material non-compliance with the organizational documents of the IP Subsidiary. PBGC acknowledges that, to its knowledge none of the parties to the IP Notes or the IP Notes Indenture is in default thereunder and no event of default exists thereunder. PBGC

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	agrees that if the Closing occurs it shall not assert that anything disclosed to it by the Company in connection with, or during the course of, the negotiation and entry into this term sheet or the definitive documentation prior to the date of Closing constitutes a breach of the representations set forth in this paragraph 4. 5. Prior to the Closing, the Company shall provide to PBGC a list of all of the sales, substitutions or transfers out of the IP Subsidiary of any Designated Assets from and after October 1, 2014 until the Closing.
III. TRANSACTIONS
Maintenance of REMIC Structure / REMIC Certificate Transfer	Ownership of the regular interest REMIC Certificates shall be transferred to the Depositor, with physical possession to be held by the Custodian (defined below) on behalf of PBGC. The existing REMIC securitization structure shall otherwise be left in place.
RE Subsidiary Bankruptcy-Remoteness	The Company shall represent, warrant and covenantthat: (i) the organizational documents of the RE Subsidiaries provide that: •Bankruptcy filing is permissible only with the unanimous consent of the directors of SRC O.P. Corporation, including the consent of the independent director (as defined in such organizational documents) thereof; and •At least one director of SRC O.P. Corporation shall be an individual who is fully independent of the Company; and •Depositor and RE Subsidiaries have been and shall continue to be operated as special purpose entities consistent with the special purpose vehicle provisions of such organizational documents (including, without limitation, provisions intended to ensure and preserve the bankruptcy-remoteness of such entities) and the prior opinions provided by REMIC counsel. REMIC counsel shall provide a bring-down opinion, in substantially the form attached hereto as Exhibit 4, that the execution, delivery and performance of the definitive documentation and the consummation of the transactions contemplated thereunder do not cause REMIC counsel to alter or withdraw the bankruptcy opinion issued in connection with the REMIC transaction (the “RE Bring-Down Opinion” and, together with the IP Bring-Down Opinion (defined below), the “Bring-Down Opinions”). Sears shall cooperate with REMIC counsel in providing such

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      authorizations, confirmations, certifications and other informational diligence requests as REMIC counsel shall reasonably require in order to prepare and issue the Bring-Down Opinion.

(ii) the organizational documents of the Depositor provide the same protection as set forth above pertaining to SRC O.P. Corporation with an independent director for the Depositor.

Upon the date of the Closing, concurrently with the receipt of the regular interest REMIC Certificates by the Depositor, the Company will cause the following to occur:

•Sections 6, 9(j) and 9(t) of the Certificate of Incorporation of SRC O.P. Corporation and Section 9(j) and 9(t) of the Certificate of Incorporation of the Depositor will be amended to permit the continuing existence of PBGC UBL Claims (as defined below); Section 7 of the Certificate of Incorporation for SRC O.P. Corporation will be amended to add to the references to “the Initial Lender” a reference to PBGC and add to the references to “the Loan” a reference to PBGC’s forbearance described below and the period thereof; any comparable provisions of Section 7 of the Certificate of Incorporation for the Depositor will be correspondingly amended.

•The organizational documents of each of SRC O.P. Corporation and the Depositor, will be amended to provide that: (i) the Independent Director of SRC O.P. Corporation (the “SRC O.P. Independent Director”) shall beas set forth on Exhibit 5; (ii) the Independent Director of Depositor (the “Depositor Independent Director” and, together with the SRC O.P. Independent Director, the “Independent Directors”) shall be as set forth on Exhibit 5; (iii) any subsequent amendment to the organizational documents of SRC O.P. or the Depositor, in each case that is materially adverse to the interests of PBGC (it being understood that any amendment to the sections of those organizational documents to be mutually agreed by PBGC and the Company as part of the definitive documentation, or any addition of new sections or amendments (including deletions) which may, in the reasonable judgment of the SRC O.P. Independent Director or the Depositor Independent Director (as applicable), impair the bankruptcy-remoteness of SRC O.P. Corporation or Depositor in any material respect, shall be deemed to be materially adverse to the interests of PBGC),² will require

² As part of definitive documentation, PBGC and the Company to agree on particular sections of specified organizational documents that cannot be amended without consent of PBGC notwithstanding the overall standard of

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the prior, written approval of the SRC O.P. Independent Director or the Depositor Independent Director (as applicable); and (iv) any existing Independent Director may be removed, and any successor Independent Director may be appointed, solely to the extent that the existing Independent Director is promptly replaced by a successor Independent Director set forth on Exhibit 5 hereto or otherwise expressly approved in writing by PBGC; provided that any Independent Director shall be entitled to vote solely on: (A) the commencement of a Voluntary Bankruptcy Event or a Transfer, Pledge or Distribution (each as defined below) of all or substantially all of the assets of the entity as to which such person is an Independent Director; (B) any amendment to the organizational documents of the entity as to which such person is an Independent Director; or (C) any action which, in the Independent Director’s reasonable judgment (x) may impair the special purpose nature or the bankruptcy-remoteness of any of the Depositor or the RE Subsidiaries (as applicable) in any material respect or (y) would otherwise be in violation of any provisions set forth in this term sheet or the definitive documentation. •The organizational documents of the Depositor and the other RE Subsidiaries will be amended to take into account the transactions contemplated herein and afford PBGC similar protections to those set forth above. •All Independent Directors contemplated herein shall (i) receive coverage from the applicable Directors’ and Officers’ liability policies of insurance and (ii) shall be paid and receive all other benefits at the same level and amount as the other directors of such entity, and at the sole expense of entity for whom such Independent Director serves. The details of the current director insurance and compensation packages are as set forth at Exhibit 5.

RE Subsidiary Negative Covenants

Neither the RE Subsidiaries nor the Depositor may: (i) incur any indebtedness and/or guarantees thereof; (ii) sell, transfer or otherwise dispose of (“Transfer”) any of the Designated Assets (as defined below), (iii) fund any dividend, equity repurchase, intercompany loan or capital contribution (“Distribute”) with the Designated Assets, (iv) pledge, hypothecate, or grant a lien, security interest or other financial encumbrance (or permit to exist any such liens, security interests or financial encumbrances) in

adversity; it being further understood that any amendment to the organizational documents that may impair the special purpose nature or bankruptcy-remoteness of the RE Subsidiaries or the Depositor shall be considered materially adverse to PBGC.

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(“Pledge”) any of the Designated Assets (as defined below); (v) amend in any manner materially adverse to the interests of PBGC (A) the organizational documents of the Depositor or RE Subsidiaries or (B) the REMIC Transactional Documents (it being understood that a reasonable extension of the expiry of the Master Lease (including any renewal of the Master Lease in accordance with its terms) shall not be materially adverse to the interests of PBGC) (this clause (v), the “REMIC Amendment Covenant”); (vi) institute, or consent to the institution of (including, without limitation, by failing to timely defend against), bankruptcy or insolvency proceedings in respect to the Depositor or the RE Subsidiaries, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to bankruptcy or insolvency, or seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Depositor or RE Subsidiaries or any substantial part of its or their assets, or make any assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take any corporate action in furtherance of any such action; (vii) (A) merge, dissolve, liquidate or consolidate with or into any other entity or engage in any other business combination with any other entity or (B) form any subsidiaries; or (viii) take any action in violation of the organizational documents of the Depositor or any RE Subsidiary, as applicable.

As used throughout, the phrase “ordinary course of business” shall mean the usual transactions, customs and practices of the Company or its relevant subsidiary, as applicable, of a kind, amount, and nature as common before the date of the Closing.

Notwithstanding the above restrictions (except as noted below), the RE Subsidiaries and the Depositor may:

•So long as a Springing Lien Event (as defined below) has not occurred, upon 30 days advance written notice to PBGC, remove up to 10 properties in aggregate from the RE Subsidiaries; provided, however, that the aggregate value (determined solely by reference to appraisals effective as of the date of the Closing provided by Sears at its sole expense) of all properties so removed pursuant to this basket may not exceed $75 million; providedfurther that, during the remainder of the calendar year in which the Closing occurs and the immediately following calendar year, the RE Subsidiaries may not remove more than 5 properties per calendar year (or portion thereof) and the aggregate value (determined solely by reference to appraisals effective as of the date of the Closing) of all properties removed during either of such calendar years

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     (or portion thereof) may not exceed $25 million; providedfurther that, during each subsequent calendar year, the RE Subsidiaries may not remove more than 5 properties per calendar year and the aggregate value (determined solely by reference to appraisals effective as of the date of the Closing) of all properties removed during any such calendar year may not exceed $35 million (together, the “RE Subsidiaries Permitted Transfers”); provided that, notwithstanding anything herein to the contrary, no sales by the RE Subsidiaries or Depositor of real properties that are Designated Assets (as distinguished from, and not including, movement of parts, subleases, substitutions of real properties, outlots, Pledges or other transactions) may occur unless such sales are either (i) RE Subsidiaries Permitted Transfers, or (ii) expressly permitted in the third bullet point of this section at subsections 2.(v) or 2.(z);

•Permit (i) the RE Subsidiaries to remain parties to (and the properties held by the RE Subsidiaries to remain subject to) the Master Lease and (ii) the RE Subsidiaries and the Depositor to remain parties to (and the properties held by such entities to remain subject to) the other REMIC Transactional Documents; for the avoidance of doubt, in the event that any action or matter is expressly prohibited (or limited) in the definitive documentation, but may otherwise be permitted (or otherwise less restricted) under the REMIC Transactional Documents, the definitive documentation will control;

•So long as a Springing Lien Event has not occurred, in the case of the RE Subsidiaries: (1) take any action required by the Master Lease, (2) undertake or permit (t) movement of parts between properties, making of improvements to properties, and installation of trade fixtures in accordance with Section 9 of the Master Lease, (u) subleases of properties subject to the Master Lease in accordance with Section 13(a) of the Master Lease, (v) terminations of the Master Lease with respect to specific properties in accordance with Section 14(a) of the Master Lease; provided that the aggregate value of properties sold pursuant to this clause (v), together with the aggregate value of properties sold pursuant to clause (z) below, shall not exceed $25 million in any calendar year (provided that any unused portion thereof with respect to any calendar year may be carried forward to any subsequent calendar year), (w) substitutions of properties subject to the Master Lease in accordance with Sections 11(a) and/or 14(d) of the Master Lease, (x) transactions involving outlots

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     pursuant to Section 14(e) of the Master Lease, (y) transactions involving easements pursuant to Section 14(f) of the Master Lease, and (z) sales of properties pursuant to Section 16 of the Master Lease; provided that the aggregate value of properties sold pursuant to this clause (z), together with the aggregate value of properties sold pursuant to clause (v) above, shall not exceed $25 million in any calendar year (provided that any unused portion thereof with respect to any calendar year may be carried forward to any subsequent calendar year); provided further that any substitution of any real property owned by any RE Subsidiary pursuant to this clause (2) (or otherwise, if any) shall be permitted only to the extent such real property is substituted for other real properties of equal or greater value (determined solely by reference to appraisals effective on or about the date of each such substitution) which become collateral for Mortgage Loans which back the REMIC Certificates, at the Company’s sole cost, and (3) except as expressly limited in the definitive documentation, permit Sears, Roebuck and Co. to exercise any of its other rights under the Master Lease;

•(i) Pay third-party servicer and trustee fees in relation to the REMIC Certificates, and (ii) pay principal and interest on the REMIC Certificates in accordance with the Pooling and Servicing Agreement;

•So long as a Springing Lien Event has not occurred, Transfer or Distribute cash or cash equivalents (but not real property constituting Designated Assets) to the Company or any of its subsidiaries but only in a manner generally consistent with the regular cash flow circulation processes employed by Sears in the ordinary course of business; and

•(1) Incur (A) ordinary course or involuntary liens and encumbrances (including, without limitation (i) liens securing real estate taxes, which shall be timely extinguished in the ordinary course of business, (ii) zoning restrictions, and (iii) easements), (B) liens arising under the REMIC Transactional Documents and (C) liens and encumbrances permitted by the REMIC Transactional Documents and (2) permit to exist any liens and encumbrances existing at the date of the Closing (“REMIC Existing Liens”). In the event that the Company, the Depositor or any of the RE Subsidiaries (or any of the Company’s other subsidiaries) is required to (or otherwise) deliver(s) a schedule of liens and encumbrances pertaining to any property owned by the

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	Depositor or any of the RE Subsidiaries to any third party, it shall deliver such schedule (including updates) to PBGC promptly following delivery to the applicable third party.
RE Subsidiary Additional Covenants	Sears shall not cause or allow, and there shall not be, (i) any direct or indirect Transfer or Distribution or (ii) any Pledge, in each case of the equity or other ownership interests of any RE Subsidiary or the Depositor to any person other than the Company or any of its subsidiaries; provided that Sears shall not cause or allow, and there shall not be, any Transfer, Distribution or Pledge of the equity or other ownership interests of any RE Subsidiary or the Depositor unless (x) such interests are (or will be) owned by the Company or a subsidiary of the Company organized under the laws of (and domiciled in) the United States of America, any state thereof or the District of Columbia and (y) upon giving effect to such Transfer, Distribution or Pledge, the RE Subsidiaries and the Depositor will remain members of the Company’s “controlled group” as defined in ERISA Section 4001(a)(14). The RE Subsidiaries and the Depositor shall at all times remain liable for their respective obligations to PBGC irrespective of whether any direct or indirect Transfer, Pledge or Distribution of the equity or other ownership interests in any RE Subsidiary or the Depositor occurs.
IP Subsidiary Organizational Changes and Bankruptcy Remoteness	The Company shall represent, warrant and covenantthat the organizational documents of the IP Subsidiary provide that: •Bankruptcy filing is permissible only with the unanimous consent of the managers of IP Subsidiary; and •At least one manager of IP Subsidiary shall be an individual who is fully independent of the Company; and •The IP Subsidiary has been and shall continue to be operated as a special purpose entity consistent with the special purpose vehicle provisions of such organizational documents (including, without limitation, provisions intended to ensure and preserve the bankruptcy-remoteness of such entity) and the prior opinions provided by IP Subsidiary counsel. IP Subsidiary counsel shall provide a bring-down opinion, in substantially the form attached hereto as Exhibit 4, that the execution, delivery and performance of the definitive documentation and the consummation of the transactions contemplated thereunder do not cause IP Subsidiary counsel to alter or withdraw the bankruptcy opinion issued in connection with the IP Notes transaction (the “IP Bring-Down Opinion”). Sears shall cooperate with IP Subsidiary counsel in providing such authorizations, confirmations,

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certifications and other informational diligence requests as IP Subsidiary counsel shall reasonably require in order to prepare and issue the IP Bring-Down Opinion. Upon the date of the Closing: (i) Sears Brands, LLC, the sole member of the IP Subsidiary (the “Member”), shall appointthat entity as identified on Exhibit 5 as a manager of the IP Subsidiary in accordance with the terms of the IP Subsidiary’s existing organizational documents (the “IP Independent Manager”); (ii) the Board of Managers shall cause an Issuer Order (as defined in the IP Notes Indenture) to be given to the Trustee (as defined in the IP Notes Indenture), instructing the Trustee to refrain from consenting to or entering into any subsequent amendments to the IP Notes Indenture without the IP Independent Manager’s prior, express written consent (unless refraining from such amendments would materially impair the value of the IP Notes) and further stating that such Issuer Order may not be revoked by any subsequent Issuer Order unless such subsequent Issuer Order is signed by the Independent Manager (it being understood that the IP Notes Indenture does not, in every instance, obligate the Trustee to adhere to the terms of any Issuer Order); and (iii) each of the Company and the Member shall individually covenant and a gree that it will not seek to remove the existing IP Independent Manager or appoint any successor IP Independent Manager unless the existing Independent IP Independent Manager is promptly replaced by a successor IP Independent Manager set forth on Exhibit 5 hereto or otherwise expressly approved in writing by PBGC; provided that any IP Independent Manager shall agree with the Company to vote solely on: (A) the commencement of a Voluntary Bankruptcy Event or a Transfer, Pledge or Distribution of all or substantially all of the assets of the IP Subsidiary; (B) any amendment to the organizational documents of the IP Subsidiary; or (C) any action which, in the Independent Manager’s reasonable judgment: (x) may impair the bankruptcy-remoteness of the IP Subsidiary in any material respect; or (y) would otherwise be in violation of any provisions set forth in this term sheet or the definitive documentation. All Independent Managers contemplated herein shall: (i) receive coverage from the applicable Directors’ and Officers’ liability policies of insurance; and (ii) shall be paid and receive all other benefits at the same level and amount as the other managers of such entity, and at the sole expense of the IP Subsidiary. The details of the current manager insurance and compensation packages are as set forth at Exhibit 5.

IP Subsidiary Negative Covenants

The Company shall not permit the IP Subsidiary to, and (as an independent covenant and solely to the extent that such agreement by the IP Subsidiary does not impair the rights of the

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holder of the IP Notes thereunder or materially impair the marketability of the IP Notes) the IP Subsidiary shall not:

•Transfer or Distribute any Designated Assets; provided that the IP Subsidiary shall be permitted to: (i) make payments in respect of the IP Notes or as required by the IP Notes Indenture; (ii) Transfer or Distribute the IP Assets to the extent that such Transfer or Distribution (1) is permitted by the IP Notes Indenture and is otherwise undertaken for fair market value and in the ordinary course of business, or (2) is a Transfer or Distribution following the occurrence of a default under the IP Notes Indenture, with the net proceeds thereof being first applied to the IP Notes and after payment in full of such IP Notes and the other obligations under the IP Notes Indenture, such remaining proceeds (being Designated Assets) subject to the Springing Lien and thereafter to be applied to the PBGC UBL Claims (defined below) (or, in the event that the PBGC UBL Claims are then contingent, unliquidated and/or unmatured, transferred within 5 business days to and held by PBGC or its designated agent for the benefit of PBGC in express trust or escrow (as applicable) until such time as the PBGC UBL Claims are fully liquidated and after application, such amount (if any) in excess of that required to pay the PBGC UBL Claims in full (provided such PBGC UBL Claims have not become unenforceable by reason of a lapse of time) shall be remitted to the Company or its appropriate subsidiary as directed by the Company); and (iii) so long as a Springing Lien Event has not occurred, Transfer or Distribute cash or cash equivalents (even if constituting Designated Assets of the IP Subsidiary) to the Company or any of its subsidiaries in a manner generally consistent with the regular cash flow circulation processes employed by Sears in the ordinary course of business, including without limitation by (1) maintaining loans (as lender) from the initial proceeds from the issuance of the IP Notes, (2) making loans (as lender) to any affiliate out of payments from the licenses constituting IP Assets, (3) canceling, amending, modifying or refinancing any such loans or (4) making distribution of amounts received by the IP Subsidiary under the waterfall provisions of the IP Notes Indenture;

•amend in any manner materially adverse to the interests of PBGC (i) the organizational documents of the IP Subsidiary (it being understood that any amendment to the sections of those organizational documents to be agreed by

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     PBGC and the Company as part of the definitive documentation shall be deemed to be materially adverse to the interests of PBGC)³ or (ii) the IP Notes Indenture (the “Indenture Amendment Covenant”);

•Pledge any Designated Assets other than (i) liens securing the IP Notes, (ii) liens granted to licensees and qualified sub-licensees under the applicable licenses and sublicenses in the ordinary course of business, (iii) licenses or sublicenses of IP Assets on arms’-length terms and otherwise in the ordinary course of business (provided that long-term licenses or sub-licenses providing only upfront (as opposed to regular and periodic) royalty payments shall not be permitted unless the IP Subsidiary (x) promptly reports such transaction(s) to PBGC, and (y) retains (and does not Distribute, Transfer or, unless otherwise permitted by this paragraph, Pledge (except as required by the IP Notes Indenture)) the proceeds of such upfront royalty payments), (iv) any rights granted pursuant to Section 1.12 of the IP Notes Indenture (to the extent as described in footnote 4), (v) ordinary course or involuntary liens and encumbrances, (vi) liens and other encumbrances existing at the date of Closing (“IP Existing Liens”); (vii) Permitted Liens (as defined in the IP Notes Indenture) and (viii) continuations or substitutions of the foregoing with substantially equivalent liens or encumbrances. In the event the Company or the IP Subsidiary (or any other subsidiary of the Company) is required to (or otherwise) deliver(s) a schedule of liens and encumbrances pertaining to any property owned by the IP Subsidiary to any third party, it shall deliver such schedule (including updates) to PBGC promptly following delivery to the applicable third-party;

•institute or consent to the institution of (including, without limitation, by failing to timely defend against) bankruptcy or insolvency proceedings in respect to the IP Subsidiary, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to bankruptcy or insolvency, or seek orconsent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the IP Subsidiary or any substantial part of its assets, or make any

³ As part of definitive documentation, PBGC and the Company to agree on particular sections of specified organizational documents that cannot be amended without consent of PBGC notwithstanding the overall standard of adversity; it being further understood that any amendment to the organizational documents that may impair the special purpose vehicle status and bankruptcy-remoteness of the relevant IP Subsidiary shall be considered materially adverse to PBGC.

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     assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or take any corporate action in furtherance of such action;

•except for (i) the IP Notes, (ii) other liabilities arising under the IP Notes Indenture and the Transaction Documents (as defined in the IP Notes Indenture), each as in effect on the date of the Closing and (iii) liabilities of the IP Subsidiary incurred in the ordinary course of business (and then, only to the extent permitted under the IP Notes Indenture), incur, assume or guaranty any indebtedness;

•make any expenditure (by long-term or operating lease or otherwise) for any capital assets (either realty or personalty);

•(A) merge, dissolve, liquidate or consolidate with or into any other entity or engage in any other business combination with any other entity or (B) form any subsidiaries; or

•take any action in violation of the organizational documents of the IP Subsidiary.

Sears shall not cause or allow, and there shall not be, (i) any direct or indirect Transfer or Distribution or (ii) any Pledge, in each case of any equity interests in the IP Subsidiary to any person other than the Company or any of its subsidiaries (other than any liens required under the Company’s existing revolving credit facility)⁴; provided that Sears shall not cause or allow, and there shall not be, any Transfer, Distribution or Pledge of the equity or other ownership interests of the IP Subsidiary (other than pursuant to any liens required under the Company’s existing revolving credit facility) unless (x) such interests are (or will be) owned by the Company or a subsidiary of the Company organized under the laws of (and domiciled in) the United States of America, any state thereof or the District of Columbia and (y) upon giving effect to such Transfer, Distribution or Pledge, the IP Subsidiary will remain a member of the Company’s “controlled group” as defined in ERISA Section 4001(a)(14). The Company, through its corporate ownership structure, shall instruct and direct the Board of Sears RE that Sears Re shall not enter into or agree to any amendment to (or waiver under) the IP Notes Indenture which would reasonably be anticipated to materially adversely impact the interests of PBGC.

⁴ Definitive documentation shall reflect that the noted parenthetical above and as used throughout this term-sheet refers solely to the rights of the lender(s) under the revolving credit facility to be afforded a limited license of the brand names and marks in the event the lender(s) conduct a liquidation of their inventory-based collateral.

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Enforcement In addition to any and all other remedies that the parties to the definitive documentation may have, the parties shall each be entitled to specific performance as a remedy for breach of the covenants set forth in this term sheet and the definitive documentation, and PBGC, the Company and all subsidiaries of the Company shall be deemed to have consented to specific performance in respect of any such violation. Any transactions or other actions in violation of the covenants set forth in this term sheet and the definitive documentation shall be, abinitio, null, void and of no force or effect. If the Company or any of its subsidiaries takes or attempts to take any action which: (i)(x) is or would be in breach of the definitive documentation, and (y) the Company does not within 10 business days following delivery of notice of such breach by PBGC to the Company either cure such breach or provide written notice to PBGC that it will not take such action, (ii) reduces or, if consummated, would reasonably be expected to reduce the aggregate value of the Designated Assets held by the Depositor, the RE Subsidiaries and the IP Subsidiary that may be realized by PBGC (whether as a result of a prohibited Transfer, Distribution or Pledge of any Designated Asset, reduction in the value of any Designated Asset or impairment of the bankruptcy remoteness or special purpose nature of any of the Depositor, the RE Subsidiaries or the IP Subsidiary, or otherwise) by at least $50 million, and (iii) is enjoined by a permanent injunction (after notice to and an opportunity to be heard by the Company) set forth in a final and non-appealable order of a court of competent jurisdiction (or determined by a final and non-appealable order of such court to constitute a breach of the definitive documentation), then the Company shall within 5 business days of entry of such final and non-appealable order (a “Final Injunction Order”) make a contribution to the Pension Plan (an “Excess Contribution”) in an amount equal to $100 million which shall be in addition to the minimum required contribution determined under 26 U.S.C. § 430 for the plan year for which the Excess Contribution is made.  For the avoidance of doubt, nothing set forth in this paragraph, including, without limitation, the payment of the Excess Contribution, will (1) relieve the Company or any of its subsidiaries from, or otherwise mitigate, its obligation to fully comply with the Final Injunction Order (including, without limitation, any obligation to pay damages to PBGC or the Pension Plan), (2) constitute a waiver by PBGC, or cure of, any breach under the definitive documentation, or (3) in any way impair, waive or abrogate any of PBGC’s remedies under the definitive documentation (including, without limitation, the right to declare a Forbearance Termination Event) or under applicable law, other

16

than the occurrence of a Springing Lien Event arising from the requirement to make such Excess Contribution.  The Company shall not at any time elect under 26 U.S.C § 430(f)(6)(B) to create or to increase any prefunding balance (as defined in 26 U.S.C § 430(f)(6)) of the Pension Plan by using (a) all or any part of any Excess Contribution, or (b) all or any portion of any excess described in 26 U.S.C. § 430(f)(6)(B) that is directly or indirectly attributable to any Excess Contribution.

PBGC Commitment

Unless after the date of the Closing (i) a Forbearance Termination Event occurs that is continuing at the time of PBGC’s issuance of a notice of determination under ERISA Section 4042(a) that it is instituting proceedings to terminate the Pension Plan, or (ii) the Company or any of its subsidiaries enters into an agreement providing for a Material Transaction, PBGC shall forbear from initiating any involuntary termination of the Pension Plan (except an involuntary termination that is based solely on PBGC’s determination (in accordance with then-applicable legal standards) that the Pension Plan “does not have assets available to pay benefits which are currently due under the terms of the plan” within the meaning of ERISA Section 4042(a) and that PBGC is therefore required to initiate pursuant to ERISA Section 4042(a)).   A “Forbearance Termination Event” shall mean: (i)the occurrence of any Springing Lien Event; (ii)an event of default under any third-party debt issued by the Company or any Material Subsidiary (as defined below) with an aggregate outstanding principal in excess of $350 million, which event of default (x) results in the acceleration of the maturity date of such debt and such debt remains outstanding for a period of 5 days following such acceleration; or (y) arises from non-payment upon the expiry of such debt’s term; (iii)    [**]; or (iv)any breach by the Company or any of its subsidiaries of any applicable representation, warranty, covenant,

[**] Confidential Information has been omitted and filed separately with the Securities and Exchange Commission.

Confidential treatment has been requested with respect to this omitted information.

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            undertaking or agreement set forth herein or in the definitive documentation applicable to such entity, in each case subject to materiality thresholds and grace periods (if any) to be agreed.

PBGC will provide the Company with the UBL Documentation (as defined below) at the time PBGC makes any determination that a Forbearance Termination Event has occurred under clause (iii), above.

A “Material Transaction” shall mean any:

[**]

[**] Confidential Information has been omitted and filed separately with the Securities and Exchange Commission.

Confidential treatment has been requested with respect to this omitted information.

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provided that: (x) a disposition of inventory and/or other assets held for sale in the ordinary course of business of the Company and its subsidiaries shall not constitute a Material Transaction and shall not count against any cap set forth above, (y) the transactions described in the Registration Statement on Form S-11 filed with the Securities and Exchange Commission by Seritage Growth Properties and declared effective on June 9, 2015 and any transactions related thereto (the “REIT Transaction”) shall, in each case, not constitute a Material Transaction and shall not count against any cap set forth above; providedhowever that no proceeds thereof may be used to effect a transaction as set forth in section (iii) above, irrespective of any caps set forth therein, and (z) any transaction solely to the extent among the Company and/or any of its subsidiaries shall not constitute a Material Transaction and shall not count against any cap set forth above. Any transaction cap amounts under sections (ii) or (iii) of the definition of a Material Transaction shall be calculated as the sum of all transactions in such section required under agreements entered into during any calendar year, with any unused amounts in any calendar year carried forward into the following calendar year at the Company’s sole discretion; provided that any unused amount with respect to a particular calendar year may not be carried forward to any calendar year other than the immediately following calendar year. Any transaction cap amounts under section (i) of the definition of a Material Transaction shall be calculated as the sum of all transactions in such section entered into during any consecutive 12-month period. For the avoidance of doubt, qualification of a transaction as a “Material Transaction” for the limited purposes of this term sheet and the definitive documentation shall not constitute an admission by the Company or any of its subsidiaries that such transaction is material for any other purpose.

[**]

[**] Confidential Information has been omitted and filed separately with the Securities and Exchange Commission.

Confidential treatment has been requested with respect to this omitted information.

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“Affiliate” means, with respect to a specified person or entity, another person or entity that directly or indirectly Controls or is Controlled by or is under common Control with the person or entity specified. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person or entity, whether through the ability to exercise voting power, by contract or otherwise.

Springing Lien

1.Upon and continuing after the occurrence of any Springing Lien Event, the Depositor, the RE Subsidiaries and the IP Subsidiary will each automatically be deemed to have granted (as of the date the applicable Springing Lien Event occurs), without further action of any party, a lien on and security interest in (the “Springing Lien”): (i) the REMIC Certificates held by the Depositor; (ii) the real property held by the RE Subsidiaries; (iii) the IP Assets held by the IP Subsidiary; and (iv) all proceeds of any of the foregoing (including, without limitation, proceeds of proceeds) set forth in clauses (i) through (iii) (all assets set forth in clauses (i) through (iv), regardless of whether a Springing Lien Event has occurred, the “Designated Assets”) to PBGC securing any and all claims (whether fixed, contingent or otherwise) of PBGC for the “unfunded benefit liabilities” together with interest (the “UBL”)5 of the Pension Plan under ERISA Section 4062(b)(1)(A) (provided that, notwithstanding anything in this term sheet or the definitive documentation, the parties reserve all

⁵ PBGC shall provide the Company with its supporting documentation relating to its determination of, estimate of, or other calculations relating to the UBL of the Pension Plan (including, but not limited to, its Pension Information Profile relating thereto in Excel format) (the "UBL Documentation"), at the times provided in this term sheet or in the the definitive documentation; provided, however, that neither PBGC's provision of the UBL Documentation to the Company nor the Company's review thereof or response thereto will prevent or delay PGBC from pursuing any and all remedies hereunder or under the definitive documentation in accordance with the terms hereof or thereof. The Company shall timely provide to PBGC: (i) all quarterly asset statements for the Pension Plan within 5 business days after the Company's receipt thereof; and (ii) the Pension Plan's Actuarial Valuation Report annually within 5 business days after the earlier of (a) the last day of the ninth calendar month of the plan year and (b) the date on which such report is received by the Company.

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          rights regarding the determination of UBL, including, but not limited to, the applicability, validity, interpretation, and application of PBGC regulations relating thereto) (such claims, the “PBGC UBL Claims”), against the Company and each of its subsidiaries; provided, however, that if the grant of the Springing Lien respecting the IP Assets (and all proceeds thereof) would constitute a default under the IP Notes Indenture as of the date of the Closing, then the Springing Lien as respecting the IP Assets (and all proceeds thereof) shall be of no force and effect until either (1) the IP Notes and all other obligations under the IP Notes Indenture have been paid in full (or the IP Notes and the IP Notes Indenture have otherwise been defeased or fully discharged) or (2) the grant of the Springing Lien respecting the IP Assets (and all proceeds thereof) ceases to constitute a default under the IP Notes Indenture (the “IP Springing Lien Conditions”). In addition, and without any limitation to any other rights or remedies of whatever kind or nature PBGC may have, and notwithstanding anything herein to the contrary, PBGC may foreclose on the Designated Assets (or any portion thereof) under the Springing Lien only: (a) if the plan administrator of the Pension Plan initiates a distress termination of the Pension Plan under ERISA Section 4041(c); or (b) upon satisfaction of the following conditions: (x) the Pension Plan is terminated and (y) PBGC does not receive from the Company within five business days after a written demand by PBGC (the “PBGC Demand Letter”) (which PBGC Demand Letter shall include the UBL Documentation) the full amount of the PBGC UBL Claims. PBGC’s reasonable estimate of the PBGC UBL Claims shall suffice for purposes of its demand as set forth above; provided however, that if the PBGC UBL Claims are then contingent, unliquidated and/or unmatured, then any proceeds from such foreclosure action shall (1) be held by PBGC or its designated agent for the benefit of PBGC in express trust or escrow (as applicable); and (2) if invested, then invested as PBGC shall reasonably determine, until such time as the PBGC UBL Claims are fully liquidated and after application, such amount (if any) in excess of that required to pay the PBGC UBL Claims in full (provided such PBGC UBL Claims have not become unenforceable by reason of a lapse of time) shall be remitted to Sears; provided further that if the amount of the PBGC UBL Claims is ultimately determined to be less than PBGC’s reasonable estimate as set forth above, any amounts paid in respect of the PBGC UBL Claims that are in excess of the

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          ultimately determined amount thereof shall be promptly returned to the Company, including, to the extent permitted by applicable law, unapplied interest and earnings (in either case, if any) as earned on the trust or escrow account. The Springing Lien shall remain in existence until the PBGC UBL Claims (x) are paid in full, or (y) become unenforceable by reason of lapse of time.

2.In addition, following the occurrence of a Springing Lien Event and determined only at such time, the Springing Lien shall (i) with respect to the lien on the Designated Assets consisting of the REMIC Certificates (and all proceeds thereof), be (a) a valid, binding and enforceable lien on and security interest in such REMIC Certificates (and all proceeds thereof) senior to all other liens except for non-consensual liens which may prime by operation of statute (if any) and (b) perfected (x) through physical possession of such REMIC Certificates to be held in escrow (in accordance with escrow arrangements reasonably acceptable to PBGC) until the occurrence of a Springing Lien Event by PBGC’s designated agent, which shall be a money-center financial institution reasonably acceptable to PBGC and the Company (the “Custodian”), such REMIC Certificates to be delivered by the Depositor to the Custodian at the date of Closing, and (y) by such other pre-executed documents of perfection and powers of attorney in form and substance reasonably acceptable to PBGC, delivered to the Custodian to be held in escrow (in accordance with escrow arrangements reasonably acceptable to PBGC) until the occurrence of a Springing Lien Event at the date of Closing for filing and recordation upon the occurrence of a Springing Lien Event; (ii) with respect to the lien on the Designated Assets consisting of the IP Assets (and all proceeds thereof), be (a) subject to and conditioned upon the satisfaction of at least one of the IP Springing Lien Conditions, a valid, binding and enforceable lien on and security interest in such IP assets (and all proceeds thereof) senior to all other liens except for the liens securing the IP Notes and non-consensual liens which may prime by operation of statute (if any) (and such rights as described supra at footnote 4) and (b) perfectible by pre-executed documents of perfection and powers of attorney in form and substance reasonably acceptable to PBGC, delivered to the Custodian to be held in escrow (in accordance with escrow arrangements reasonably acceptable to PBGC) until the occurrence of a Springing Lien Event at the date of the Closing for filing and recordation upon the occurrence of a Springing Lien Event;

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          and (iii) with respect to the lien on the Designated Assets consisting of the real property (and all proceeds thereof), be (a) a valid, binding and enforceable lien on and security interest in such real property (and all proceeds thereof) senior to all other liens except for the mortgages and non-consensual liens which may prime by operation of statute (if any) and (b) perfectible by (I) other than mortgages (addressed in sub-paragraph (II) below), pre-executed documents of perfection and powers of attorney in form and substance reasonably acceptable to PBGC, delivered to the Custodian to be held in escrow (in accordance with escrow arrangements reasonably acceptable to PBGC) until the occurrence of a Springing Lien Event at the date of Closing for filing and recordation upon the occurrence of a Springing Lien Event and (II) mortgages, which shall be substantially in the form of the form of mortgage attached hereto as Exhibit 6 (together with any state-specific conformations required as of the time of the applicable Springing Lien Event), to be recorded promptly following the occurrence of a Springing Lien Event; provided that the Company shall: (i) cause to be provided at Closing pre-executed signature pages of the applicable subsidiary of the Company with respect to such mortgages; and (ii) appoint PBGC as its attorney-in-fact (pursuant to a power of attorney in a form reasonably acceptable to PBGC, which shall be updated at the reasonable request of PBGC to reflect any changes required by law) to execute, make state-specific conformations, and record such mortgages on the real properties held by the RE Subsidiaries; provided, however, that PBGC may act in reliance upon such power of attorney only following the occurrence of a Springing Lien Event. Upon the occurrence of a Springing Lien Event, PBGC may remove any of the foregoing pre-executed documents from escrow, file such pre-executed documents with applicable government entities, file applicable UCC-1 financing statements, negotiate, execute and record mortgages, and take such other actions, in each case to the extent reasonably necessary to perfect the applicable Springing Lien and, to the extent in accordance with applicable law and not otherwise prohibited by the definitive documentation, foreclose on the Designated Assets.

3.Each of the Depositor, the RE Subsidiaries, the IP Subsidiary and their respective direct parents, as well as the Company, shall enter into a subordination agreement with PBGC agreeing on the date of the Closing that solely after the occurrence of a Springing Lien Event, (i) any and all

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          claims such entity may then or thereafter hold against the Company or any of its subsidiaries will be subordinated in right of payment to the PBGC UBL Claims against the Company or such subsidiary, as applicable, (ii) except as pertaining to amounts owed in connection with REMIC Transaction Documents and/or the IP Notes, any and all monetary obligations of Depositor, the RE subsidiaries and the IP Subsidiary then owed to the Company or any of its subsidiaries will be subordinated in right of payment to the PBGC claims against the Company or such subsidiary as applicable and (iii) that any funds received contrary to such subordination shall be held expressly in trust and turned over to PBGC for application to the PBGC UBL Claims.

For the avoidance of doubt, the Springing Lien shall consensually secure the PBGC UBL Claims in total (without regard to any rights of the Company or any of its subsidiaries to seek marshalling or similar remedies, which shall be deemed waived). Each of (i) the Company and (ii) the RE Subsidiaries, Depositor and the IP Subsidiary, hereby acknowledge and shall in the definitive documentation further acknowledge its joint and several contingent liability for the PBGC UBL Claims.

The Springing Lien shall not be subject to the collective net worth limit applicable to a statutory lien under ERISA Section 4068 (the “ERISA Lien”). Rather, the Springing Lien shall secure the PBGC UBL Claims on a joint and several basis against each of the RE Subsidiaries, the Depositor, and the IP Subsidiary. Each of the RE Subsidiaries, the Depositor, and the IP Subsidiary shall waive any and all defenses based on marshalling, suretyship or impairment of collateral.

Nothing herein in any way limits PBGC's rights, if any, to an ERISA Lien. However, any amount PBGC collects pursuant to an ERISA Lien from any of the RE Subsidiaries, the Depositor or the IP Subsidiary shall serve to reduce the amount owed by the RE Subsidiaries and the Depositor or the IP Subsidiary, as applicable, for the PBGC UBL Claims that would otherwise be secured by the Springing Lien, provided that no amounts collected hereunder from the Company or any of its subsidiaries will reduce any PBGC claim against any other of the Company and its subsidiaries until PBGC has received a single satisfaction of such claim. Except as otherwise expressly agreed to herein or in the definitive documentation, nothing herein will limit PBGC’s or the Pension Plan’s rights and remedies, whether by statute, contract, at law, in equity or otherwise.

As set forth in footnote 4 hereof, the Springing Lien shall not extend to such rights with respect to the IP Assets as are reasonably necessary to permit the collateral agents under the

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Company’s existing credit facility to enforce their rights and remedies under the documents governing such facility with respect to the collateral securing such facility. At Closing, the Company shall deposit with the Custodian the sum of $250,000 to cover all out-of-pocket costs and expenses of PBGC to be incurred in connection with the execution, perfection and recordation of any mortgages and other security interests related to the Springing Lien. Any unused portion of such escrowed funds shall be returned by the Custodian to the Company promptly following the termination of the parties’ agreement under the definitive documentation. For the avoidance of doubt, these escrowed funds shall not be released by the Custodian to PBGC until a Springing Lien Event occurs.

Springing Lien Events

Each of the following shall constitute a “Springing Lien Event” hereunder: 1.A “Voluntary Bankruptcy Event” or an “Involuntary Bankruptcy Event” (each as defined below). 2.Failure by the Company (or any of its subsidiaries) to timely make any quarterly or other required Pension Plan contributions (including, without limitation, any Excess Contribution). 3.Entry into an agreement providing for (i) direct or indirect Distribution or Transfer or (ii) Pledge, in each case of any ownership interest in the Depositor, any RE Subsidiary or the IP Subsidiary by the Company or any of its subsidiaries to any entity other than the Company or any of its subsidiaries (other than pursuant to any liens required under the Company’s existing revolving credit facility, as described in footnote 4) without the Depositor, such RE Subsidiary or the IP Subsidiary, as applicable, remaining liable for its obligations to PBGC. 4.(i) The initiation by the plan administrator of the Pension Plan of a distress termination of the Pension Plan under ERISA Section 4041(c), (ii) entry by a court of competent jurisdiction of a decree under ERISA §4042(c)(1) adjudicating that the Pension Plan is terminated or (iii) agreement between PBGC and the plan administrator of the Pension Plan that the Pension Plan is terminated. For the purposes hereof: (i) a “Voluntary Bankruptcy Event” shall mean voluntary commencement (or consent to, including, without limitation, by failure to timely defend against, either involuntary commencement or entry of an order for relief in an involuntary

25

case) of a bankruptcy case or similar proceeding (including, without limitation, appointment of a receiver or other custodian or general assignment for the benefit of creditors) with respect to the Company or any of its Material Subsidiaries; (ii) an “Involuntary Bankruptcy Event” shall mean commencement of an involuntary bankruptcy case or similar proceeding (including without limitation appointment of a receiver or other custodian or required winding up or liquidation) with respect to the Company or any of its Material Subsidiaries that is not dismissed or vacated within60 days after commencement; (iii) a “Material Subsidiary” shall mean any direct or indirect subsidiary of the Company (A) for which the Company’s share (determined on a prorata basis by reference to the portion of the equity of such subsidiary held directly or indirectly by the Company) of the assets of such subsidiary and its direct and indirect subsidiaries, taken as a consolidated whole, constitutes more than 5% of the assets of the Company and its direct and indirect subsidiaries, taken as a consolidated whole, (B) which is the Depositor, a RE Subsidiary, the IP Subsidiary or Sears Re or (C) which is a direct or indirect parent of the Depositor, a RE Subsidiary, the IP Subsidiary or Sears Re; and (iv) “Closing” or “Close” means the mutual execution and delivery of the definitive documentation and the effectiveness thereof.

With respect to any and all agreements, indentures, appraisals, leases, articles, governance documents, or other documents of any kind or nature that are referred to herein or in the definitive documentation, the Company: (i)(a) shall with respect to any appraisals to be conducted as of the Closing and thereafter in connection with the Designated Assets and the transactions contemplated herein and in the definitive documentation, bear all costs and expenses associated therewith and select such appraiser(s) from the list of approved appraisers set forth on Exhibit 7 (as the parties may reasonably agree to amend), (b) shall provide to PBGC the most current version of such documents then in effect at least 3 weeks before the date of the Closing, (c) shall (x) identify any changes, waivers or amendments thereto which have been made within the last 12 months, or (y) represent and warrant that no such changes or amendments have been made during the last 12 months, and (d) represents, warrants and covenants that no other changes or amendments have been or will be made until after the Closing, and then only to the extent permitted hereunder or in the definitive documentation; and (ii) shall with respect to references herein to REMIC Existing Liens and IP Existing Liens, the Company shall, as pertaining to the Depositor, the RE Subsidiaries and the IP Subsidiary provide a definitive schedule of all such REMIC Existing Liens and IP

26

	Existing Liens that are permitted under the definitive documentation solely as a result of being REMIC Existing Liens or IP Existing Liens, as applicable, and not pursuant to any other carve-out.
Termination of Agreement	The parties’ agreements under the definitive documentation shall terminate, the definitive documentation shall be of no further effect and the Springing Lien shall be released upon the earliest of: •The Pension Plan’s achieving an 85% funded level on a termination basis as of the last day of two consecutive plan years of the Pension Plan; provided that Company may, at any time, provide to PBGC a calculation of the Pension Plan’s funding percentage on a termination basis with supporting documentation and request PBGC review thereof and, in such event, PBGC will promptly inform the Company in writing that it agrees or disagrees with such calculation and, if it disagrees with such calculation, will simultaneously provide the Company with the UBL Documentation relating to such disagreement and a written explanation of the bases upon which it disagrees; •5 years after the earlier of (i) the date of the Closing and (ii) the date that is 60 days after the date of this term sheet; provided that, if PBGC has commenced an enforcement action with respect to its rights hereunder (or the definitive documentation), such agreements shall not terminate solely as a result of the lapse of time until such enforcement action is finally resolved; or •The Company completes a standard termination of the Pension Plan. Any such standard termination will be deemed completed for purposes of the definitive documentation upon the expiration of the Audit Period. “Audit Period” means the period beginning on the date on which PBGC receives a Form 501 Post-Distribution Certification for the Pension Plan indicating that the Pension Plan has terminated in a standard termination under ERISA § 4041(b) and ending on the later of (a) the 180th day after such receipt, and (b) if PBGC has, by such 180th day, issued audit findings or a notice of noncompliance with respect to such standard termination, the date on which such audit findings have been complied with or rescinded or on which such notice of noncompliance has been rescinded.
Disclosure	The content of any public disclosure or press release relating to the terms set forth herein shall be substantially in the form attached hereto as Exhibit 8. The timing of any such disclosure or

27

	release shall be mutually agreed prior to the date of the Closing and in advance of such disclosure or release.
Representation	It is contemplated that each of the parties will consult their own counsel regarding the foregoing arrangements and the effects thereof. In furtherance thereof, no legal opinions of either party’s counsel will be required to be provided to the other party other than (1) the Bring-Down Opinions and (2) opinions of local counsel solely as to corporate existence, good standing, power and authority and authorization with respect to the Company and each of its subsidiaries party to the definitive documentation implementing the transactions contemplated herein and in the definitive documentation.
Binding Term Sheet Provisions	It is recognized that despite the Parties’ efforts to effectuate concurrently the Closing and the REIT Transaction closing, the REIT Transaction has already closed. Therefore, by affixing authorized signatures hereto, the Company and PBGC agree (the “Binding Term Sheet Provisions”) that: 1. Each party shall act in good faith to attempt to prepare, finalize and Close definitive documentation on the terms and conditions as contemplated in this term sheet (including, without limitation, finalizing and resolving all bracketed provisions, provisions subject to further review, and Exhibits as noted herein) as soon as reasonably practicable, but in any event, within 60 days of mutual execution hereof (the “Documentation Period”). 2. During the Documentation Period: (a) both parties shall not issue any press release or make any other public disclosure relating to the terms set forth herein except (1) as to which the timing and content shall have been mutually agreed by both parties prior to the time of such disclosure or release or (2) as required by applicable law or compulsory legal process or in connection with any pending legal proceeding (in which case each party agrees, to the extent permitted by applicable law, to inform the other party promptly thereof and such other party may reply or otherwise respond as it deems necessary or advisable); (b) the Company shall, as if the definitive documentation were in effect, (i) comply with the covenants set forth in the sections entitled “RE Subsidiary Negative Covenants,” “RE Subsidiary Additional Covenants,” “IP Subsidiary Negative Covenants” and “IP Subsidiary Additional Covenants”, and (ii) refrain from using the proceeds of the REIT Transaction to fund any spinoffs, dividends or share repurchases; and (c) unless after the date of the term sheet either (i) a Forbearance Termination Event occurs that is continuing or (ii) the Company or any of its subsidiaries enters into an agreement providing for a Material Transaction, PBGC shall refrain from issuing a notice of determination under ERISA

28

	Section 4042(a) that it is instituting proceedings to terminate the Pension Plan. 3. Unless extended in writing by both parties, upon the expiry of the Documentation Period, these Binding Term Sheet Provisions shall be of no further force or effect.
AGREED AS TO THE BINDING TERM SHEET PROVISIONS ONLY	SEARS HOLDINGS CORPORATION Dated: September 4, 2015 By: /s/ Kristin M. Coleman Print: Kristin M. Coleman Title: Senior Vice President, General Counsel and Corporate Secretary     – and – PENSION BENEFIT GUARANTY CORPORATION Dated: September 4, 2015 By: /s/ Sanford Rich Print: Sanford Rich Title: Chief of Negotiations and Restructuring, PBGC

29

EXHIBIT 1

(SEARS OWNERSHIP CHART)

[To be provided by Company as soon as practicable as part of

definitive documentation process]

30

EXHIBIT 2

(Other Company Subsidiaries)

[To be provided by Company as soon as practicable as part of

definitive documentation process]

31

EXHIBIT 3

(Current Holders of REMIC Certificates)

[To be provided by Company as soon as practicable as part of

definitive documentation process]

32

EXHIBIT 4

(Bring-Down Opinions)

[To be provided by Company counsel and finalized with PBGC

as soon as practicable as part of definitive documentation process]

33

EXHIBIT 5

(Independent Director and Independent Manager Lists and

Schedule of Compensation and Benefits for Current Relevant

Company Directors and Managers )

[(i) Initial and Replacement Independent Director and Manager Lists to be finalized as soon

as practicable as part of definitive documentation process; (ii) Schedule of

Independent Director and Manager Compensation and Benefits to be

provided by Company as soon as practicable as part of definitive documentation process]

34

EXHIBIT 6

(Form of Springing Lien Mortgage)

[To be finalized by Company and PBGC as soon as practicable as part of

definitive documentation process]

35

EXHIBIT 7

(List of Approved Appraisers)

[**]

[**] Confidential Information has been omitted and filed separately with the Securities and Exchange Commission.

Confidential treatment has been requested with respect to this omitted information.

36

EXHIBIT 8

(Form of Press Release)

[To be finalized by Company and PBGC as soon as practicable as part of

definitive documentation process]

37

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: December 3, 2015

/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: December 3, 2015

/s/ Robert A. Schriesheim         

Robert A. Schriesheim
Executive Vice President and Chief Financial Officer

Sears Holdings Corporation

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

Edward S. Lampert, Chairman of the Board and Chief Executive Officer of Sears Holdings Corporation (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 October 31, 2015 (the “Report”).

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.

December 3, 2015

/s/ Edward S. Lampert

Edward S. Lampert

Chairman of the Board and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION

Pursuant to 18 U.S.C. 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002

Robert A. Schriesheim, Executive Vice President and Chief Financial Officer of Sears Holdings Corporation (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 October 31, 2015 (the “Report”).

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.

December 3, 2015

/s/ Robert A. Schriesheim

Robert A. Schriesheim

Executive Vice President and

Chief Financial Officer

XML

BORROWINGS (Senior Secured Notes) (Details) - Senior Secured Note [Member] - USD ($) $ in Millions	1 Months Ended	9 Months Ended		12 Months Ended
	Oct. 31, 2010	Oct. 31, 2015	Nov. 01, 2014	Jan. 31, 2015
Debt Instrument [Line Items]
Long-term Debt	$ 1,000	$ 304	$ 1,240	$ 1,240
Senior secured note, interest rate		6.625%	6.625%	6.625%
Debt instrument, face amount		$ 0
Debt instrument, maturity date	Oct. 15, 2018
Debt Redemption Price Percent Of Principal Amount	101.00%
Treasury Lock [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		0.50%
United States Pension Plan of US Entity [Member]
Debt Instrument [Line Items]
Long-term Debt	$ 250	$ 0

XML

EQUITY EQUITY (Earnings per Share) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Equity [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1.4	0.1	6.7	0.1
Basic weighted average common shares outstanding (in shares)	106.6	106.4	106.5	106.3
Diluted weighted average common shares outstanding (in shares)	106.6	106.4	106.5	106.3
Net Income (Loss) Attributable to Parent	$ (454)	$ (548)	$ (549)	$ (1,523)
Basic loss per share (in USD per share)	$ (4.26)	$ (5.15)	$ (5.15)	$ (14.33)
Diluted loss per share (in USD per share)	$ (4.26)	$ (5.15)	$ (5.15)	$ (14.33)

XML

STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Real Estate Transactions) (Detail) CAD in Millions, $ in Millions		3 Months Ended			9 Months Ended
		Oct. 31, 2015 USD ($)	May. 02, 2015 USD ($)	Nov. 01, 2014 USD ($)	Oct. 31, 2015 USD ($)	Nov. 01, 2014 CAD	Nov. 01, 2014 USD ($)	Jul. 07, 2015 USD ($)	Jan. 31, 2015 USD ($)
Restructuring Cost and Reserve [Line Items]
Number of Distinct Real Estate Joint Ventures			3
Number of properties contributed to joint venture			31
Proceeds from sale-leaseback financing	[1]				$ 508		$ 0
Real estate investments, joint ventures			$ 858
Leaseback transaction, number of stores					255
Sale-leaseback transaction, lease period					10 years
REIT Transaction, Number of Options for Five-Year Renewals of the Term			3
Sale-leaseback transaction, renewal option period					5 years
Sale-leaseback transaction, final renewal option period					4
Joint Venture Transactions, Number of Options for Five-Year Renewals of the Term					2
Sale-leaseback transaction, percentage of space within stores that may be recaptured by REIT					50.00%
Sale-leaseback transaction, number of stores for which REIT may recapture 100% of the space					21
Sale-leaseback transaction, percentage of space within stores that may be recaptured by Seritage for 21 stores					100.00%
Sale-leaseback transaction, lease termination, required payment equal to rent, term (in years)					1 year
Sale-leaseback transaction, maximum permissible annual percentage reduction of fixed rent under master lease					20.00%
Annual aggregate base rent under master lease					$ 134
Sale-leaseback transaction, minimum lease payment annual increase, percentage					2.00%
Sale-leaseback transaction, straight line rent		$ 50			$ 73
Amortization of deferred gain on sale-leaseback		(23)			(30)		0
Sale-leaseback financing obligation		164		$ 0	164		0		$ 0
Aggregate net proceeds from sale-leaseback transaction and joint venture agreements					3,100
Sale-leaseback transaction, net book value								$ 1,500
Sale-leaseback transaction, current period gain recognized					508
Sale-leaseback transaction, gain on sale in excess of the present value of minimum lease payments					625
Sale-leaseback transaction, loss on sale of properties with fair value less than carrying value and the write-off of lease balances related to third-party leases assigned to Seritage and JVs					(117)
Sale-leaseback transaction, deferred gain, net								894
Sale-leaseback transaction, current portion of deferred gain, net		89			89
Deferred gain on sale-leaseback		775		0	775		0		$ 0
Sale-leaseback transaction, portion of obligation for future minimum lease payments on behalf of third-party tenant		60			60
Gain on sales of assets		97		68	730		148
Investment income related to sale of 15% joint venture					$ (33)		9
Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Leaseback transaction, number of stores					1
Sale-leaseback transaction, lease period					6 months
Sale-leaseback transaction, rent expense		23			$ 38
Sale-leaseback transaction, straight line rent		41			62
Amortization of deferred gain on sale-leaseback		(18)			(24)
Sale-leaseback transaction, net book value								1,300
Sale-leaseback transaction, current period gain recognized					371
Sale-leaseback transaction, gain on sale in excess of the present value of minimum lease payments					471
Sale-leaseback transaction, loss on sale of properties with fair value less than carrying value and the write-off of lease balances related to third-party leases assigned to Seritage and JVs					(100)
Gains (losses) on sales of other real estate		$ 83			$ 86		$ 42
Number of properties sold		1			2	2	2
Proceeds from Sale of Buildings							$ 16
Proceeds from sale of real estate		$ 102		90	$ 96		64
Sale Leaseback Transaction, Net Proceeds, Investing Activities		12
Gain on sales of assets		85		44	557		73
Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Sale-leaseback transaction, rent expense		4			5
Sale-leaseback transaction, straight line rent		9			11
Amortization of deferred gain on sale-leaseback		(5)			(6)
Sale-leaseback transaction, net book value								$ 175
Sale-leaseback transaction, current period gain recognized					137
Sale-leaseback transaction, gain on sale in excess of the present value of minimum lease payments					154
Sale-leaseback transaction, loss on sale of properties with fair value less than carrying value and the write-off of lease balances related to third-party leases assigned to Seritage and JVs					(17)
Gains (losses) on sales of other real estate							10
Proceeds from sale of real estate							10
Gain on sales of assets		$ 12		24	173		76
Kmart [Member] | Lease Surrender and Early Termination [Member]
Restructuring Cost and Reserve [Line Items]
Gains (losses) on sales of other real estate					$ 10
Number of properties sold					1
Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Gain on sales of assets				$ 0			(1)
Equity Method Investment, Realized Gain (Loss) on Disposal							35
Proceeds from Divestiture of Interest in Joint Venture						CAD 71	65
Seritage Growth Properties [Member]
Restructuring Cost and Reserve [Line Items]
Proceeds from sale-leaseback financing	[1]				$ 82
Number of stores sold		235			235
Aggregate proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units		$ 2,700			$ 2,700
Net proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units		2,600			2,600
Proceeds from rights offering of common shares and limited partnership units					1,600
Sale-leaseback transaction, purchase price financed through mortgage and mezzanine loan proceeds					1,200
Sale-leaseback transaction, aggregate value					2,300
Sale-leaseback financing obligation		164			$ 164
Sale Leaseback Transaction, Number of Properties with Continuing Involvement					4
Sale-leaseback transaction, obligation for future minimum lease payments for properties that have continuing involvement		105			$ 105
Sale-leaseback transaction, lease term for properties with continuing involvement					10 years
Sale-leaseback transaction, annual obligation for future minimum lease payments for properties that have continuing involvement, 2016 though 2019		10			$ 10
Sale-leaseback transaction, annual obligation for future minimum lease payments for properties that have continuing involvement, 2020		11			11
Seritage Growth Properties [Member] | Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Sale-leaseback transaction, real property assets of properties with continuing involvement		51			51
Seritage Growth Properties [Member] | Esl Investments Inc [Member]
Restructuring Cost and Reserve [Line Items]
Proceeds from rights offering of common shares and limited partnership units					745
Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Gains (losses) on sales of other real estate							$ 13
Corporate Joint Venture [Member]
Restructuring Cost and Reserve [Line Items]
Percentage of ownership interests			50.00%
Sale leaseback transaction, gross proceeds, financing activities					429
Proceeds from sale-leaseback financing					426
Annual aggregate base rent under master lease					42
Sale-leaseback financing obligation			$ 426
Corporate Joint Venture [Member] | Seritage Growth Properties [Member]
Restructuring Cost and Reserve [Line Items]
Sale-leaseback transaction, rent expense		$ 27			$ 43
Minimum [Member]
Restructuring Cost and Reserve [Line Items]
Sale leaseback transaction, rent payments, third-party obligation, expected commencement term (in years)					1 year
Maximum [Member]
Restructuring Cost and Reserve [Line Items]
Sale leaseback transaction, rent payments, third-party obligation, expected commencement term (in years)					2 years

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in Proceeds from sales of property and investments ($2.6 billion), and Proceeds from sale-leaseback financing ($82 million) for the 39 weeks ended October 31, 2015. Proceeds from the JV transactions are included in Proceeds from sale-leaseback financing ($426 million) for the 39 weeks ended October 31, 2015.

XML

BENEFIT PLANS Summary of Components of Total Net Periodic Benefit Expense for Retirement Plans (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Components of net periodic expense:
Interest cost	$ 54	$ 68	$ 162	$ 219
Expected return on plan assets	(62)	(75)	(187)	(244)
Amortization of experience losses	65	30	196	92
Net periodic expense	$ 57	$ 23	$ 171	$ 67

XML

STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Store Closing Cost Accruals) (Detail) - USD ($) $ in Millions	6 Months Ended	9 Months Ended
	Jan. 31, 2015	Oct. 31, 2015	Nov. 01, 2014
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	$ 207	$ 158	$ 153
Restructuring Reserve, Period Increase (Decrease)	82	21
Payments for Restructuring	(28)	(70)
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	43	28	22
Restructuring Reserve, Period Increase (Decrease)	31	4
Payments for Restructuring	(10)	(19)
Contract Termination [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	156	126	112
Restructuring Reserve, Period Increase (Decrease)	55	12
Payments for Restructuring	(11)	(42)
Other Charges [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve	8	4	$ 19
Restructuring Reserve, Period Increase (Decrease)	(4)	5
Payments for Restructuring	$ (7)	$ (9)

XML

BASIS OF PRESENTATION - Additional Information (Detail) shares in Millions, $ in Millions	1 Months Ended	3 Months Ended		8 Months Ended	9 Months Ended				10 Months Ended	12 Months Ended
	Nov. 07, 2014 USD ($) shares	Oct. 31, 2015 USD ($) Store shares	Nov. 01, 2014 USD ($) shares	Oct. 16, 2014 Segment shares	Oct. 31, 2015 USD ($) Store shares		Nov. 01, 2014 USD ($) shares		Aug. 01, 2015 Segment	Jan. 31, 2015 USD ($) shares	Apr. 04, 2014 USD ($)	Nov. 02, 2013 USD ($)
Significant Accounting Policies [Line Items]
Number of Reportable Segments | Segment				3					2
Depreciation		$ 93	$ 144		$ 325		$ 441
Cost of Sales, Buying and Occupancy, One-Time Credits from Vendors					126
Line of credit facility, maximum borrowing capacity		$ 3,275			3,275
Repayments of debt					1,387	[1]	61
Proceeds from Divestiture of Interest in Consolidated Subsidiaries					$ 0		$ 169	[2]
UNITED STATES [Member]
Significant Accounting Policies [Line Items]
Number of stores | Store		1,687			1,687
Seritage Growth Properties [Member]
Significant Accounting Policies [Line Items]
Aggregate proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units		$ 2,700			$ 2,700
Sears Canada [Member]
Significant Accounting Policies [Line Items]
Sears Canada Rights Offering, Maximum Number of Shares | shares			40
Investment Owned, Balance, Shares | shares		12	23	34	12		23			12
Percentage of ownership interests		12.00%	23.00%	34.00%	12.00%		23.00%			12.00%
Sears Canada Rights Offering, Common Share Rights Exercised | shares	40
Proceeds from Divestiture of Interest in Consolidated Subsidiaries	$ 380
Deconsolidation, Gain (Loss), Amount										$ 70
Deconsolidation, Revaluation of Retained Investment, Gain (Loss), Amount										$ 42
Esl Investments Inc [Member] | Sears Canada [Member]
Significant Accounting Policies [Line Items]
Sears Canada Rights Offering, Number of Common Shares Sold | shares				18
Lands' End, Inc. [Member]
Significant Accounting Policies [Line Items]
Line of credit facility, maximum borrowing capacity											$ 175
Expected Cash Dividends Paid to Parent Company by Consolidated Subsidiaries											500
Capital in Excess of Par Value [Member]
Significant Accounting Policies [Line Items]
Separation of Lands' End, Inc.			$ (323)
Senior Secured Note [Member]
Significant Accounting Policies [Line Items]
Senior secured note, interest rate					6.625%		6.625%			6.625%
Repayments of debt					$ 936
Debt instrument, face amount		$ 0			0
Senior Secured Note [Member] | Esl Investments Inc [Member]
Significant Accounting Policies [Line Items]
Repayments of debt					165
Extended Maturity [Member]
Significant Accounting Policies [Line Items]
Line of credit facility, maximum borrowing capacity		1,971			1,971
Term Loan [Member] | Secured Debt [Member]
Significant Accounting Policies [Line Items]
Debt instrument, face amount												$ 1,000
Term Loan [Member] | Secured Debt [Member] | Lands' End, Inc. [Member]
Significant Accounting Policies [Line Items]
Debt instrument, face amount											$ 515
Domestic Credit Agreement [Member]
Significant Accounting Policies [Line Items]
Line of credit facility, maximum borrowing capacity		$ 1,304			$ 1,304

[1] Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

[2] All proceeds were received from ESL and its affiliates.

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INCOME TAXES - Additional Information (Detail)	3 Months Ended			9 Months Ended		12 Months Ended
	Oct. 31, 2015 USD ($)	May. 02, 2015	Nov. 01, 2014 USD ($)	Oct. 31, 2015 USD ($)	Nov. 01, 2014 USD ($)	Jan. 31, 2015 USD ($)
Income Taxes [Line Items]
Gross unrecognized tax benefits	$ 142,000,000		$ 120,000,000	$ 142,000,000	$ 120,000,000	$ 131,000,000
Unrecognized tax benefits that would, if recognized, impact effective tax rate	92,000,000			92,000,000
Unrecognized Tax Benefits, Period Increase (Decrease)	4,000,000		21,000,000	11,000,000	29,000,000
Expected decrease in unrecognized tax benefits over the next 12 months	6,000,000			6,000,000
Interest and penalties recognized on balance sheet	56,000,000		48,000,000	56,000,000	48,000,000	49,000,000
Interest and penalties recognized, net of federal benefit	37,000,000		$ 31,000,000	37,000,000	31,000,000	32,000,000
Net interest expense recognized in statement of income	$ 2,000,000			5,000,000	$ 3,000,000
Income Tax Examination, Description	The U.S. Internal Revenue Service ("IRS") has completed its examination of all federal tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2013, and Kmart is under examination by such jurisdictions for the years 2006 through 2013.
Deferred tax asset operating loss ("NOL") carryforwards						1,800,000,000
Credit carryforwards						791,000,000
Number of properties contributed to joint venture		31
Tax Benefit Realized on Deferred Taxes Related to Indefinite-Life Assets Sold to Seritage and JVs				229,000,000
Taxable Gain on Sales of Properties to Joint Venture				2,200,000,000
Income Taxes Payable on Sale of Properties to Joint Venture	$ 0			0
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount				856,000,000
State and City Income Taxes Payable	$ 5,000,000			5,000,000
Valuation Allowances and Reserves, Period Increase (Decrease)				$ 500,000,000
Deferred tax asset valuation allowance						$ 4,500,000,000
Effective Income Tax Rate Reconciliation, Percent	3.20%
Minimum [Member]
Income Taxes [Line Items]
Operating loss carryforwards expiration year						2019
Credit carryforwards expiration year						2015
Maximum [Member]
Income Taxes [Line Items]
Operating loss carryforwards expiration year						2035
Credit carryforwards expiration year						2035
Corporate Joint Venture [Member]
Income Taxes [Line Items]
Percentage of ownership interests		50.00%
Seritage Growth Properties [Member]
Income Taxes [Line Items]
Number of stores sold	235			235

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BORROWINGS (Tables)

9 Months Ended

Oct. 31, 2015

Debt Disclosure [Abstract]

Total Borrowings

Total borrowings were as follows:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Short-term borrowings:
Unsecured commercial paper	$	9	$	91	$	2
Secured short-term loan	—		400		400
Secured borrowings	677		1,605		213
Long-term debt, including current portion:
Notes and debentures outstanding	1,989		2,564		2,913
Capitalized lease obligations	206		280		272
Total borrowings	$	2,881	$	4,940	$	3,800

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EQUITY (Components of Accumulated Other Comprehensive Loss - Tax) (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014	Jan. 31, 2015
Equity [Abstract]
Stock Repurchased During Period, Shares	0.0	0.0	0.0	0.0
Accumulated Other Comprehensive Income Loss Defined Benefit Pension And Other Postretirement Plans Tax	$ (296)	$ (296)	$ (296)	$ (296)	$ (296)
Accumulated Other Comprehensive Income Loss Foreign Currency Translation Adjustment Tax	$ 0	$ 0	$ 0	$ 0	$ 0

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DERIVATIVE FINANCIAL INSTRUMENTS (Details) - Forward Contracts [Member] - USD ($) $ in Millions	3 Months Ended
	Nov. 01, 2014	Oct. 27, 2014	Oct. 16, 2014
Derivative [Line Items]
Derivative Asset, Notional Amount	$ 300
Derivative, Notional Amount of Contracts Settled		$ 113	$ 187
Settlement Of Foreign Currency Contracts Received Paid	$ 8

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BORROWINGS (Secured Short-Term Loan) (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended	9 Months Ended
	May. 02, 2015	Aug. 01, 2015	Oct. 31, 2015		Nov. 01, 2014	Jan. 31, 2015	Sep. 30, 2014	Sep. 15, 2014
Short-term Debt [Line Items]
Repayments of debt			$ 1,387	[1]	$ 61
Esl Investments Inc [Member]
Short-term Debt [Line Items]
Secured short-term loan			$ 0		$ 400	$ 400	$ 200	$ 200
Debt instrument, extension fee					0.50%	0.50%
Debt Instrument, Fee Amount					1.75%
Debt Instrument, interest rate, stated percentage			5.00%
Esl Investments Inc [Member] | Short-term Debt [Member]
Short-term Debt [Line Items]
Repayments of debt	$ 200	$ 200	$ 400

[1] Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

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EQUITY (Additional Information) (Detail) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Equity [Abstract]
Repurchase of common shares, shares	0.0	0.0	0.0	0.0
Remaining authorization to repurchase common shares under share repurchase program, value	$ 504		$ 504

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RELATED PARTY DISCLOSURE - Additional Information (Detail) $ in Millions	3 Months Ended			6 Months Ended	9 Months Ended			12 Months Ended
	Oct. 31, 2015 USD ($) shares	May. 02, 2015 USD ($)	Nov. 01, 2014 USD ($)	Aug. 01, 2015 USD ($)	Oct. 31, 2015 USD ($) Day shares		Nov. 01, 2014 USD ($) Day	Jan. 31, 2015 USD ($) shares	Nov. 21, 2014 shares	Sep. 30, 2014 USD ($)	Sep. 15, 2014 USD ($)
Related Party Transaction [Line Items]
Unsecured commercial paper	$ 9.0		$ 91.0		$ 9.0		$ 91.0	$ 2.0
Interest paid					191.0		193.0
Repayments of debt					1,387.0	[1]	61.0
Class of warrant or right, outstanding | shares									22,000,000
Annual aggregate base rent under master lease					$ 134.0
Sale-leaseback transaction, minimum lease payment annual increase, percentage					2.00%
Duration of Transition Services Agreement, Maximum					18 months
Amortization of deferred gain on sale-leaseback	$ (23.0)				$ (30.0)		$ 0.0
Senior Secured Note [Member]
Related Party Transaction [Line Items]
Debt Instrument, interest rate, stated percentage	6.625%				6.625%
Repayments of debt					$ 936.0
Senior secured note, interest rate					6.625%		6.625%	6.625%
Unsecured Senior Notes [Member]
Related Party Transaction [Line Items]
Debt Instrument, interest rate, stated percentage	8.00%		8.00%		8.00%		8.00%		8.00%
Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Debt instrument, weighted average maturity period | Day					32.0		18.8
Debt Instrument, interest rate, stated percentage	5.00%				5.00%
Commercial paper, weighted average principal amount outstanding					$ 12.0		$ 33.0
Secured short-term loan	$ 0.0		$ 400.0		0.0		$ 400.0	$ 400.0		$ 200.0	$ 200.0
Debt instrument, extension fee			0.50%				0.50%	0.50%
Debt instrument, fee amount			$ 7.0				$ 7.0
Debt instrument, extension fee amount								$ 2.0
Interest expense, related party					5.9			5.6
Senior secured notes	11.0		205.0		11.0		205.0	205.0
Subsidiary notes	3.0		3.0		3.0		3.0	3.0
Senior unsecured notes	$ 201.0		$ 0.0		$ 201.0		$ 0.0	$ 299.0
Class of warrant or right, outstanding | shares	10,529,740				10,529,740			10,530,633
Esl Investments Inc [Member] | Maximum [Member]
Related Party Transaction [Line Items]
Unsecured commercial paper	$ 100.0				$ 100.0
Esl Investments Inc [Member] | Commercial Paper [Member]
Related Party Transaction [Line Items]
Debt Instrument, interest rate, stated percentage	4.55%		3.68%		4.55%		3.68%
Interest paid					$ 0.4
Esl Investments Inc [Member] | Short-term Debt [Member]
Related Party Transaction [Line Items]
Repayments of debt		$ 200.0		$ 200.0	400.0
Esl Investments Inc [Member] | Senior Secured Note [Member]
Related Party Transaction [Line Items]
Repayments of debt					165.0
Lands' End, Inc. [Member]
Related Party Transaction [Line Items]
Due from affiliate, current	$ 4.0		$ 5.0		4.0		$ 5.0	$ 5.0
Related party transaction, other revenues from transactions with related party	18.0		20.0		52.0		44.0
Related party transaction, expenses from transactions with related party	2.0		2.0		6.0		6.0
Sears Hometown and Outlet Stores, Inc. [Member]
Related Party Transaction [Line Items]
Due from affiliate, current	85.0		80.0		$ 85.0		80.0	$ 61.0
Related party receivables, repayment term					10 days
Proceeds from sale of inventory and shared corporate services to affiliate	359.0		376.0		$ 1,100.0		1,200.0
Payments for commissions to affiliate	22.0		22.0		71.0		77.0
Seritage Growth Properties [Member]
Related Party Transaction [Line Items]
Due from affiliate, current	8.0				8.0
Annual aggregate base rent under master lease					$ 134.0
Sale-leaseback transaction, minimum lease payment annual increase, percentage					2.00%
Sale-leaseback transaction, rent expense	22.0		0.0		$ 27.0		0.0
Sale leaseback transaction, installment expense	17.0		$ 0.0		22.0		$ 0.0
Straight line rent	37.0				47.0
Amortization of deferred gain on sale-leaseback	$ 15.0				20.0
Annual Aggregate Installment Expenses Under Master Lease					$ 70.0
Sears Holdings Corporation [Member] | Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Beneficial interest acquired by related party, percentage					49.00%
Sears Canada [Member] | Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Beneficial interest acquired by related party, percentage					48.00%
Lands' End, Inc. [Member] | Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Beneficial interest acquired by related party, percentage					50.00%
Sears Hometown and Outlet Stores, Inc. [Member] | Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Beneficial interest acquired by related party, percentage					46.00%
Seritage Growth Properties [Member] | Esl Investments Inc [Member]
Related Party Transaction [Line Items]
Beneficial interest acquired by related party, percentage					9.80%
Beneficial interest acquired by related party, limited partnership percentage					43.50%

[1] Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

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STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Long-Lived Assets) (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Oct. 31, 2015	Oct. 31, 2015	Nov. 01, 2014
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of	$ 17	$ 71
Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of	7	59
Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of	$ 10	$ 12
Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of			$ 15

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Condensed Consolidated Statements of Equity (Deficit) (Unaudited) - USD ($) shares in Millions, $ in Millions	Total		Common Stock [Member]	Treasury Stock [Member]	Capital in Excess of Par Value [Member]	Retained Earnings (Deficit) [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Noncontrolling Interests [Member]
Beginning Balance (in shares) at Feb. 01, 2014			106
Beginning Balance at Feb. 01, 2014	$ 2,183		$ 1	$ (5,963)	$ 9,298	$ (480)	$ (1,117)	$ 444
Comprehensive income (loss)
Net loss	(1,651)					(1,523)		(128)
Pension and postretirement adjustments, net of tax	95	[1]					90	5
Deferred loss on derivatives, net of tax	(2)						(2)
Currency translation adjustments, net of tax	3						4	(1)
Sears Canada de-consolidation	(186)						128	(314)
Total Comprehensive Income (Loss)	(1,741)
Stock awards	1			5	(4)
Separation of Lands' End, Inc.	(321)				(323)		2
Associate stock purchase	4			4
Ending Balance (in shares) at Nov. 01, 2014			106
Ending Balance at Nov. 01, 2014	126		$ 1	(5,954)	8,971	(2,003)	(895)	6
Beginning Balance (in shares) at Jan. 31, 2015			107
Beginning Balance at Jan. 31, 2015	(945)		$ 1	(5,949)	9,189	(2,162)	(2,030)	6
Comprehensive income (loss)
Net loss	(548)					(549)		1
Pension and postretirement adjustments, net of tax	196	[1]					196
Deferred loss on derivatives, net of tax	0
Currency translation adjustments, net of tax	0
Sears Canada de-consolidation	0
Total Comprehensive Income (Loss)	(352)
Stock awards	0			11	(11)
Associate stock purchase	4			4
Ending Balance (in shares) at Oct. 31, 2015			107
Ending Balance at Oct. 31, 2015	$ (1,293)		$ 1	$ (5,934)	$ 9,178	$ (2,711)	$ (1,834)	$ 7

[1] Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION - Additional Information (Detail) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014	Jan. 31, 2015	Oct. 31, 2010
Condensed Financial Statements, Captions [Line Items]
TOTAL ASSETS		$ 12,769	$ 15,169	$ 12,769	$ 15,169	$ 13,209
Total Liabilities		14,062	15,043	14,062	15,043	14,154
Merchandise sales and services	[1],[2]	5,750	7,207	17,843	23,099
Net Income (Loss) Attributable to Parent		(454)	(548)	(549)	(1,523)
Sears Canada [Member]
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services			611		2,100
Net Income (Loss) Attributable to Parent			(86)		(137)
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
TOTAL ASSETS		36,039	37,881	36,039	37,881	35,994
Total Liabilities		27,876	27,791	27,876	27,791	27,401
Merchandise sales and services		5,766	6,638	17,954	21,154
Net Income (Loss) Attributable to Parent		$ (490)	(763)	$ (647)	(1,880)
Debt Instrument Collateral Percentage Of Outstanding Common Stock		100.00%		100.00%
Senior Secured Note [Member]
Condensed Financial Statements, Captions [Line Items]
Debt Instrument, Maturity Year				2018
Debt Instrument, interest rate, stated percentage		6.625%		6.625%
Senior secured notes, principal amount outstanding		$ 0		$ 0
Long-term Debt		$ 304	$ 1,240	$ 304	1,240	$ 1,240	$ 1,000
Lands' End, Inc. [Member]
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services					185
Net Income (Loss) Attributable to Parent					$ 5

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $315 million and $329 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $1.0 billion and $1.1 billion for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at owned Sears locations, participation in the Shop Your Way® program and corporate shared services of $14 million and $18 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $45 million and $41 million for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively.

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Fair Value Measurement Amounts for Other Financial Assets and Liabilities Recorded in Condensed Consolidated Balance Sheets at Fair Value) (Detail) - USD ($) $ in Millions		Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Fair Value Measurements [Line Items]
Equity Method Investments, Fair Value Disclosure	[1]	$ 86	$ 111	$ 225
Level 1 [Member]
Fair Value Measurements [Line Items]
Equity Method Investments, Fair Value Disclosure	[1]	86	111	225
Level 2 [Member]
Fair Value Measurements [Line Items]
Equity Method Investments, Fair Value Disclosure	[1]	0	0	0
Level 3 [Member]
Fair Value Measurements [Line Items]
Equity Method Investments, Fair Value Disclosure	[1]	$ 0	$ 0	$ 0

[1] Included within Other assets on the Condensed Consolidated Balance Sheets.

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BENEFIT PLANS (Tables)

9 Months Ended

Oct. 31, 2015

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						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Components of net periodic expense:
Interest cost	$	54		$	68		$	162		$	219
Expected return on plan assets	(62		)	(75		)	(187		)	(244		)
Amortization of experience losses	65			30			196			92
Net periodic expense	$	57		$	23		$	171		$	67

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EQUITY (Tables)

9 Months Ended

Oct. 31, 2015

Equity [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth the components used to calculate basic and diluted loss per share attributable to Holdings' shareholders. During the 13- and 39-week period ended October 31, 2015, warrants, restricted stock awards and restricted stock units, totaling 1.4 million shares and 6.7 million shares, respectively, were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive. During both the 13- and 39-week periods ended November 1, 2014, restricted stock awards and restricted stock units, totaling 0.1 million shares, were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive.

	13 Weeks Ended						39 Weeks Ended
millions, except earnings per share	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Basic weighted average shares	106.6			106.4			106.5			106.3
Diluted weighted average shares	106.6			106.4			106.5			106.3
Net loss attributable to Holdings' shareholders	$	(454	)	$	(548	)	$	(549	)	$	(1,523	)
Loss per share attributable to Holdings' shareholders:
Basic	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Diluted	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)

Components of Accumulated Other Comprehensive Loss

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

millions	October 31, 2015			November 1, 2014			January 31, 2015
Pension and postretirement adjustments (net of tax of $(296) for all periods presented)	$	(1,832	)	$	(893	)	$	(2,028	)
Currency translation adjustments (net of tax of $0 for all periods presented)	(2		)	(2		)	(2		)
Accumulated other comprehensive loss	$	(1,834	)	$	(895	)	$	(2,030	)

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.

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 October 31, 2015						13 Weeks Ended November 1, 2014
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)	$	65	$	—	$	65	$	30		$	—	$	30
Currency translation adjustments	—		—		—		(11		)	—		(11		)
Sears Canada de-consolidation	—		—		—		(186		)	—		(186		)
Total other comprehensive income (loss)	$	65	$	—	$	65	$	(167	)	$	—	$	(167	)

	39 Weeks Ended October 31, 2015						39 Weeks Ended November 1, 2014
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)	$	196	$	—	$	196	$	98		$	(3	)	$	95
Deferred loss on derivatives	—		—		—		(2		)	—			(2		)
Currency translation adjustments	—		—		—		4			(1		)	3
Sears Canada de-consolidation	—		—		—		(186		)	—			(186		)
Total other comprehensive income (loss)	$	196	$	—	$	196	$	(86	)	$	(4	)	$	(90	)

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

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BENEFIT PLANS - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]
Contributions to pension and post-retirement plans	$ 117	$ 161	$ 246	$ 366
Defined Benefit Plans, Estimated Future Employer Contributions in Current Fiscal Year			$ 71

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STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Store Closings and Severance) (Detail)	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Number Of Stores Closed	11	27	27	102
Number Of Stores Closed During Period	9	73	31	113
Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Number Of Stores Closed	3	6	9	27
Number Of Stores Closed During Period	2	37	9	43

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SUMMARY OF SEGMENT DATA (Tables)

9 Months Ended

Oct. 31, 2015

Segment Reporting [Abstract]

Segment Data

	13 Weeks Ended October 31, 2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales and services
Hardlines	$	620		$	1,832		$	2,452
Apparel and Soft Home	701			639			1,340
Food and Drug	915			1			916
Service	3			538			541
Other	8			493			501
Total merchandise sales and services	2,247			3,503			5,750
Costs and expenses
Cost of sales, buying and occupancy	1,774			2,714			4,488
Selling and administrative	585			1,045			1,630
Depreciation and amortization	17			77			94
Impairment charges	10			7			17
Gain on sales of assets	(12		)	(85		)	(97		)
Total costs and expenses	2,374			3,758			6,132
Operating loss	$	(127	)	$	(255	)	$	(382	)
Total assets	$	3,655		$	9,114		$	12,769
Capital expenditures	$	10		$	56		$	66

	13 Weeks Ended November 1, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	793		$	2,029		$	327		$	3,149
Apparel and Soft Home	842			770			255			1,867
Food and Drug	1,050			2			—			1,052
Service	5			574			20			599
Other	17			514			9			540
Total merchandise sales and services	2,707			3,889			611			7,207
Costs and expenses
Cost of sales, buying and occupancy	2,147			3,002			457			5,606
Selling and administrative	708			1,131			172			2,011
Depreciation and amortization	25			110			13			148
Gain on sales of assets	(24		)	(44		)	—			(68		)
Total costs and expenses	2,856			4,199			642			7,697
Operating loss	$	(149	)	$	(310	)	$	(31	)	$	(490	)
Total assets	$	4,259		$	10,910		$	—		$	15,169
Capital expenditures	$	11		$	52		$	13		$	76

	39 Weeks Ended October 31, 2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales and services
Hardlines	$	1,986		$	5,704		$	7,690
Apparel and Soft Home	2,274			1,917			4,191
Food and Drug	2,749			5			2,754
Service	10			1,619			1,629
Other	43			1,536			1,579
Total merchandise sales and services	7,062			10,781			17,843
Costs and expenses
Cost of sales, buying and occupancy	5,562			8,066			13,628
Selling and administrative	1,802			3,203			5,005
Depreciation and amortization	56			274			330
Impairment charges	12			59			71
Gain on sales of assets	(173		)	(557		)	(730		)
Total costs and expenses	7,259			11,045			18,304
Operating loss	$	(197	)	$	(264	)	$	(461	)
Total assets	$	3,655		$	9,114		$	12,769
Capital expenditures	$	21		$	131		$	152

	39 Weeks Ended November 1, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	2,502		$	6,542		$	1,100		$	10,144
Apparel and Soft Home	2,728			2,562			880			6,170
Food and Drug	3,234			6			—			3,240
Service	13			1,770			77			1,860
Other	50			1,604			31			1,685
Total merchandise sales and services	8,527			12,484			2,088			23,099
Costs and expenses
Cost of sales, buying and occupancy	6,790			9,552			1,586			17,928
Selling and administrative	2,128			3,487			603			6,218
Depreciation and amortization	72			334			49			455
Impairment charges	2			8			15			25
(Gain) loss on sales of assets	(76		)	(73		)	1			(148		)
Total costs and expenses	8,916			13,308			2,254			24,478
Operating loss	$	(389	)	$	(824	)	$	(166	)	$	(1,379	)
Total assets	$	4,259		$	10,910		$	—		$	15,169
Capital expenditures	$	31		$	139		$	32		$	202

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SUPPLEMENTAL FINANCIAL INFORMATION (Tables)

9 Months Ended

Oct. 31, 2015

Supplemental Financial Information Disclosure [Abstract]

Other Long-Term Liabilities

Other long-term liabilities at October 31, 2015, November 1, 2014 and January 31, 2015 consisted of the following:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Unearned revenues	$	703	$	754	$	739
Self-insurance reserves	604		688		611
Other	504		388		499
Total	$	1,811	$	1,830	$	1,849

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($) $ in Millions		3 Months Ended		6 Months Ended	9 Months Ended
		Oct. 31, 2015	May. 02, 2015	Aug. 01, 2015	Oct. 31, 2015		Nov. 01, 2014
Proceeds from sale-leaseback financing	[1]				$ 508		$ 0
Repayments of debt					1,387	[2]	$ 61
Senior Secured Note [Member]
Repayments of debt					936
Corporate Joint Venture [Member]
Sale leaseback transaction, gross proceeds, financing activities					429
Proceeds from sale-leaseback financing					426
Esl Investments Inc [Member] | Short-term Debt [Member]
Repayments of debt			$ 200	$ 200	400
Esl Investments Inc [Member] | Senior Secured Note [Member]
Repayments of debt					165
Seritage Growth Properties [Member]
Proceeds from rights offering of common shares and limited partnership units					1,600
Aggregate proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units		$ 2,700			2,700
Net proceeds from sale-leaseback transaction and rights offering of common stock and limited partnership units		$ 2,600			2,600
Proceeds from sale-leaseback financing	[1]				82
Seritage Growth Properties [Member] | Esl Investments Inc [Member]
Proceeds from rights offering of common shares and limited partnership units					745
Pension Plan [Member] | Senior Secured Note [Member]
Repayments of debt					$ 110

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in Proceeds from sales of property and investments ($2.6 billion), and Proceeds from sale-leaseback financing ($82 million) for the 39 weeks ended October 31, 2015. Proceeds from the JV transactions are included in Proceeds from sale-leaseback financing ($426 million) for the 39 weeks ended October 31, 2015.

[2] Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Tables)

9 Months Ended

Oct. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Balance Sheet

Condensed Consolidating Balance Sheet

October 31, 2015

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	256	$	38	$	—		$	294
Intercompany receivables	—			—		27,181		(27,181		)	—
Accounts receivable	9			441		25		—			475
Merchandise inventories	—			6,208		—		—			6,208
Prepaid expenses and other current assets	39			611		269		(677		)	242
Total current assets	48			7,516		27,513		(27,858		)	7,219
Total property and equipment, net	—			1,852		816		—			2,668
Goodwill and intangible assets	—			270		2,089		—			2,359
Other assets	6			700		2,129		(2,312		)	523
Investment in subsidiaries	11,328			25,701		—		(37,029		)	—
TOTAL ASSETS	$	11,382		$	36,039	$	32,547	$	(67,199	)	$	12,769
Current liabilities
Short-term borrowings	$	—		$	686	$	—	$	—		$	686
Current portion of long-term debt and capitalized lease obligations	—			69		2		—			71
Merchandise payables	—			2,295		—		—			2,295
Intercompany payables	11,987			15,194		—		(27,181		)	—
Short-term deferred tax liabilities	3			427		—		(8		)	422
Other current liabilities	28			2,215		1,470		(669		)	3,044
Total current liabilities	12,018			20,886		1,472		(27,858		)	6,518
Long-term debt and capitalized lease obligations	681			3,058		39		(1,654		)	2,124
Pension and postretirement benefits	—			2,128		5		—			2,133
Deferred gain on sale-leaseback	—			775		—		—			775
Sale-leaseback financing obligation	—			164		—		—			164
Long-term deferred tax liabilities	56			—		976		(495		)	537
Other long-term liabilities	—			865		1,181		(235		)	1,811
Total Liabilities	12,755			27,876		3,673		(30,242		)	14,062
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(1,373		)	8,163		28,874		(36,964		)	(1,300		)
Noncontrolling interest	—			—		—		7			7
Total Equity (Deficit)	(1,373		)	8,163		28,874		(36,957		)	(1,293		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	11,382		$	36,039	$	32,547	$	(67,199	)	$	12,769

Condensed Consolidating Balance Sheet

November 1, 2014

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	296	$	30	$	—		$	326
Intercompany receivables	—			—		26,681		(26,681		)	—
Accounts receivable	103			409		34		—			546
Merchandise inventories	—			6,464		—		—			6,464
Prepaid expenses and other current assets	43			796		288		(872		)	255
Total current assets	146			7,965		27,033		(27,553		)	7,591
Total property and equipment, net	—			3,610		951		—			4,561
Goodwill and intangible assets	—			284		2,089		—			2,373
Other assets	117			433		2,535		(2,441		)	644
Investment in subsidiaries	13,013			25,589		—		(38,602		)	—
TOTAL ASSETS	$	13,276		$	37,881	$	32,608	$	(68,596	)	$	15,169
Current liabilities
Short-term borrowings	$	—		$	2,096	$	—	$	—		$	2,096
Current portion of long-term debt and capitalized lease obligations	—			71		4		—			75
Merchandise payables	—			2,431		—		—			2,431
Intercompany payables	12,101			14,579		—		(26,680		)	—
Short-term deferred tax liabilities	1			501		—		(21		)	481
Other current liabilities	4			2,355		1,823		(851		)	3,331
Total current liabilities	12,106			22,033		1,827		(27,552		)	8,414
Long-term debt and capitalized lease obligations	1,238			3,668		36		(2,173		)	2,769
Pension and postretirement benefits	—			1,316		4		—			1,320
Long-term deferred tax liabilities	—			—		917		(207		)	710
Other long-term liabilities	—			774		1,305		(249		)	1,830
Total Liabilities	13,344			27,791		4,089		(30,181		)	15,043
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(68		)	10,090		28,519		(38,421		)	120
Noncontrolling interest	—			—		—		6			6
Total Equity (Deficit)	(68		)	10,090		28,519		(38,415		)	126
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	13,276		$	37,881	$	32,608	$	(68,596	)	$	15,169

Condensed Consolidating Balance Sheet

January 31, 2015

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	219	$	31	$	—		$	250
Intercompany receivables	—			—		26,291		(26,291		)	—
Accounts receivable	—			390		39		—			429
Merchandise inventories	—			4,943		—		—			4,943
Prepaid expenses and other current assets	38			797		274		(868		)	241
Total current assets	38			6,349		26,635		(27,159		)	5,863
Total property and equipment, net	—			3,524		925		—			4,449
Goodwill and intangible assets	—			277		2,089		—			2,366
Other assets	13			494		2,763		(2,739		)	531
Investment in subsidiaries	11,700			25,350		—		(37,050		)	—
TOTAL ASSETS	$	11,751		$	35,994	$	32,412	$	(66,948	)	$	13,209
Current liabilities
Short-term borrowings	$	—		$	615	$	—	$	—		$	615
Current portion of long-term debt and capitalized lease obligations	—			72		3		—			75
Merchandise payables	—			1,621		—		—			1,621
Intercompany payables	11,103			15,188		—		(26,291		)	—
Short-term deferred tax liabilities	3			485		—		(8		)	480
Other current liabilities	34			2,395		1,716		(860		)	3,285
Total current liabilities	11,140			20,376		1,719		(27,159		)	6,076
Long-term debt and capitalized lease obligations	1,590			3,736		40		(2,256		)	3,110
Pension and postretirement benefits	—			2,400		4		—			2,404
Long-term deferred tax liabilities	56			—		981		(322		)	715
Other long-term liabilities	—			889		1,205		(245		)	1,849
Total Liabilities	12,786			27,401		3,949		(29,982		)	14,154
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(1,035		)	8,593		28,463		(36,972		)	(951		)
Noncontrolling interest	—			—		—		6			6
Total Equity (Deficit)	(1,035		)	8,593		28,463		(36,966		)	(945		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	11,751		$	35,994	$	32,412	$	(66,948	)	$	13,209

Condensed Consolidating Statement of Operations

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	5,766		$	725		$	(741	)	$	5,750
Cost of sales, buying and occupancy	—			4,616			291			(419		)	4,488
Selling and administrative	1			1,706			245			(322		)	1,630
Depreciation and amortization	—			76			18			—			94
Impairment charges	—			17			—			—			17
Gain on sales of assets	—			(97		)	—			—			(97		)
Total costs and expenses	1			6,318			554			(741		)	6,132
Operating income (loss)	(1		)	(552		)	171			—			(382		)
Interest expense	(60		)	(117		)	(21		)	124			(74		)
Interest and investment income (loss)	(3		)	8			136			(124		)	17
Income (loss) before income taxes	(64		)	(661		)	286			—			(439		)
Income tax (expense) benefit	—			33			(47		)	—			(14		)
Equity (deficit) in earnings in subsidiaries	(390		)	138			—			252			—
Net income (loss)	(454		)	(490		)	239			252			(453		)
Income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(454	)	$	(490	)	$	238		$	252		$	(454	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	6,638		$	1,186		$	(617	)	$	7,207
Cost of sales, buying and occupancy	—			5,272			767			(433		)	5,606
Selling and administrative	—			1,958			237			(184		)	2,011
Depreciation and amortization	—			116			32			—			148
Gain on sales of assets	—			(66		)	(2		)	—			(68		)
Total costs and expenses	—			7,280			1,034			(617		)	7,697
Operating income (loss)	—			(642		)	152			—			(490		)
Interest expense	(52		)	(123		)	(23		)	120			(78		)
Interest and investment income	91			—			126			(120		)	97
Other income	—			—			2			—			2
Income (loss) before income taxes	39			(765		)	257			—			(469		)
Income tax (expense) benefit	—			31			(190		)	—			(159		)
Equity (deficit) in earnings in subsidiaries	(667		)	(29		)	—			696			—
Net income (loss)	(628		)	(763		)	67			696			(628		)
Loss attributable to noncontrolling interests	—			—			—			80			80
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(628	)	$	(763	)	$	67		$	776		$	(548	)

Condensed Consolidating Statement of Operations

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	17,954		$	2,160		$	(2,271	)	$	17,843
Cost of sales, buying and occupancy	—			13,997			838			(1,207		)	13,628
Selling and administrative	2			5,326			741			(1,064		)	5,005
Depreciation and amortization	—			276			54			—			330
Impairment charges	—			71			—			—			71
Gain on sales of assets	—			(722		)	(8		)	—			(730		)
Total costs and expenses	2			18,948			1,625			(2,271		)	18,304
Operating income (loss)	(2		)	(994		)	535			—			(461		)
Interest expense	(204		)	(355		)	(63		)	373			(249		)
Interest and investment income (loss)	(14		)	28			332			(373		)	(27		)
Income (loss) before income taxes	(220		)	(1,321		)	804			—			(737		)
Income tax (expense) benefit	—			332			(143		)	—			189
Equity (deficit) in earnings in subsidiaries	(329		)	342			—			(13		)	—
Net income (loss)	(549		)	(647		)	661			(13		)	(548		)
Income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(549	)	$	(647	)	$	660		$	(13	)	$	(549	)

Condensed Consolidating Statement of Operations

For the 39 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	21,154		$	4,238		$	(2,293	)	$	23,099
Cost of sales, buying and occupancy	—			16,679			2,527			(1,278		)	17,928
Selling and administrative	1			6,028			1,204			(1,015		)	6,218
Depreciation and amortization	—			347			108			—			455
Impairment charges	—			10			15			—			25
Gain on sales of assets	—			(133		)	(15		)	—			(148		)
Total costs and expenses	1			22,931			3,839			(2,293		)	24,478
Operating income (loss)	(1		)	(1,777		)	399			—			(1,379		)
Interest expense	(156		)	(344		)	(70		)	349			(221		)
Interest and investment income	91			18			373			(349		)	133
Other income	—			—			4			—			4
Income (loss) before income taxes	(66		)	(2,103		)	706			—			(1,463		)
Income tax (expense) benefit	—			78			(266		)	—			(188		)
Equity (deficit) in earnings in subsidiaries	(1,585		)	145			—			1,440			—
Net income (loss)	(1,651		)	(1,880		)	440			1,440			(1,651		)
Loss attributable to noncontrolling interests	—			—			—			128			128
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(1,651	)	$	(1,880	)	$	440		$	1,568		$	(1,523	)

Condensed Consolidating Statement of Comprehensive Income

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(454	)	$	(490	)	$	239	$	252		$	(453	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			65			—		—			65
Unrealized net gain, net of tax	—			—			27		(27		)	—
Total other comprehensive income	—			65			27		(27		)	65
Comprehensive income (loss)	(454		)	(425		)	266		225			(388		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(454	)	$	(425	)	$	266	$	224		$	(389	)

Condensed Consolidating Statement of Comprehensive Loss

For the 13 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(628	)	$	(763	)	$	67		$	696		$	(628	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			28			2			—			30
Currency translation adjustments, net of tax	5			—			(16		)	—			(11		)
Sears Canada de-consolidation	54			10			(250		)	—			(186		)
Unrealized net gain, net of tax	—			—			8			(8		)	—
Total other comprehensive income (loss)	59			38			(256		)	(8		)	(167		)
Comprehensive loss	(569		)	(725		)	(189		)	688			(795		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			401			401
Comprehensive loss attributable to Holdings' shareholders	$	(569	)	$	(725	)	$	(189	)	$	1,089		$	(394	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(549	)	$	(647	)	$	661	$	(13	)	$	(548	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			196			—		—			196
Unrealized net loss, net of tax	—			—			11		(11		)	—
Total other comprehensive income	—			196			11		(11		)	196
Comprehensive income (loss)	(549		)	(451		)	672		(24		)	(352		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(549	)	$	(451	)	$	672	$	(25	)	$	(353	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 39 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(1,651	)	$	(1,880	)	$	440		$	1,440		$	(1,651	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			85			10			—			95
Deferred loss on derivatives, net of tax	(2		)	—			—			—			(2		)
Currency translation adjustments, net of tax	5			—			(2		)	—			3
Sears Canada de-consolidation	54			10			(250		)	—			(186		)
Unrealized net gain, net of tax	—			—			120			(120		)	—
Total other comprehensive income (loss)	57			95			(122		)	(120		)	(90		)
Comprehensive income (loss)	(1,594		)	(1,785		)	318			1,320			(1,741		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			438			438
Comprehensive income (loss) attributable to Holdings' shareholders	$	(1,594	)	$	(1,785	)	$	318		$	1,758		$	(1,303	)

Condensed Consolidating Statement of Cash Flows

Condensed Consolidating Statement of Cash Flows

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	249		$	(2,691	)	$	642		$	(254	)	$	(2,054	)
Proceeds from sales of property and investments				2,703			5			—			2,708
Purchases of property and equipment				(146		)	(6		)	—			(152		)
Net investing with Affiliates	(249		)	—			(378		)	627			—
Net cash provided by (used in) investing activities	(249		)	2,557			(379		)	627			2,556
Repayments of long-term debt	—			(1,385		)	(2		)	—			(1,387		)
Increase in short-term borrowings, primarily 90 days or less	—			471			—			—			471
Proceeds from sale-leaseback financing	—			508			—			—			508
Debt issuance costs	—			(50		)	—			—			(50		)
Intercompany dividend	—						(254		)	254			—
Net borrowing with Affiliates	—			627			—			(627		)	—
Net cash provided by (used in) financing activities	—			171			(256		)	(373		)	(458		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	—			37			7			—			44
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			219			31			—			250
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	256		$	38		$	—		$	294

Condensed Consolidating Statement of Cash Flows

For the 39 Weeks EndedNovember 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	233		$	(2,473	)	$	539		$	(241	)	$	(1,942	)
Proceeds from sales of property and investments	—			250			66			—			316
Purchases of property and equipment	—			(170		)	(32		)	—			(202		)
Sears Canada de-consolidation	—			—			(207		)	—			(207		)
Proceeds from Sears Canada rights offering	169			—			—			—			169
Net investing with Affiliates	(402		)	—			(573		)	975			—
Net cash provided by (used in) investing activities	(233		)	80			(746		)	975			76
Proceeds from debt issuances	—			400			—			—			400
Repayments of long-term debt	—			(51		)	(10		)	—			(61		)
Increase in short-term borrowings, primarily 90 days or less	—			364			—			—			364
Lands' End, Inc. pre-separation funding	—			515			—			—			515
Separation of Lands' End, Inc.	—			(31		)	—			—			(31		)
Debt issuance costs	—			(20		)	—			—			(20		)
Intercompany dividend	—			—			(241		)	241			—
Net borrowing with Affiliates	—			975			—			(975		)	—
Net cash provided by (used in) financing activities	—			2,152			(251		)	(734		)	1,167
Effect of exchange rate changes on cash and cash equivalents	—			—			(3		)	—			(3		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			(241		)	(461		)	—			(702		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			537			491			—			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	296		$	30		$	—		$	326

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BORROWINGS (Senior Unsecured Notes) (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended			12 Months Ended
	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014		Jan. 31, 2015	Nov. 21, 2014
Debt Instrument [Line Items]
Rights Offering of Units Consisting of Senior Unsecured Notes and Warrants, Maximum Amount			$ 625
Proceeds from Issuance of Debt		$ 0	$ 400	[1]
Unsecured Senior Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, interest rate, stated percentage	8.00%	8.00%	8.00%			8.00%
Debt Instrument, Maturity Year	2019	2019
Debt Instrument, Unamortized Discount		$ 248			$ 273	$ 278
Long-term Debt		377			352
Debt Instrument, Interest Rate, Effective Percentage						11.55%
Amortization of Debt Discount (Premium)		$ 25			5
Unsecured Senior Notes [Member]
Debt Instrument [Line Items]
Rights Offering of Units Consisting of Senior Unsecured Notes and Warrants, Maximum Amount			$ 625
Proceeds from Issuance of Debt					$ 625
Long-term debt						$ 625

[1] All proceeds were received from ESL and its affiliates.

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EQUITY (Issuance of Warrants to Purchase Common Shares) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	9 Months Ended
	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014	Nov. 21, 2014
Class of Warrant or Right [Line Items]
Class of warrant or right, outstanding				22,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 25.686		$ 28.41
Rights Offering of Units Consisting of Senior Unsecured Notes and Warrants, Maximum Amount			$ 625
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right		1.11		1.00
Unsecured Senior Notes [Member]
Class of Warrant or Right [Line Items]
Debt Instrument, interest rate, stated percentage	8.00%	8.00%	8.00%	8.00%
Debt Instrument, Maturity Year	2019	2019

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions		3 Months Ended			9 Months Ended
		Oct. 31, 2015		Nov. 01, 2014	Oct. 31, 2015		Nov. 01, 2014
REVENUES
Merchandise sales and services	[1],[2]	$ 5,750		$ 7,207	$ 17,843		$ 23,099
COSTS AND EXPENSES
Cost of sales, buying and occupancy	[1]	4,488	[3]	5,606	13,628	[3]	17,928
Selling and administrative		1,630		2,011	5,005		6,218
Depreciation and amortization		94		148	330		455
Impairment charges		17		0	71		25
Gain on sales of assets		(97)		(68)	(730)		(148)
Total costs and expenses		6,132		7,697	18,304		24,478
Operating loss		(382)		(490)	(461)		(1,379)
Interest expense		(74)		(78)	(249)		(221)
Interest and investment income (loss)		17		97	(27)		133
Other income		0		2	0		4
Loss before income taxes		(439)		(469)	(737)		(1,463)
Income tax (expense) benefit		(14)		(159)	189		(188)
Net loss		(453)		(628)	(548)		(1,651)
(Income) loss attributable to noncontrolling interests		(1)		80	(1)		128
NET LOSS ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS		$ (454)		$ (548)	$ (549)		$ (1,523)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS
Basic loss per share (in USD per share)		$ (4.26)		$ (5.15)	$ (5.15)		$ (14.33)
Diluted loss per share (in USD per share)		$ (4.26)		$ (5.15)	$ (5.15)		$ (14.33)
Basic weighted average common shares outstanding (in shares)		106.6		106.4	106.5		106.3
Diluted weighted average common shares outstanding (in shares)		106.6		106.4	106.5		106.3

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $315 million and $329 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $1.0 billion and $1.1 billion for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at owned Sears locations, participation in the Shop Your Way® program and corporate shared services of $14 million and $18 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $45 million and $41 million for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively.

[3] Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $22 million and $27 million for the 13- and 39-weeks ended October 31, 2015, respectively, and installment expenses of $17 million and $22 million for the 13- and 39-weeks ended October 31, 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage"). There was no such rent or installment expenses incurred for the 13- and 39-weeks ended November 1, 2014.

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STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS (Store Closing Costs and Severance Recorded) (Detail) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014		Oct. 31, 2015	Nov. 01, 2014
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of		$ 17			$ 71
Depreciation		93	$ 144		325	$ 441
Restructuring Charges		(1)	75		38	144
Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of		10			12
Restructuring Charges		1	50		42	89
Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of		7			59
Restructuring Charges		(2)	24		(4)	39
Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of						15
Restructuring Charges			1			16
Markdowns [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[1]	6	41		17	59
Markdowns [Member] | Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[1]	5	31		14	46
Markdowns [Member] | Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[1]	1	10		3	12
Markdowns [Member] | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[1]		0			1
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	0	10		4	25
Employee Severance [Member] | Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	0	6		2	10
Employee Severance [Member] | Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	0	3		2	5
Employee Severance [Member] | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]		1			10
Contract Termination [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	(8)	1		10	19
Contract Termination [Member] | Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	(5)	0		22	11
Contract Termination [Member] | Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	(3)	1		(12)	3
Contract Termination [Member] | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]		0			5
Other Charges [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	1	17		5	24
Other Charges [Member] | Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	1	11		4	17
Other Charges [Member] | Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]	0	6		1	7
Other Charges [Member] | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges	[2]		0			0
Impairment And Accelerated Depreciation [Member]
Restructuring Cost and Reserve [Line Items]
Impairment of Long-Lived Assets to be Disposed of						10
Depreciation						7
Restructuring Charges		0	6	[3]	2	17	[3]
Impairment And Accelerated Depreciation [Member] | Kmart [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges		0	2		0	5
Impairment And Accelerated Depreciation [Member] | Sears Domestic [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges		$ 0	4	[3]	$ 2	12	[3]
Impairment And Accelerated Depreciation [Member] | Sears Canada [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring Charges			$ 0			$ 0

[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 13- and 39-week periods ended October 31, 2015, and the 13-week period ended November 1, 2014 are recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 39-week period ended November 1, 2014 include $10 million recorded within Impairment charges and $7 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Accumulated depreciation and amortization	$ 2,925	$ 3,864	$ 4,001
Sears Hometown and Outlet Stores, Inc. [Member]
Due from affiliate, current	85	61	80
Lands' End, Inc. [Member]
Due from affiliate, current	4	5	5
Seritage Growth Properties [Member]
Due from affiliate, current	8
Esl Investments Inc [Member]
Secured short-term loan	0	400	400
Senior secured notes	11	205	205
Subsidiary notes	3	3	3
Senior unsecured notes	$ 201	$ 299	$ 0

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SUPPLEMENTAL FINANCIAL INFORMATION (Other Long-Term Liabilities) (Detail) - USD ($) $ in Millions	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Supplemental Financial Information Disclosure [Abstract]
Unearned revenues	$ 703	$ 739	$ 754
Self-insurance reserves	604	611	688
Other	504	499	388
Total	$ 1,811	$ 1,849	$ 1,830

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BORROWINGS (Debt Repurchase Authorization) (Details) - USD ($)	9 Months Ended
	Oct. 31, 2015		Nov. 01, 2014
Debt Instrument [Line Items]
Debt Repurchase Authorized Amount	$ 1,000,000,000
Repayments of debt	1,387,000,000	[1]	$ 61,000,000
Senior Secured Note [Member]
Debt Instrument [Line Items]
Debt Repurchase Authorized Amount	1,000,000,000
Debt Instrument, Repurchase Amount per Tender Offer	960
Repayments of debt	936,000,000
Debt Instrument, Repurchase Amount, Early Tender Repurchase Amount per Tender Offer	0
Debt Instrument, Repurchased Face Amount	936,000,000
Unamortized Debt Issue Costs and Discount	7,000,000
Debt instrument, face amount	0
Debt Instrument, Early Tender Payment	0
Debt Instrument, Repurchase Amount	929,000,000
Esl Investments Inc [Member] | Senior Secured Note [Member]
Debt Instrument [Line Items]
Repayments of debt	165,000,000
Pension Plan [Member] | Senior Secured Note [Member]
Debt Instrument [Line Items]
Repayments of debt	$ 110,000,000

[1] Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Condensed Consolidating Statement of Comprehensive Income) (Detail) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Condensed Financial Statements, Captions [Line Items]
Net loss		$ (453)	$ (628)	$ (548)	$ (1,651)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	[1]	65	30	196	95
Deferred loss on derivatives, net of tax		0	0	0	(2)
Currency translation adjustments, net of tax		0	(11)	0	3
Sears Canada de-consolidation		0	(186)	0	(186)
Unrealized net gain, net of tax		0	0	0	0
Total other comprehensive income (loss)		65	(167)	196	(90)
Comprehensive loss		(388)	(795)	(352)	(1,741)
Comprehensive income (loss) attributable to noncontrolling interests		(1)	401	(1)	438
Comprehensive loss attributable to Holdings’ shareholders		(389)	(394)	(353)	(1,303)
Parent [Member]
Condensed Financial Statements, Captions [Line Items]
Net loss		(454)	(628)	(549)	(1,651)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax		0	0	0	0
Deferred loss on derivatives, net of tax					(2)
Currency translation adjustments, net of tax			5		5
Sears Canada de-consolidation			54		54
Unrealized net gain, net of tax		0	0	0	0
Total other comprehensive income (loss)		0	59	0	57
Comprehensive loss		(454)	(569)	(549)	(1,594)
Comprehensive income (loss) attributable to noncontrolling interests		0	0	0	0
Comprehensive loss attributable to Holdings’ shareholders		(454)	(569)	(549)	(1,594)
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Net loss		(490)	(763)	(647)	(1,880)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax		65	28	196	85
Deferred loss on derivatives, net of tax					0
Currency translation adjustments, net of tax			0		0
Sears Canada de-consolidation			10		10
Unrealized net gain, net of tax		0	0	0	0
Total other comprehensive income (loss)		65	38	196	95
Comprehensive loss		(425)	(725)	(451)	(1,785)
Comprehensive income (loss) attributable to noncontrolling interests		0	0	0	0
Comprehensive loss attributable to Holdings’ shareholders		(425)	(725)	(451)	(1,785)
Non-Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Net loss		239	67	661	440
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax		0	2	0	10
Deferred loss on derivatives, net of tax					0
Currency translation adjustments, net of tax			(16)		(2)
Sears Canada de-consolidation			(250)		(250)
Unrealized net gain, net of tax		27	8	11	120
Total other comprehensive income (loss)		27	(256)	11	(122)
Comprehensive loss		266	(189)	672	318
Comprehensive income (loss) attributable to noncontrolling interests		0	0	0	0
Comprehensive loss attributable to Holdings’ shareholders		266	(189)	672	318
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Net loss		252	696	(13)	1,440
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax		0	0	0	0
Deferred loss on derivatives, net of tax					0
Currency translation adjustments, net of tax			0		0
Sears Canada de-consolidation			0		0
Unrealized net gain, net of tax		(27)	(8)	(11)	(120)
Total other comprehensive income (loss)		(27)	(8)	(11)	(120)
Comprehensive loss		225	688	(24)	1,320
Comprehensive income (loss) attributable to noncontrolling interests		(1)	401	1	438
Comprehensive loss attributable to Holdings’ shareholders		$ 224	$ 1,089	$ (25)	$ 1,758

[1] Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

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RELATED PARTY DISCLOSURE

9 Months Ended

Oct. 31, 2015

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 Mr. 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 owned approximately 49% of our outstanding common stock at October 31, 2015 (excluding shares of common stock that ESL may acquire within 60 days upon the exercise of warrants to purchase shares of our common stock).

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 39-week periods ended October 31, 2015 and November 1, 2014, ESL and its affiliates held unsecured commercial paper issued by SRAC, an indirect wholly owned subsidiary of Holdings. For the commercial paper outstanding to ESL, the weighted average of each of maturity, annual interest rate, and principal amount outstanding for this commercial paper was 32.0 days, 4.55% and $12 million and 18.8 days, 3.68% and $33 million, respectively, during the 39-week periods ended October 31, 2015 and November 1, 2014. The largest aggregate amount of principal outstanding to ESL at any time since the beginning of 2015 was $100 million and $0.4 million of interest was paid by SRAC to ESL during the 39-week period ended October 31, 2015. 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.

Secured Short-Term Loan

In September 2014, the Company, through Sears, Sears Development Co., and Kmart Corporation ("Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Loan") with JPP II, LLC and JPP, LLC (together, the "Lender"), entities affiliated with ESL. The Loan was originally scheduled to mature on December 31, 2014. As permitted by the Loan agreement, the Company paid an extension fee equal to 0.5% of the principal amount to extend the maturity date of the loan to February 28, 2015. The Loan had an annual base interest rate of 5%. The Loan was guaranteed by the Company and was secured by a first priority lien on certain real properties owned by the Borrowers.

During 2014, the Borrowers paid an upfront fee of $7 million, an extension fee of $2 million and interest of $5.6 million to the Lender. On February 25, 2015, we entered into an agreement effective February 28, 2015, to amend and extend the $400 million secured short-term loan. Under the terms of the amendment, we repaid $200 million of the $400 million on March 2, 2015 and the remaining $200 million on June 1, 2015. At November 1, 2014 and January 31, 2015, the outstanding balance of the Loan was $400 million. During the 39-week period ended October 31, 2015, the Borrowers paid interest of $5.9 million to the Lender. See Note 2 for additional information regarding the Loan.

Senior Secured Notes and Subsidiary Notes

At October 31, 2015, Mr. Lampert and ESL held an aggregate of approximately $11 million of principal of the Company's Senior Secured Notes. Mr. Lampert and ESL tendered approximately $165 million of the Company's Senior Secured Notes in the Offer, which is further discussed in Note 2. At each of November 1, 2014 and January 31, 2015, Mr. Lampert and ESL held an aggregate of $205 million of principal amount of the Company's Senior Secured Notes. At each of October 31, 2015, November 1, 2014 and January 31, 2015, Mr. Lampert and ESL held an aggregate of $3 million of principal amount of unsecured notes issued by SRAC (the "Subsidiary Notes").

Senior Unsecured Notes and Warrants

At October 31, 2015 and January 31, 2015, respectively, Mr. Lampert and ESL held an aggregate of $201 million and $299 million of principal amount of the Company's Senior Unsecured Notes, and 10,529,740 and 10,530,633 warrants to purchase shares of Holdings common stock.

Sears Canada

ESL owns approximately 48% of the outstanding common shares of Sears Canada (based on publicly available information as of April 7, 2015).

Lands' End

ESL owns approximately 50% of the outstanding common stock of Lands' End (based on publicly available information as of September 30, 2015). Holdings and certain of its subsidiaries entered into a transition services agreement in connection with the spin-off pursuant to which Lands' End and Holdings will provide to each other, on an interim, transitional basis, various services, which may include, but are not limited to, tax services, logistics services, auditing and compliance services, inventory management services, information technology services and continued participation in certain contracts shared with Holdings and its subsidiaries, as well as agreements related to Lands' End Shops at Sears and participation in the Shop Your Way^® program.

Amounts due to or from Lands' End are non-interest bearing, and generally settled on a net basis. Holdings invoices Lands' End on at least a monthly basis. At October 31, 2015, November 1, 2014 and January 31, 2015, Holdings reported a net amount receivable from Lands' End of $4 million, $5 million and $5 million, respectively, in the Accounts receivable line of the Condensed Consolidated Balance Sheet. Amounts related to revenue from retail services and rent for Lands' End Shops at Sears, participation in the Shop Your Way^® program and corporate shared services were $18 million and $20 million, respectively, for the 13-week periods ended October 31, 2015 and November 1, 2014, and $52 million and $44 million, respectively, for the 39-week periods ended October 31, 2015 and November 1, 2014. The amounts Lands' End earned related to call center services and commissions were $2 million for each of the 13-week periods ended October 31, 2015 and November 1, 2014, and $6 million for each of the 39-week periods ended October 31, 2015 and November 1, 2014.

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 46% of the outstanding common stock of SHO (based on publicly available information as of April 7, 2015).

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 October 31, 2015, November 1, 2014 and January 31, 2015, Holdings reported a net amount receivable from SHO of $85 million, $80 million and $61 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 $359 million and $376 million, respectively, for the 13-week periods ended October 31, 2015 and November 1, 2014, and $1.1 billion and $1.2 billion, respectively, for the 39-week periods ended October 31, 2015 and November 1, 2014. The net amounts SHO earned related to commissions were $22 million for each of the 13-week periods ended October 31, 2015 and November 1, 2014, and $71 million and $77 million, respectively, for the 39-week periods ended October 31, 2015 and November 1, 2014. 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 January 31, 2015 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.

Seritage

ESL owns approximately 9.8% of the total voting power of Seritage, and approximately 43.5% of the limited partnership units of Seritage Growth Properties, L.P. (the “Operating Partnership”), the entity that now owns the properties sold by the Company in the Seritage transaction and through which Seritage conducts its operations (based on publicly available information as of August 14, 2015). Mr. Lampert is also currently the Chairman of the Board of Trustees of Seritage.

In connection with the Seritage transaction as described in Note 5, Holdings entered into a master lease agreement with Seritage. The initial amount of aggregate annual base rent under the master lease is $134 million for the REIT properties, with increases of 2% per year beginning in the second lease year. Holdings recorded rent expense of $22 million and $27 million, respectively, in Cost of sales, buying and occupancy for the 13- and 39-week periods ended October 31, 2015. Rent expense consists of straight-line rent expense of $37 million and $47 million, respectively, offset by amortization of a deferred gain recognized pursuant to the sale and leaseback of properties from Seritage of $15 million and $20 million, respectively, for the 13- and 39-week periods ended October 31, 2015.

In addition to base rent under the Master Lease, Holdings pays monthly installment expenses for property taxes and insurance at all REIT properties where Holdings is a tenant and installment expenses for common area maintenance, utilities and other operating expenses at REIT properties that are multi-tenant locations where Holdings and other third parties are tenants. The initial amount of aggregate installment expenses under the Master Lease is $70 million, based on estimated installment expenses, and will be reconciled annually based on actual installment expenses. Holdings paid $17 million and $22 million for the 13- and 39-week periods ended October 31, 2015, respectively, recorded in Cost of sales, buying and occupancy.

Holdings and Seritage entered into a transition services agreement pursuant to which Holdings will provide certain limited services to Seritage for up to 18 months. The services include specified facilities management, accounting, treasury, tax, information technology, risk management, human resources, and related support services. Under the terms of the transition services agreement, the scope and level of the facilities management services will be substantially consistent with the scope and level of the services provided in connection with the operation of the transferred properties held by Holdings prior to the closing of the Seritage transaction. Amounts due from Seritage are generally settled on a net basis. Holdings invoices Seritage on at least a monthly basis. Revenues recognized related to the transition services agreement were not material for the 13- or 39-week period ended October 31, 2015. At October 31, 2015, Holdings reported a net amount receivable from Seritage of $8 million in the Accounts receivable line of the Condensed Consolidated Balance Sheets.

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BORROWINGS (Unsecured Commercial Paper) (Details) - USD ($) $ in Millions	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Short-term Debt [Line Items]
Unsecured commercial paper	$ 9	$ 2	$ 91

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RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

9 Months Ended

Oct. 31, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements Policy

Presentation of Debt Issuance Costs

In April 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standards update which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with discounts or premiums. In August 2015, the FASB issued an accounting standards update which adds paragraphs about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements, and allows for the presentation of debt issuance costs as an asset regardless of whether or not there is an outstanding balance on the line-of-credit arrangement. These updates will be effective for the Company in the first quarter of 2016, and early adoption of the updates is permitted. The adoption of the new standards is not expected to have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Consolidation

In February 2015, the FASB issued an accounting standards update which revises the consolidation model. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Extraordinary and Unusual Items

In January 2015, the FASB issued an accounting standards update which eliminates the concept of an extraordinary item. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity

In November 2014, the FASB issued an accounting standards update which clarifies how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features-including the embedded derivative feature being evaluated for bifurcation-in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued an accounting standards update which requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This update will be effective for the Company in the first quarter of 2017, and early application is permitted. The adoption of the new standard is not expected to have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update which replaces the current revenue recognition standards. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was initially released as effective for fiscal years beginning after December 15, 2016, however, the FASB has decided to defer the effective date of this accounting standard update for one year. The update may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. The Company is evaluating the effect of adopting this new standard.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the FASB issued an accounting standards update which modifies the requirements for disposals to qualify as discontinued operations and expands related disclosure requirements. The update was effective and adopted by the Company in the first quarter of 2015 and did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures. The adoption of the update may impact whether future disposals qualify as discontinued operations and therefore could impact the Company's financial statement presentation and disclosures.

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions		9 Months Ended
		Oct. 31, 2015		Nov. 01, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$ (548)		$ (1,651)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred tax valuation allowance		(500)		152
Depreciation and amortization		330		455
Impairment charges		71		25
Gain on sales of assets		(730)		(148)
Gain on sales of investments		0		(105)
Pension and postretirement plan contributions		(246)		(366)
Mark-to-market adjustments of financial instruments		33		(9)
Amortization of deferred gain on sale-leaseback		(30)		0
Settlement of Canadian dollar hedges		0		(8)
Change in operating assets and liabilities (net of acquisitions and dispositions):
Deferred income taxes		213		(40)
Merchandise inventories		(1,265)		(430)
Merchandise payables		674		282
Income and other taxes		(40)		(48)
Other operating assets		7		(58)
Other operating liabilities		(23)		(9)
Net cash used in operating activities		(2,054)		(1,942)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of property and investments	[1],[2]	2,708		316
Purchases of property and equipment		(152)		(202)
Cash Divested from Deconsolidation		0		207
Proceeds from Divestiture of Interest in Consolidated Subsidiaries		0		169	[3]
Net cash provided by investing activities		2,556		76
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Debt		0		400	[3]
Repayments of debt		1,387	[4]	61
Increase in short-term borrowings, primarily 90 days or less		471		364
Proceeds from sale-leaseback financing	[1]	508		0
Lands' End, Inc. pre-separation funding		0		515
Separation of Lands' End, Inc.		0		(31)
Debt issuance costs		(50)		(20)
Net cash provided by (used in) financing activities		(458)		1,167
Effect of exchange rate changes on cash and cash equivalents		0		(3)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		44		(702)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		250		1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD		294		326
Supplemental Cash Flow Data:
Income taxes paid, net of refunds		36		94
Cash interest paid		191		193
Unpaid liability to acquire equipment and software		11		20
Receivable Related to Sears Canada Rights Offering		$ 0		$ 103

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in Proceeds from sales of property and investments ($2.6 billion), and Proceeds from sale-leaseback financing ($82 million) for the 39 weeks ended October 31, 2015. Proceeds from the JV transactions are included in Proceeds from sale-leaseback financing ($426 million) for the 39 weeks ended October 31, 2015.

[2] The Seritage transaction was partially financed through the sale of common shares and limited partnership units (the "rights offering"), totaling $1.6 billion, including $745 million received from ESL and its affiliates.

[3] All proceeds were received from ESL and its affiliates.

[4] Repayments in 2015 include $400 million of a secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, and $165 million and $110 million of Senior Secured Notes to ESL and the Company's domestic pension plan, respectively.

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Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Sears Hometown and Outlet Stores, Inc. [Member]
Proceeds from sale of inventory to affiliate	$ 315	$ 329	$ 1,000	$ 1,100
Lands' End, Inc. [Member]
Revenue from related parties	14	18	45	41
Seritage Growth Properties [Member]
Sale-leaseback transaction, rent expense	22	0	27	0
Sale leaseback transaction, installment expense	$ 17	$ 0	$ 22	$ 0

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INCOME TAXES

9 Months Ended

Oct. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

We had gross unrecognized tax benefits of $142 million at October 31, 2015, $120 million at November 1, 2014 and $131 million at January 31, 2015. Of the amount at October 31, 2015, $92 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-week period ended October 31, 2015, gross unrecognized tax benefits increased by $4 million due to state activity. During the 39-week period ended October 31, 2015, gross unrecognized tax benefits increased by $11 million. During the 13-week period ended November 1, 2014, gross unrecognized tax benefits decreased by $21 million. During the 39-week period ended November 1, 2014, gross unrecognized tax benefits decreased by $29 million due to the Lands' End spin-off and Sears Canada's de-consolidation. We expect that our unrecognized tax benefits could decrease by as much as $6 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 October 31, 2015, November 1, 2014 and January 31, 2015, the total amount of interest and penalties included in our tax accounts in our Condensed Consolidated Balance Sheet was $56 million ($37 million net of federal benefit), $48 million ($31 million net of federal benefit), and $49 million ($32 million net of federal benefit), respectively. The total amount of net interest expense recognized as part of Income tax expense in our Condensed Consolidated Statements of Operations was $2 million (net of federal benefit) and $5 million (net of federal benefit), respectively, for the 13- and 39-week periods ended October 31, 2015. We recognized a negligible net interest benefit (net of federal benefit) and $3 million net interest expense (net of federal benefit), respectively, for the 13- and 39-week periods ended November 1, 2014.

We file income tax returns in both the United States and various foreign jurisdictions. The U.S. Internal Revenue Service ("IRS") has completed its examination of all federal tax returns of Holdings through the 2009 return, and all matters arising from such examinations have been resolved. In addition, Holdings and Sears are under examination by various state, local and foreign income tax jurisdictions for the years 2002 through 2013, and Kmart is under examination by such jurisdictions for the years 2006 through 2013.

At the end of 2014, we had a federal and state net operating loss ("NOL") deferred tax asset of $1.8 billion, which will expire predominately between 2019 and 2035. We have credit carryforwards of $791 million, which will expire between 2015 and 2035.

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction with Seritage, a recently formed independent publicly traded REIT. As part of the transaction, Holdings sold 235 properties to Seritage along with Holdings' 50% interests in joint ventures with each of Simon Property Group, Inc., General Growth Properties, Inc., and The Macerich Company, which together hold an additional 31 properties (See Note 5).

In connection with the sale-leaseback transaction with Seritage in the second quarter of 2015, along with the Simon Property Group, Inc., General Growth Properties, Inc., and The Macerich Company joint venture transactions in the first quarter of 2015, the Company realized a tax benefit of $229 million on the deferred taxes related to the indefinite-life assets associated with the property sold in the transaction with Seritage and respective joint venture transactions. In addition, the Company incurred a taxable gain of approximately $2.2 billion, taking into account any related party loss disallowance, on these transactions. There was no federal income tax payable resulting from the taxable gain due to the utilization of NOL tax attributes of approximately $856 million with a valuation allowance release of the same amount. However, there was a minor amount of state and city income tax payable of $5 million after the utilization of state and city tax attributes.  As a result of all the effects from these transactions, the net valuation allowance release was approximately $500 million.

At January 31, 2015, we had a valuation allowance of $4.5 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.

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. As such, for the 13-week period ended October 31, 2015, our effective income tax rate was an expense of 3.2%. Our tax rate continues to reflect the effect of not recognizing the benefit of current period losses in certain domestic jurisdictions where it is not more likely than not that such benefits would be realized. In addition, the 13-week period ended October 31, 2015 was negatively impacted by foreign branch taxes and state income taxes.

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Document and Entity Information - shares	9 Months Ended
	Oct. 31, 2015	Nov. 27, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	SEARS HOLDINGS CORP
Entity Central Index Key	0001310067
Current Fiscal Year End Date	--01-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Oct. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false
Trading Symbol	SHLD
Entity Common Stock, Shares Outstanding		106,689,188

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SUMMARY OF SEGMENT DATA

9 Months Ended

Oct. 31, 2015

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 format represents both an operating and reportable segment. As a result of the de-consolidation of Sears Canada as described in Note 1, Sears Canada is no longer an operating or 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 home 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;

(iv) Service—includes repair, installation and automotive service and extended contract revenue; and

(v) Other—includes revenues earned in connection with our agreements with SHO and Lands' End, as well as credit revenues and licensed business revenues.

	13 Weeks Ended October 31, 2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales and services
Hardlines	$	620		$	1,832		$	2,452
Apparel and Soft Home	701			639			1,340
Food and Drug	915			1			916
Service	3			538			541
Other	8			493			501
Total merchandise sales and services	2,247			3,503			5,750
Costs and expenses
Cost of sales, buying and occupancy	1,774			2,714			4,488
Selling and administrative	585			1,045			1,630
Depreciation and amortization	17			77			94
Impairment charges	10			7			17
Gain on sales of assets	(12		)	(85		)	(97		)
Total costs and expenses	2,374			3,758			6,132
Operating loss	$	(127	)	$	(255	)	$	(382	)
Total assets	$	3,655		$	9,114		$	12,769
Capital expenditures	$	10		$	56		$	66

	13 Weeks Ended November 1, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	793		$	2,029		$	327		$	3,149
Apparel and Soft Home	842			770			255			1,867
Food and Drug	1,050			2			—			1,052
Service	5			574			20			599
Other	17			514			9			540
Total merchandise sales and services	2,707			3,889			611			7,207
Costs and expenses
Cost of sales, buying and occupancy	2,147			3,002			457			5,606
Selling and administrative	708			1,131			172			2,011
Depreciation and amortization	25			110			13			148
Gain on sales of assets	(24		)	(44		)	—			(68		)
Total costs and expenses	2,856			4,199			642			7,697
Operating loss	$	(149	)	$	(310	)	$	(31	)	$	(490	)
Total assets	$	4,259		$	10,910		$	—		$	15,169
Capital expenditures	$	11		$	52		$	13		$	76

	39 Weeks Ended October 31, 2015
millions	Kmart			Sears Domestic			Sears Holdings
Merchandise sales and services
Hardlines	$	1,986		$	5,704		$	7,690
Apparel and Soft Home	2,274			1,917			4,191
Food and Drug	2,749			5			2,754
Service	10			1,619			1,629
Other	43			1,536			1,579
Total merchandise sales and services	7,062			10,781			17,843
Costs and expenses
Cost of sales, buying and occupancy	5,562			8,066			13,628
Selling and administrative	1,802			3,203			5,005
Depreciation and amortization	56			274			330
Impairment charges	12			59			71
Gain on sales of assets	(173		)	(557		)	(730		)
Total costs and expenses	7,259			11,045			18,304
Operating loss	$	(197	)	$	(264	)	$	(461	)
Total assets	$	3,655		$	9,114		$	12,769
Capital expenditures	$	21		$	131		$	152

	39 Weeks Ended November 1, 2014
millions	Kmart			Sears Domestic			Sears Canada			Sears Holdings
Merchandise sales and services
Hardlines	$	2,502		$	6,542		$	1,100		$	10,144
Apparel and Soft Home	2,728			2,562			880			6,170
Food and Drug	3,234			6			—			3,240
Service	13			1,770			77			1,860
Other	50			1,604			31			1,685
Total merchandise sales and services	8,527			12,484			2,088			23,099
Costs and expenses
Cost of sales, buying and occupancy	6,790			9,552			1,586			17,928
Selling and administrative	2,128			3,487			603			6,218
Depreciation and amortization	72			334			49			455
Impairment charges	2			8			15			25
(Gain) loss on sales of assets	(76		)	(73		)	1			(148		)
Total costs and expenses	8,916			13,308			2,254			24,478
Operating loss	$	(389	)	$	(824	)	$	(166	)	$	(1,379	)
Total assets	$	4,259		$	10,910		$	—		$	15,169
Capital expenditures	$	31		$	139		$	32		$	202

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Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Statement of Comprehensive Income [Abstract]
Net loss		$ (453)	$ (628)	$ (548)	$ (1,651)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	[1]	65	30	196	95
Deferred loss on derivatives, net of tax		0	0	0	(2)
Currency translation adjustments, net of tax		0	(11)	0	3
Sears Canada de-consolidation		0	(186)	0	(186)
Total other comprehensive income (loss)		65	(167)	196	(90)
Comprehensive loss		(388)	(795)	(352)	(1,741)
Comprehensive income (loss) attributable to noncontrolling interests		(1)	401	(1)	438
Comprehensive loss attributable to Holdings' shareholders		$ (389)	$ (394)	$ (353)	$ (1,303)

[1] Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

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DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Oct. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

We primarily used 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. Prior to de-consolidation, we were exposed to fluctuations in foreign currency exchange rates as a result of our net investment in Sears Canada. Further, Sears Canada was exposed to fluctuations in foreign currency exchange rates due to inventory purchase contracts denominated in U.S. dollars. We had no material outstanding derivatives at October 31, 2015, November 1, 2014 or January 31, 2015. The gains on hedging activity were not material for the 13-and 39-week periods ended November 1, 2014.

Hedges of Net Investment in Sears Canada

During the 13-week period ended November 1, 2014, we entered into foreign currency forward contracts with a total Canadian notional value of $300 million. These contracts were designated and qualify as hedges of the foreign currency exposure of our net investment in Sears Canada. On October 16, 2014, we settled foreign currency forward contracts with a total Canadian notional value of $187 million and de-designated the remaining contracts with a total Canadian notional value of $113 million as hedges, which were settled on October 27, 2014.

For derivatives that were designated as hedges of our net investment in Sears Canada, we assessed effectiveness based on changes in forward currency exchange rates. Changes in forward rates on the derivatives were recorded in the currency translation adjustments line in accumulated other comprehensive loss prior to the de-consolidation of Sears Canada on October 16, 2014. Subsequent to that date, the change in forward rates on the remaining derivative contracts that were no longer designated as hedges was recorded in Interest and investment income in the Condensed Consolidated Statements of Operations.

We settled foreign currency forward contracts during the 13-week and 39-week periods ended November 1, 2014 and received a net amount of $8 million relative to these contract settlements.

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BORROWINGS

9 Months Ended

Oct. 31, 2015

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

Total borrowings were as follows:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Short-term borrowings:
Unsecured commercial paper	$	9	$	91	$	2
Secured short-term loan	—		400		400
Secured borrowings	677		1,605		213
Long-term debt, including current portion:
Notes and debentures outstanding	1,989		2,564		2,913
Capitalized lease obligations	206		280		272
Total borrowings	$	2,881	$	4,940	$	3,800

The fair value of long-term debt, excluding capitalized lease obligations, was $2.2 billion at October 31, 2015, $2.3 billion at November 1, 2014 and $2.9 billion at January 31, 2015. 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.

Debt Repurchase Authorization

During the second quarter of 2015, the Board of Directors authorized the repurchase, subject to market conditions and other factors, of up to $1.0 billion of our outstanding indebtedness in open market or privately negotiated transactions, superseding the previously disclosed debt repurchase authorization from 2005.

On August 3, 2015, the Company commenced a tender offer (the "Offer") to purchase for cash up to$1.0 billion principal amount of its outstanding 6 5/8% Senior Secured Notes Due 2018 (the "Senior Secured Notes"), which expired on August 28, 2015. Approximately $936 million principal amount of the Senior Secured Notes were validly tendered and not validly withdrawn in the Offer, including $165 million by ESL and $110 million by the Company's domestic pension plan. Holders who validly tendered and did not validly withdraw Senior Secured Notes at or prior to the early tender date of August 14, 2015 received total consideration of $990 per $1,000 principal amount of Senior Secured Notes that were accepted for purchase, which included an early tender payment of $30 per $1,000 principal amount of Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date. Holders who validly tendered and did not validly withdraw Senior Secured Notes after the early tender date but at or prior to the expiration date of August 28, 2015 received total consideration of $960 per $1,000 principal amount of Senior Secured Notes accepted for purchase, plus accrued and unpaid interest up to, but excluding, the settlement date.

We accounted for the Offer in accordance with accounting standards applicable to extinguishment of liabilities and debt modifications and extinguishments. Accordingly, we de-recognized the net carrying amount of Senior Secured Notes of$929 million(comprised of the principal amount of$936 million, offset by unamortized debt issuance costs and discount of$7 million), and the reacquisition cost was$929 million.

Unsecured Commercial Paper

We borrow through the commercial paper markets. At October 31, 2015, November 1, 2014 and January 31, 2015, we had outstanding commercial paper borrowings of $9 million, $91 million and $2 million, respectively.

Secured Short-Term Loan

On September 15, 2014, the Company, through Sears, Sears Development Co. and Kmart Corporation ("Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, entered into a $400 million secured short-term loan (the "Loan'") with JPP II, LLC and JPP, LLC (together, the "Lender"), entities affiliated with ESL. The first $200 million of the Loan was funded at the closing on September 15, 2014 and the remaining $200 million was funded on September 30, 2014. Proceeds of the Loan were used for general corporate purposes.

The Loan was originally scheduled to mature on December 31, 2014. As permitted by the Loan agreement, the Company paid an extension fee equal to 0.5% of the principal amount to extend the maturity date to February 28, 2015. The Loan had an annual base interest rate of 5%. The Borrowers paid an upfront fee of 1.75% of the full principal amount. The Loan was guaranteed by the Company and was secured by a first priority lien on certain real properties owned by the Borrowers.

On February 25, 2015, we entered into an agreement effective February 28, 2015, to amend and extend the $400 million secured short-term loan. Under the terms of the amendment, we repaid $200 million of the $400 million on March 2, 2015 and the remaining $200 million on June 1, 2015, resulting in no balance outstanding at October 31, 2015. At January 31, 2015, the outstanding balance of the Loan was $400 million.

Domestic Credit Agreement

During the first quarter of 2011, SRAC, Kmart Corporation (together with SRAC, the "Borrowers") and Holdings entered into an amended credit agreement (the "Domestic Credit Agreement"). On October 2, 2013, Holdings and the Borrowers entered into a First Amendment (the "Amendment") to the Domestic Credit Agreement with a syndicate of lenders. Pursuant to the Amendment, the Borrowers borrowed $1.0 billion under a new senior secured term loan facility (the "Term Loan"). On July 21, 2015, the Borrowers and Holdings entered into an amended and restated credit agreement (the "Amended Domestic Credit Agreement") with a syndicate of lenders that amended and restated the then-existing Domestic Credit Agreement. The Amended Domestic Credit Agreement provides a $3.275 billion asset-based revolving credit facility (the "Revolving Facility") with a $1.0 billion letter of credit sub-facility. The maturity date for $1.971 billion of the Revolving Facility has been extended to July 20, 2020, while $1.304 billion retains the existing maturity date of April 8, 2016. The Amended Domestic Credit Agreement also governs the existing Term Loan, which retains its maturity date of June 30, 2018. The Amended Domestic Credit Agreement includes an accordion feature that allows the Borrowers to use existing collateral for the facility to obtain up to $1.0 billion of additional borrowing capacity, subject to borrowing base requirements, as well as a "FILO" ("first in last out") tranche feature that allows an additional $500 million of borrowing capacity. The Amended Domestic Credit Agreement also increases Holdings' ability to undertake short-term borrowings from $500 million to $750 million.

Revolving advances under the Amended 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 dependent on Holdings' consolidated leverage ratio (as measured under the Amended Domestic Credit Agreement). The margin with respect to borrowings under the extended commitments ranges from 3.25% to 3.75% for LIBOR loans and from 2.25% to 2.75% for base rate loans. The margin with respect to borrowings under the non-extended commitments remains 2.00% to 2.50% for LIBOR loans and 1.00% to 1.50% for base rate loans. The Amended Domestic Credit Agreement also provides for the payment of fees with respect to issued and undrawn letters of credit at a rate equal to the margin applicable to LIBOR loans and a commitment fee with respect to unused amounts of the Revolving Facility at a rate, depending on facility usage, between 0.375% to 0.625%, per annum, with a minimum of 0.50% applicable to commitments under the extended tranche. From and after April 8, 2016, such commitment fees with respect to the extended tranche will change to a flat 0.50%.

The Revolving Facility is in place as a funding source for general corporate purposes and is secured by a first lien on substantially all of our domestic inventory and credit card and pharmacy receivables, and is subject to a borrowing base formula to determine availability. The Revolving Facility is guaranteed by all domestic subsidiaries of Holdings that own inventory or credit card or pharmacy receivables. The Revolving Facility also permits aggregate second lien indebtedness of up to $2.0 billion, of which $304 million in second lien notes were outstanding at October 31, 2015, resulting in $1.7 billion of permitted second lien indebtedness, subject to limitations imposed by a borrowing base requirement under the indenture that governs our 6 5/8% senior secured notes due 2018.

The Term Loan bears interest at a rate equal to, at the election of the Borrowers, either (1) LIBOR (subject to a 1.00% LIBOR floor) or (2) the highest of (x) the prime rate of the bank acting as agent of the syndicate of lenders, (y) the federal funds rate plus 0.50% and (z) the one-month LIBOR rate plus 1.00% (the highest of (x), (y) and (z), the "Base Rate"), plus an applicable margin for LIBOR loans of 4.50% and for Base Rate loans of 3.50%. Currently, the Borrowers are required to repay the Term Loan in quarterly installments of $2.5 million, with the remainder of the Term Loan maturing June 30, 2018. Additionally, the Borrowers are required to make certain mandatory repayments of the Term Loan from excess cash flow (as defined in the Amended Domestic Credit Agreement). The Term Loan may be prepaid in whole or part without penalty. The Term Loan is secured by the same collateral as the Revolving Facility on a pari passu basis with the Revolving Facility, and is guaranteed by the same subsidiaries of the Company that guarantee the Revolving Facility. At October 31, 2015, November 1, 2014 and January 31, 2015, respectively, we had borrowings of $983 million, $993 million and $990 million under the Term Loan, and carrying value, net of the remaining discount, of $977 million, $985 million and $983 million.

The Amended 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 least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt, and make investments, subject, in each case, to various exceptions. The Amended 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.

At October 31, 2015, November 1, 2014 and January 31, 2015, we had $677 million, $1.6 billion and $213 million, respectively, of Revolving Facility borrowings and $654 million, $671 million and $667 million, respectively, of letters of credit outstanding under the Revolving Facility. At October 31, 2015, November 1, 2014 and January 31, 2015, the amount available to borrow under the Revolving Facility was $963 million, $234 million and $808 million, respectively, which reflects the effect of the springing fixed charge coverage ratio covenant and the borrowing base limitation. 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 $1.0 billion aggregate principal amount of senior secured notes (the "Senior Secured Notes"), which bear interest at 6 5/8% per annum and mature on October 15, 2018. Concurrent with the closing of the sale of the Senior Secured Notes, the Company sold $250 million aggregate principal amount of Senior Secured Notes to the Company's domestic pension plan in a private placement, none of which remain in the domestic pension plan as a result of the Offer discussed above. The Senior Secured 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 Senior Secured Notes is junior in priority to the lien on such assets that secures obligations under the Amended Domestic Credit Agreement, as well as certain other first priority lien obligations. The Company used the net proceeds of this offering to repay borrowings outstanding under a previous domestic credit agreement on the settlement date and to fund the working capital requirements of our retail businesses, capital expenditures and for general corporate purposes. The indenture under which the Senior Secured 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 Senior Secured Notes to be due and payable immediately. Generally, the Company is required to offer to repurchase all outstanding Senior Secured Notes at a purchase price equal to 101% of the principal amount if the borrowing base (as calculated pursuant to the indenture) falls below the principal value of the Senior Secured 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 Senior Secured Notes at a premium based on the "Treasury Rate" as defined in the indenture, plus 50 basis points. On September 6, 2011, we completed our offer to exchange the Senior Secured Notes held by nonaffiliates for a new issue of substantially identical notes registered under the Securities Act of 1933, as amended. As discussed above, the Company completed the Offer for $936 millionprincipal amount of its outstanding Senior Secured Notes. The carrying value of Senior Secured Notes, net of the remaining discount, was$304 million,$1.2 billion, and$1.2 billionatOctober 31, 2015,November 1, 2014, andJanuary 31, 2015, respectively.

Senior Unsecured Notes

On October 20, 2014, the Company announced its board of directors had approved a rights offering allowing its stockholders to purchase up to $625 million in aggregate principal amount of 8% senior unsecured notes due 2019 and warrants to purchase shares of its common stock. The subscription rights were distributed to all stockholders of the Company as of October 30, 2014, the record date for this rights offering, and every stockholder had the right to participate on the same terms in accordance with its pro rata ownership of the Company's common stock, except that holders of the Company's restricted stock that was unvested as of the record date received cash awards in lieu of subscription rights. This rights offering closed on November 18, 2014 and was oversubscribed.

Accordingly, on November 21, 2014, the Company issued $625 million aggregate original principal amount of 8% senior unsecured notes due 2019 (the "Senior Unsecured Notes") and received proceeds of $625 million which were used for general corporate purposes. The Senior Unsecured Notes are the unsecured and unsubordinated obligations of the Company and rank equal in right of payment with the existing and future unsecured and unsubordinated indebtedness of the Company. The Senior Unsecured Notes bear interest at a rate of 8% per annum and the Company will pay interest semi-annually on June 15 and December 15 of each year. The Senior Unsecured Notes are not guaranteed.

We accounted for the Senior Unsecured Notes in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, we allocated the proceeds received for the Senior Unsecured Notes based on the relative fair values of the Senior Unsecured Notes and warrants, which resulted in a discount to the notes of approximately $278 million. The fair value of the Senior Unsecured Notes and warrants was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 4. The discount is being amortized over the life of the Senior Unsecured Notes using the effective interest method with an effective interest rate of 11.55%. Approximately $5 million of the discount was amortized during 2014, resulting in a remaining discount of approximately $273 million at January 31, 2015. The carrying value of the Senior Unsecured Notes net of the remaining discount was approximately $352 million at January 31, 2015. Approximately $25 million of the discount was amortized during the 39-week period ended October 31, 2015, resulting in a remaining discount of approximately $248 million at October 31, 2015. The book value of the Senior Unsecured Notes net of the remaining discount was approximately $377 million at October 31, 2015.

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 has utilized two securitization structures to issue specific securities in which Sears Re has invested its capital to fund its insurance obligations. In November 2003, Sears formed a Real Estate Mortgage Investment Conduit ("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 to wholly owned subsidiaries of Sears (including Sears Re) $1.3 billion (par value) of securities (the "REMIC Securities") that are secured by the mortgages and collateral assignments of the store leases. Payments to the holders on the REMIC 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 (the "KCD Securities") 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 the holders on the KCD Securities are funded by the royalty payments. The issuers of the REMIC Securities and KCD 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. In the fourth quarter of fiscal 2013, Holdings contributed all of the outstanding capital stock of Sears Re to SRe Holding Corporation, a direct wholly owned subsidiary of Holdings. Sears Re thereafter reduced its excess statutory capital through the distribution of all REMIC Securities held by it to SRe Holding Corporation. Since the inception of the REMIC and KCD IP, LLC, the REMIC Securities and the KCD Securities have been entirely held by our wholly owned consolidated subsidiaries. At October 31, 2015, November 1, 2014 and January 31, 2015, 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 $0.6 billion at October 31, 2015, and approximately $0.7 billion at both November 1, 2014 and January 31, 2015.

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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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

9 Months Ended

Oct. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION

At October 31, 2015, the principal amount outstanding of the Company's 65/8% Senior Secured Notes due 2018 was $304 million. The Senior Secured Notes were issued in 2010 by Sears Holdings Corporation ("Parent"). The Senior Secured 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 October 31, 2015, November 1, 2014 and January 31, 2015, the Condensed Consolidating Statements of Operations and the Condensed Consolidating Statements of Comprehensive Income (Loss) for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014, and the Condensed Consolidating Statements of Cash flows for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014 of (i) Parent; (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; (iv) eliminations and (v) the Company on a consolidated basis.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. Merchandise sales and services included revenues of approximately $185 million from the Lands' End domestic business for the 39-week period ended November 1, 2014. Net loss attributable to Holdings' shareholders included net income of approximately $5 million from the Lands' End domestic business for the 39-week period ended November 1, 2014. The financial information for the domestic portion of Lands' End business is reflected within the guarantor subsidiaries balances for this period, while the international portion is reflected within the non-guarantor subsidiaries balances for this period.

On October 16, 2014, we de-consolidated Sears Canada pursuant to a rights offering transaction. Merchandise sales and services in the following condensed consolidated financial statements included revenues of approximately $611 million and $2.1 billion, respectively, for the 13- and 39-week periods ended November 1, 2014. Net loss attributable to Holdings' shareholders included net loss of approximately $86 million and $137 million, respectively, for the 13- and 39-week periods ended November 1, 2014. The financial information for Sears Canada is reflected within the non-guarantor subsidiaries balances for these periods.

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

October 31, 2015

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	256	$	38	$	—		$	294
Intercompany receivables	—			—		27,181		(27,181		)	—
Accounts receivable	9			441		25		—			475
Merchandise inventories	—			6,208		—		—			6,208
Prepaid expenses and other current assets	39			611		269		(677		)	242
Total current assets	48			7,516		27,513		(27,858		)	7,219
Total property and equipment, net	—			1,852		816		—			2,668
Goodwill and intangible assets	—			270		2,089		—			2,359
Other assets	6			700		2,129		(2,312		)	523
Investment in subsidiaries	11,328			25,701		—		(37,029		)	—
TOTAL ASSETS	$	11,382		$	36,039	$	32,547	$	(67,199	)	$	12,769
Current liabilities
Short-term borrowings	$	—		$	686	$	—	$	—		$	686
Current portion of long-term debt and capitalized lease obligations	—			69		2		—			71
Merchandise payables	—			2,295		—		—			2,295
Intercompany payables	11,987			15,194		—		(27,181		)	—
Short-term deferred tax liabilities	3			427		—		(8		)	422
Other current liabilities	28			2,215		1,470		(669		)	3,044
Total current liabilities	12,018			20,886		1,472		(27,858		)	6,518
Long-term debt and capitalized lease obligations	681			3,058		39		(1,654		)	2,124
Pension and postretirement benefits	—			2,128		5		—			2,133
Deferred gain on sale-leaseback	—			775		—		—			775
Sale-leaseback financing obligation	—			164		—		—			164
Long-term deferred tax liabilities	56			—		976		(495		)	537
Other long-term liabilities	—			865		1,181		(235		)	1,811
Total Liabilities	12,755			27,876		3,673		(30,242		)	14,062
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(1,373		)	8,163		28,874		(36,964		)	(1,300		)
Noncontrolling interest	—			—		—		7			7
Total Equity (Deficit)	(1,373		)	8,163		28,874		(36,957		)	(1,293		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	11,382		$	36,039	$	32,547	$	(67,199	)	$	12,769

Condensed Consolidating Balance Sheet

November 1, 2014

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	296	$	30	$	—		$	326
Intercompany receivables	—			—		26,681		(26,681		)	—
Accounts receivable	103			409		34		—			546
Merchandise inventories	—			6,464		—		—			6,464
Prepaid expenses and other current assets	43			796		288		(872		)	255
Total current assets	146			7,965		27,033		(27,553		)	7,591
Total property and equipment, net	—			3,610		951		—			4,561
Goodwill and intangible assets	—			284		2,089		—			2,373
Other assets	117			433		2,535		(2,441		)	644
Investment in subsidiaries	13,013			25,589		—		(38,602		)	—
TOTAL ASSETS	$	13,276		$	37,881	$	32,608	$	(68,596	)	$	15,169
Current liabilities
Short-term borrowings	$	—		$	2,096	$	—	$	—		$	2,096
Current portion of long-term debt and capitalized lease obligations	—			71		4		—			75
Merchandise payables	—			2,431		—		—			2,431
Intercompany payables	12,101			14,579		—		(26,680		)	—
Short-term deferred tax liabilities	1			501		—		(21		)	481
Other current liabilities	4			2,355		1,823		(851		)	3,331
Total current liabilities	12,106			22,033		1,827		(27,552		)	8,414
Long-term debt and capitalized lease obligations	1,238			3,668		36		(2,173		)	2,769
Pension and postretirement benefits	—			1,316		4		—			1,320
Long-term deferred tax liabilities	—			—		917		(207		)	710
Other long-term liabilities	—			774		1,305		(249		)	1,830
Total Liabilities	13,344			27,791		4,089		(30,181		)	15,043
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(68		)	10,090		28,519		(38,421		)	120
Noncontrolling interest	—			—		—		6			6
Total Equity (Deficit)	(68		)	10,090		28,519		(38,415		)	126
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	13,276		$	37,881	$	32,608	$	(68,596	)	$	15,169

Condensed Consolidating Balance Sheet

January 31, 2015

millions	Parent			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Current assets
Cash and cash equivalents	$	—		$	219	$	31	$	—		$	250
Intercompany receivables	—			—		26,291		(26,291		)	—
Accounts receivable	—			390		39		—			429
Merchandise inventories	—			4,943		—		—			4,943
Prepaid expenses and other current assets	38			797		274		(868		)	241
Total current assets	38			6,349		26,635		(27,159		)	5,863
Total property and equipment, net	—			3,524		925		—			4,449
Goodwill and intangible assets	—			277		2,089		—			2,366
Other assets	13			494		2,763		(2,739		)	531
Investment in subsidiaries	11,700			25,350		—		(37,050		)	—
TOTAL ASSETS	$	11,751		$	35,994	$	32,412	$	(66,948	)	$	13,209
Current liabilities
Short-term borrowings	$	—		$	615	$	—	$	—		$	615
Current portion of long-term debt and capitalized lease obligations	—			72		3		—			75
Merchandise payables	—			1,621		—		—			1,621
Intercompany payables	11,103			15,188		—		(26,291		)	—
Short-term deferred tax liabilities	3			485		—		(8		)	480
Other current liabilities	34			2,395		1,716		(860		)	3,285
Total current liabilities	11,140			20,376		1,719		(27,159		)	6,076
Long-term debt and capitalized lease obligations	1,590			3,736		40		(2,256		)	3,110
Pension and postretirement benefits	—			2,400		4		—			2,404
Long-term deferred tax liabilities	56			—		981		(322		)	715
Other long-term liabilities	—			889		1,205		(245		)	1,849
Total Liabilities	12,786			27,401		3,949		(29,982		)	14,154
EQUITY (DEFICIT)
Shareholder's equity (deficit)	(1,035		)	8,593		28,463		(36,972		)	(951		)
Noncontrolling interest	—			—		—		6			6
Total Equity (Deficit)	(1,035		)	8,593		28,463		(36,966		)	(945		)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	11,751		$	35,994	$	32,412	$	(66,948	)	$	13,209

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	5,766		$	725		$	(741	)	$	5,750
Cost of sales, buying and occupancy	—			4,616			291			(419		)	4,488
Selling and administrative	1			1,706			245			(322		)	1,630
Depreciation and amortization	—			76			18			—			94
Impairment charges	—			17			—			—			17
Gain on sales of assets	—			(97		)	—			—			(97		)
Total costs and expenses	1			6,318			554			(741		)	6,132
Operating income (loss)	(1		)	(552		)	171			—			(382		)
Interest expense	(60		)	(117		)	(21		)	124			(74		)
Interest and investment income (loss)	(3		)	8			136			(124		)	17
Income (loss) before income taxes	(64		)	(661		)	286			—			(439		)
Income tax (expense) benefit	—			33			(47		)	—			(14		)
Equity (deficit) in earnings in subsidiaries	(390		)	138			—			252			—
Net income (loss)	(454		)	(490		)	239			252			(453		)
Income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(454	)	$	(490	)	$	238		$	252		$	(454	)

Condensed Consolidating Statement of Operations

For the 13 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	6,638		$	1,186		$	(617	)	$	7,207
Cost of sales, buying and occupancy	—			5,272			767			(433		)	5,606
Selling and administrative	—			1,958			237			(184		)	2,011
Depreciation and amortization	—			116			32			—			148
Gain on sales of assets	—			(66		)	(2		)	—			(68		)
Total costs and expenses	—			7,280			1,034			(617		)	7,697
Operating income (loss)	—			(642		)	152			—			(490		)
Interest expense	(52		)	(123		)	(23		)	120			(78		)
Interest and investment income	91			—			126			(120		)	97
Other income	—			—			2			—			2
Income (loss) before income taxes	39			(765		)	257			—			(469		)
Income tax (expense) benefit	—			31			(190		)	—			(159		)
Equity (deficit) in earnings in subsidiaries	(667		)	(29		)	—			696			—
Net income (loss)	(628		)	(763		)	67			696			(628		)
Loss attributable to noncontrolling interests	—			—			—			80			80
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(628	)	$	(763	)	$	67		$	776		$	(548	)

Condensed Consolidating Statement of Operations

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	17,954		$	2,160		$	(2,271	)	$	17,843
Cost of sales, buying and occupancy	—			13,997			838			(1,207		)	13,628
Selling and administrative	2			5,326			741			(1,064		)	5,005
Depreciation and amortization	—			276			54			—			330
Impairment charges	—			71			—			—			71
Gain on sales of assets	—			(722		)	(8		)	—			(730		)
Total costs and expenses	2			18,948			1,625			(2,271		)	18,304
Operating income (loss)	(2		)	(994		)	535			—			(461		)
Interest expense	(204		)	(355		)	(63		)	373			(249		)
Interest and investment income (loss)	(14		)	28			332			(373		)	(27		)
Income (loss) before income taxes	(220		)	(1,321		)	804			—			(737		)
Income tax (expense) benefit	—			332			(143		)	—			189
Equity (deficit) in earnings in subsidiaries	(329		)	342			—			(13		)	—
Net income (loss)	(549		)	(647		)	661			(13		)	(548		)
Income attributable to noncontrolling interests	—			—			(1		)	—			(1		)
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(549	)	$	(647	)	$	660		$	(13	)	$	(549	)

Condensed Consolidating Statement of Operations

For the 39 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Merchandise sales and services	$	—		$	21,154		$	4,238		$	(2,293	)	$	23,099
Cost of sales, buying and occupancy	—			16,679			2,527			(1,278		)	17,928
Selling and administrative	1			6,028			1,204			(1,015		)	6,218
Depreciation and amortization	—			347			108			—			455
Impairment charges	—			10			15			—			25
Gain on sales of assets	—			(133		)	(15		)	—			(148		)
Total costs and expenses	1			22,931			3,839			(2,293		)	24,478
Operating income (loss)	(1		)	(1,777		)	399			—			(1,379		)
Interest expense	(156		)	(344		)	(70		)	349			(221		)
Interest and investment income	91			18			373			(349		)	133
Other income	—			—			4			—			4
Income (loss) before income taxes	(66		)	(2,103		)	706			—			(1,463		)
Income tax (expense) benefit	—			78			(266		)	—			(188		)
Equity (deficit) in earnings in subsidiaries	(1,585		)	145			—			1,440			—
Net income (loss)	(1,651		)	(1,880		)	440			1,440			(1,651		)
Loss attributable to noncontrolling interests	—			—			—			128			128
NET INCOME (LOSS) ATTRIBUTABLE TO HOLDINGS' SHAREHOLDERS	$	(1,651	)	$	(1,880	)	$	440		$	1,568		$	(1,523	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 13 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(454	)	$	(490	)	$	239	$	252		$	(453	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			65			—		—			65
Unrealized net gain, net of tax	—			—			27		(27		)	—
Total other comprehensive income	—			65			27		(27		)	65
Comprehensive income (loss)	(454		)	(425		)	266		225			(388		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(454	)	$	(425	)	$	266	$	224		$	(389	)

Condensed Consolidating Statement of Comprehensive Loss

For the 13 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(628	)	$	(763	)	$	67		$	696		$	(628	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			28			2			—			30
Currency translation adjustments, net of tax	5			—			(16		)	—			(11		)
Sears Canada de-consolidation	54			10			(250		)	—			(186		)
Unrealized net gain, net of tax	—			—			8			(8		)	—
Total other comprehensive income (loss)	59			38			(256		)	(8		)	(167		)
Comprehensive loss	(569		)	(725		)	(189		)	688			(795		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			401			401
Comprehensive loss attributable to Holdings' shareholders	$	(569	)	$	(725	)	$	(189	)	$	1,089		$	(394	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations			Consolidated
Net income (loss)	$	(549	)	$	(647	)	$	661	$	(13	)	$	(548	)
Other comprehensive income
Pension and postretirement adjustments, net of tax	—			196			—		—			196
Unrealized net loss, net of tax	—			—			11		(11		)	—
Total other comprehensive income	—			196			11		(11		)	196
Comprehensive income (loss)	(549		)	(451		)	672		(24		)	(352		)
Comprehensive loss attributable to noncontrolling interests	—			—			—		(1		)	(1		)
Comprehensive income (loss) attributable to Holdings' shareholders	$	(549	)	$	(451	)	$	672	$	(25	)	$	(353	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the 39 Weeks Ended November 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	(1,651	)	$	(1,880	)	$	440		$	1,440		$	(1,651	)
Other comprehensive income (loss)
Pension and postretirement adjustments, net of tax	—			85			10			—			95
Deferred loss on derivatives, net of tax	(2		)	—			—			—			(2		)
Currency translation adjustments, net of tax	5			—			(2		)	—			3
Sears Canada de-consolidation	54			10			(250		)	—			(186		)
Unrealized net gain, net of tax	—			—			120			(120		)	—
Total other comprehensive income (loss)	57			95			(122		)	(120		)	(90		)
Comprehensive income (loss)	(1,594		)	(1,785		)	318			1,320			(1,741		)
Comprehensive loss attributable to noncontrolling interests	—			—			—			438			438
Comprehensive income (loss) attributable to Holdings' shareholders	$	(1,594	)	$	(1,785	)	$	318		$	1,758		$	(1,303	)

Condensed Consolidating Statement of Cash Flows

For the 39 Weeks Ended October 31, 2015

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	249		$	(2,691	)	$	642		$	(254	)	$	(2,054	)
Proceeds from sales of property and investments				2,703			5			—			2,708
Purchases of property and equipment				(146		)	(6		)	—			(152		)
Net investing with Affiliates	(249		)	—			(378		)	627			—
Net cash provided by (used in) investing activities	(249		)	2,557			(379		)	627			2,556
Repayments of long-term debt	—			(1,385		)	(2		)	—			(1,387		)
Increase in short-term borrowings, primarily 90 days or less	—			471			—			—			471
Proceeds from sale-leaseback financing	—			508			—			—			508
Debt issuance costs	—			(50		)	—			—			(50		)
Intercompany dividend	—						(254		)	254			—
Net borrowing with Affiliates	—			627			—			(627		)	—
Net cash provided by (used in) financing activities	—			171			(256		)	(373		)	(458		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	—			37			7			—			44
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			219			31			—			250
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	256		$	38		$	—		$	294

Condensed Consolidating Statement of Cash Flows

For the 39 Weeks EndedNovember 1, 2014

millions	Parent			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	233		$	(2,473	)	$	539		$	(241	)	$	(1,942	)
Proceeds from sales of property and investments	—			250			66			—			316
Purchases of property and equipment	—			(170		)	(32		)	—			(202		)
Sears Canada de-consolidation	—			—			(207		)	—			(207		)
Proceeds from Sears Canada rights offering	169			—			—			—			169
Net investing with Affiliates	(402		)	—			(573		)	975			—
Net cash provided by (used in) investing activities	(233		)	80			(746		)	975			76
Proceeds from debt issuances	—			400			—			—			400
Repayments of long-term debt	—			(51		)	(10		)	—			(61		)
Increase in short-term borrowings, primarily 90 days or less	—			364			—			—			364
Lands' End, Inc. pre-separation funding	—			515			—			—			515
Separation of Lands' End, Inc.	—			(31		)	—			—			(31		)
Debt issuance costs	—			(20		)	—			—			(20		)
Intercompany dividend	—			—			(241		)	241			—
Net borrowing with Affiliates	—			975			—			(975		)	—
Net cash provided by (used in) financing activities	—			2,152			(251		)	(734		)	1,167
Effect of exchange rate changes on cash and cash equivalents	—			—			(3		)	—			(3		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	—			(241		)	(461		)	—			(702		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	—			537			491			—			1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	296		$	30		$	—		$	326

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SUPPLEMENTAL FINANCIAL INFORMATION

9 Months Ended

Oct. 31, 2015

Supplemental Financial Information Disclosure [Abstract]

SUPPLEMENTAL FINANCIAL INFORMATION

SUPPLEMENTAL FINANCIAL INFORMATION

Other long-term liabilities at October 31, 2015, November 1, 2014 and January 31, 2015 consisted of the following:

millions	October 31, 2015		November 1, 2014		January 31, 2015
Unearned revenues	$	703	$	754	$	739
Self-insurance reserves	604		688		611
Other	504		388		499
Total	$	1,811	$	1,830	$	1,849

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EQUITY

9 Months Ended

Oct. 31, 2015

Equity [Abstract]

EQUITY

EQUITY

Earnings per Share

The following table sets forth the components used to calculate basic and diluted loss per share attributable to Holdings' shareholders. During the 13- and 39-week period ended October 31, 2015, warrants, restricted stock awards and restricted stock units, totaling 1.4 million shares and 6.7 million shares, respectively, were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive. During both the 13- and 39-week periods ended November 1, 2014, restricted stock awards and restricted stock units, totaling 0.1 million shares, were not included in the computation of diluted loss per share attributable to Holdings' shareholders because the effect of their inclusion would have been antidilutive.

	13 Weeks Ended						39 Weeks Ended
millions, except earnings per share	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Basic weighted average shares	106.6			106.4			106.5			106.3
Diluted weighted average shares	106.6			106.4			106.5			106.3
Net loss attributable to Holdings' shareholders	$	(454	)	$	(548	)	$	(549	)	$	(1,523	)
Loss per share attributable to Holdings' shareholders:
Basic	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)
Diluted	$	(4.26	)	$	(5.15	)	$	(5.15	)	$	(14.33	)

Accumulated Other Comprehensive Loss

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

millions	October 31, 2015			November 1, 2014			January 31, 2015
Pension and postretirement adjustments (net of tax of $(296) for all periods presented)	$	(1,832	)	$	(893	)	$	(2,028	)
Currency translation adjustments (net of tax of $0 for all periods presented)	(2		)	(2		)	(2		)
Accumulated other comprehensive loss	$	(1,834	)	$	(895	)	$	(2,030	)

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.

Income Tax Expense Allocated to Each Component of Other Comprehensive Income

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

	13 Weeks Ended October 31, 2015						13 Weeks Ended November 1, 2014
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)	$	65	$	—	$	65	$	30		$	—	$	30
Currency translation adjustments	—		—		—		(11		)	—		(11		)
Sears Canada de-consolidation	—		—		—		(186		)	—		(186		)
Total other comprehensive income (loss)	$	65	$	—	$	65	$	(167	)	$	—	$	(167	)

	39 Weeks Ended October 31, 2015						39 Weeks Ended November 1, 2014
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)	$	196	$	—	$	196	$	98		$	(3	)	$	95
Deferred loss on derivatives	—		—		—		(2		)	—			(2		)
Currency translation adjustments	—		—		—		4			(1		)	3
Sears Canada de-consolidation	—		—		—		(186		)	—			(186		)
Total other comprehensive income (loss)	$	196	$	—	$	196	$	(86	)	$	(4	)	$	(90	)

⁽¹⁾  Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

Common Share Repurchase Program

During the 13- and 39-week periods ended October 31, 2015 and November 1, 2014, we did not repurchase any shares of our common stock under our common share repurchase program. At October 31, 2015, 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.

Issuance of Warrants to Purchase Common Stock

On November 21, 2014, the Company issued an aggregate of approximately 22 million warrants pursuant to the exercise of rights in the rights offering for $625 million in aggregate principal amount of 8% Senior Unsecured Notes due 2019 and warrants to purchase shares of its common stock. The exercise price and the number of shares of common stock issuable upon exercise of a warrant are both subject to adjustment in certain circumstances. As of October 31, 2015, each warrant, when exercised, will entitle the holder thereof to purchase 1.11 shares of the Company's common stock at an exercise price of $25.686 per share under the terms of the warrant agreement, adjusted from the previously disclosed one share of Company common stock at an exercise price of $28.41 per share. The exercise price is payable in cash or by surrendering 8% Senior Unsecured Notes due 2019 with a principal amount at least equal to the exercise price. The warrants may be exercised at any time after November 24, 2014. Unless earlier exercised, the warrants will expire on December 15, 2019.

We accounted for the warrants in accordance with accounting standards applicable to distinguishing liabilities from equity and debt with conversion and other options. Accordingly, the warrants have been classified as Capital in excess of par value on the Condensed Consolidated Balance Sheet based on the relative fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 at the time of issuance. The fair value of the warrants and the related 8% Senior Unsecured Notes due 2019 was estimated based on quoted market prices for the same issues using Level 1 measurements as defined in Note 4.

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LEGAL PROCEEDINGS Legal Proceedings (Details)	9 Months Ended
	Oct. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Loss Contingency, New Claims Filed, Number	4

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

9 Months Ended

Oct. 31, 2015

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, cash and domestic 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 long-term debt is disclosed in Note 2. 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 October 31, 2015, November 1, 2014 and January 31, 2015:

millions	Total Fair Value Amounts at October 31, 2015		Level 1		Level 2		Level 3
Equity method investments(1)	$	86	$	86	$	—	$	—

millions	Total Fair Value Amounts at November 1, 2014		Level 1		Level 2		Level 3
Equity method investments(1)	$	225	$	225	$	—	$	—

millions	Total Fair Value Amounts at January 31, 2015		Level 1		Level 2		Level 3
Equity method investments(1)	$	111	$	111	$	—	$	—

__________________

⁽¹⁾  Included within Other assets on the Condensed Consolidated Balance Sheets.

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

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, we measure the impairment and adjust the carrying value. With the exception of the fixed asset impairments described in Note 5, we had no significant remeasurements of such assets or liabilities to fair value during the 13- and 39-week periods ended October 31, 2015 and November 1, 2014.

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STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

9 Months Ended

Oct. 31, 2015

Store Closings Conversions And Real Estate Transactions [Abstract]

Store Closing Charges, Severance Costs, Impairments And Real Estate Transactions

STORE CLOSING CHARGES, SEVERANCE COSTS, IMPAIRMENTS AND REAL ESTATE TRANSACTIONS

Store Closings and Severance

During the 13-week period ended October 31, 2015, we closed 11 stores in our Kmart segment and three stores in our Sears Domestic segment we previously announced would close. During the 39-week period ended October 31, 2015, we closed 27 stores in our Kmart segment and nine stores in our Sears Domestic segment we previously announced would close. We made the decision to close nine stores in our Kmart segment and two stores in our Sears Domestic segment during the 13-week period ended October 31, 2015, and 31 stores in our Kmart segment and nine stores in our Sears Domestic segment during the 39-week period ended October 31, 2015.

During the 13-week period ended November 1, 2014, we closed 27 stores in our Kmart segment and six stores in our Sears Domestic segment we previously announced would close. During the 39-week period ended November 1, 2014, we closed 102 stores in our Kmart segment and 27 stores in our Sears Domestic segment we previously announced would close. We made the decision to close 73 stores in our Kmart segment and 37 stores in our Sears Domestic segment during the 13-week period ended November 1, 2014, and 113 stores in our Kmart segment and 43 stores in our Sears Domestic segment during the 39-week period ended November 1, 2014.

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.

Store closing costs and severance recorded for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014 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	$	5	$	—	$	(5	)	$	1	$	—	$	1
Sears Domestic	1		—		(3		)	—		—		(2		)
Total for the 13-week period ended October 31, 2015	$	6	$	—	$	(8	)	$	1	$	—	$	(1	)
Kmart	$	31	$	6	$	—		$	11	$	2	$	50
Sears Domestic	10		3		1			6		4		24
Sears Canada	—		1		—			—		—		1
Total for the 13-week period ended November 1, 2014	$	41	$	10	$	1		$	17	$	6	$	75
Kmart	$	14	$	2	$	22		$	4	$	—	$	42
Sears Domestic	3		2		(12		)	1		2		(4		)
Total for the 39-week period ended October 31, 2015	$	17	$	4	$	10		$	5	$	2	$	38
Kmart	$	46	$	10	$	11		$	17	$	5	$	89
Sears Domestic	12		5		3			7		12		39
Sears Canada	1		10		5			—		—		16
Total for the 39-week period ended November 1, 2014	$	59	$	25	$	19		$	24	$	17	$	144

_____________

⁽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 13- and 39-week periods ended October 31, 2015, and the 13-week period ended November 1, 2014 are recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 39-week period ended November 1, 2014 include $10 million recorded within Impairment charges and $7 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations.

Store closing cost accruals of $158 million, $153 million and $207 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at November 1, 2014	$	22		$	112		$	19		$	153
Store closing costs	31			55			(4		)	82
Payments/utilizations	(10		)	(11		)	(7		)	(28		)
Balance at January 31, 2015	43			156			8			207
Store closing costs	4			12			5			21
Payments/utilizations	(19		)	(42		)	(9		)	(70		)
Balance at October 31, 2015	$	28		$	126		$	4		$	158

Long-Lived Assets

In accordance with accounting standards governing the impairment or disposal of long-lived assets, we performed an impairment test of certain of our long-lived assets due to events and changes in circumstances during the 13- and 39-week periods ended October 31, 2015 that indicated an impairment might have occurred. As a result of impairment testing, the Company recorded impairment charges of $17 million, of which $7 million and $10 million were recorded within the Sears Domestic and Kmart segments, respectively, during the 13-week period ended October 31, 2015, and $71 million, of which $59 million and $12 million were recorded within the Sears Domestic and Kmart segments, respectively, during the 39-week period ended October 31, 2015.

As a result of impairment testing, triggered by a decline in operating performance at certain locations within the Sears Canada segment, the Company recorded impairment charges of $15 million during the 39-week period ended November 1, 2014 within the Sears Canada segment.

Real Estate Transactions

On April 1, 2015, April 13, 2015, and April 30, 2015, Holdings and General Growth Properties, Inc. ("GGP"), Simon Property Group, Inc. ("Simon") and The Macerich Company ("Macerich"), respectively, announced that they entered into three distinct real estate joint ventures (collectively, the "JVs"). Holdings contributed 31 properties to the JVs where Holdings currently operates stores (the "JV properties"), in exchange for a 50% interest in the JVs and $429 million in cash ($426 million, net of closing costs) (the "JV transactions"). The JV transactions valued the JV properties at $858 million in the aggregate.

On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction (the "Seritage transaction") with Seritage Growth Properties ("Seritage"), a recently formed, independent publicly traded real estate investment trust ("REIT"). As part of the Seritage transaction, Holdings sold 235 properties to Seritage (the "REIT properties") along with Holdings' 50% interest in the JVs. Holdings received aggregate gross proceeds from the Seritage transaction of $2.7 billion ($2.6 billion, net of closing costs). The Seritage transaction was partially financed through the sale of common shares and limited partnership units, totaling $1.6 billion, including $745 million received from ESL and its affiliates as further described in Note 13. The Seritage transaction was also partially financed by Seritage through mortgage and mezzanine loan proceeds totaling $1.2 billion. Immediately prior to completing the Seritage transaction, subsidiaries of Kmart and Sears obtained mortgage and mezzanine financing for the REIT properties. Upon completion of the Seritage transaction, all obligations with respect to such financing were assumed by Seritage. The Seritage transaction valued the REIT properties at $2.3 billion in the aggregate.

In connection with the Seritage transaction and JV transactions, Holdings has entered into agreements with Seritage and the JVs under which Holdings leases 255 of the properties (the "Master Leases"), with the remaining properties being leased by Seritage to third parties. The Master Leases generally are triple net leases with respect to the space occupied by Holdings, and Holdings has the obligation to pay rent, costs and expenses of operation, repair, and maintenance of the space occupied. The Master Leases have an initial term of 10 years. The master lease for the REIT properties provides Holdings three options for five-year renewals of the term and a final option for a four-year renewal. The Master Leases for the JV properties provide Holdings two options for five-year renewals of the term. Seritage and the JVs have a recapture right with respect to approximately 50% of the space within the stores at the REIT properties and JV properties (subject to certain exceptions), in addition to all of the automotive care centers which are free-standing or attached as “appendages”, and all outparcels or outlots, as well as certain portions of parking areas and common areas, except as set forth in the Master Leases, for no additional consideration. With respect to 21 stores identified in the Master Leases, Seritage has the further additional right to recapture 100% of the space within the Holdings’ main store, effectively terminating the Master Leases with respect to such properties. The Master Leases also provide Holdings certain rights to terminate the Master Leases with respect to REIT properties or JV properties that cease to be profitable for operation by Holdings. In order to terminate the Master Lease with respect to a certain property, Holdings must make a payment to Seritage or the JV of an amount equal to one year of rent (together with taxes and other expenses) with respect to such property. Such termination right, however, is limited so that it will not have the effect of reducing the fixed rent under the Master Lease for the REIT properties by more than 20% per annum.

Also, in connection with the Seritage transaction and JV transactions, Holdings assigned its lease agreements with third party tenants for REIT properties and JV properties to Seritage and each of the JVs, respectively, and also assigned rental income from Lands' End for REIT properties and JV properties to Seritage and each of the JVs, respectively.

The initial amount of aggregate annual base rent under the Master Leases is $134 million for the REIT properties and $42 million for the JV properties, with increases of 2% per year beginning in the second lease year for the REIT properties and in the fourth lease year for the JV properties. Holdings recorded rent expense of $27 million and $43 million, respectively, in Cost of sales, buying and occupancy for the 13- and 39-week periods ended October 31, 2015. Rent expense consists of straight-line rent expense of $50 million and $73 million, respectively, offset by amortization of a deferred gain on sale-leaseback of $23 million and $30 million, respectively, for the 13- and 39-week periods ended October 31, 2015. For the 13- and 39-week periods ended October 31, 2015, rent expense of $23 million and $38 million, respectively, (consisting of straight-line rent expense of $41 million and $62 million, respectively, offset by amortization of a deferred gain on sale-leaseback of $18 million and $24 million, respectively) was recorded in our Sears Domestic segment, and rent expense of $4 million and $5 million, respectively (consisting of straight-line rent expense of $9 million and $11 million, respectively, offset by amortization of a deferred gain on sale-leaseback of $5 million and $6 million, respectively), was recorded in our Kmart segment.

We accounted for the Seritage transaction and JV transactions in accordance with accounting standards applicable to real estate sales and sale-leaseback transactions. We determined that the Seritage transaction qualifies for sales recognition and sale-leaseback accounting. Because of our initial ownership interest in the JVs and continuing involvement in the properties, we determined that the JV transactions, which occurred in the first quarter of 2015, did not initially qualify for sale-leaseback accounting and, therefore, accounted for the JV transactions as financing transactions and, accordingly, recorded a sale-leaseback financing obligation of $426 million and continued to report the real property assets on our Condensed Consolidated Balance Sheets at May 2, 2015. Upon the sale of our 50% interest in the JVs to Seritage, the continuing involvement through an ownership interest in the buyer-lessor no longer exists, and Holdings determined that the JV transactions then qualified for sales recognition and sale-leaseback accounting, with the exception of four properties for which we still have continuing involvement as a result of an obligation to redevelop the stores for a third-party tenant and pay rent on behalf of the third-party tenant until it commences rent payments to the JVs.

With the exception of the four properties that have continuing involvement, in accordance with accounting standards related to sale-leaseback transactions, Holdings recognized any loss on sale immediately, any gain on sale in excess of the present value of minimum lease payments immediately, and any remaining gain was deferred and will be recognized in proportion to the related rent expense over the lease term. Holdings received aggregate net proceeds of $3.1 billion for the Seritage transaction and JV transactions. The carrying amount of Property and equipment, net and lease balances related to third-party leases that were assigned to Seritage and the JVs was $1.5 billion at July 7, 2015, of which $1.3 billion was recorded in our Sears Domestic segment and $175 million in our Kmart segment. Accordingly, during the second quarter of 2015, Holdings recognized an immediate net gain of $508 million within Gain on sales of assets on the Condensed Consolidated Statement of Operations for the 39-week period ended October 31, 2015, comprised of a gain of $625 million for the amount of gain on sale in excess of the present value of minimum lease payments, offset by a loss of $117 million for properties where the fair value was less than the carrying value and the write-off of lease balances related to third-party leases that were assigned to Seritage and the JVs. For the 39-week period ended October 31, 2015, an immediate net gain of $371 million (comprised of a gain of $471 million and loss of $100 million) was recorded in our Sears Domestic segment, and an immediate net gain of $137 million (comprised of a gain of $154 million and loss of $17 million) was recorded in our Kmart segment. The remaining gain of $894 million was deferred and will be recognized in proportion to the related rent expense, which is a component of Cost of sales, buying and occupancy, on the Condensed Consolidated Statement of Operations, over the lease term. At October 31, 2015, $89 million of the deferred gain on sale-leaseback is classified as current within Other current liabilities and $775 million is classified as long-term as Deferred gain on sale-leaseback on the Condensed Consolidated Balance Sheets.

Holdings accounted for the four properties that have continuing involvement as a financing transaction in accordance with accounting standards related to sale-leaseback transactions. Accordingly, Holdings recorded a sale-leaseback financing obligation of $164 million, which is classified as long-term as Sale-leaseback financing obligation on the Condensed Consolidated Balance Sheet at October 31, 2015. The decrease in the sale-leaseback financing obligation from $426 million at May 2, 2015 to $164 million at October 31, 2015 represents a noncash change. We continued to report the real property assets of $51 million at October 31, 2015 on our Condensed Consolidated Balance Sheets, which are included in our Sears Domestic segment.

The obligation for future minimum lease payments at October 31, 2015 for the four properties that have continuing involvement is $105 million over the 10 year lease term, and is $10 million for each of 2016, 2017, 2018, and 2019, respectively, and $11 million for 2020. This obligation for future minimum lease payments includes $60 million of rent on behalf of a third-party tenant over the 10 year lease term. We will no longer have the obligation to pay rent on behalf of the third-party tenant when it commences rent payments to the JVs, which we expect to occur within one to two years.

During the 13-week period ended October 31, 2015, we recorded gains on the sales of assets of $83 million recognized on the sale of one Sears Full-line store for which we received $102 million of cash proceeds, $90 million of which was received during the third quarter of 2014. As the leaseback ended and the remaining cash proceeds of $12 million were received during the 13-week period ended October 31, 2015, we recognized the gain that had previously been deferred. During the 39-week period ended October 31, 2015, we also recorded gains on the sales of assets of $86 million recognized on the sale of two Sears Full-line stores for which we received $96 million of cash proceeds, and $10 million recognized on the surrender and early termination of one Kmart store lease. In connection with one of the Sears Full-line stores, we entered into a leaseback agreement for up to six months. We determined that we have surrendered substantially all of our rights and obligations, and, therefore, immediate gain recognition is appropriate on these transactions.

During the 39-week period ended November 1, 2014, we recorded gains on the sales of assets of $148 million in connection with real estate transactions, which included a gain of $42 million recognized on the sale of two Sears Full-line stores for which we received $64 million of cash proceeds, a gain of $13 million recognized on the sale of a distribution facility in our Sears Domestic segment for which we received $16 million of cash proceeds and a gain of $10 million recognized on sale of a Kmart store for which we received $10 million of cash proceeds.

Additionally, during the 39-week period ended November 1, 2014, we recorded investment income of $35 million related to the sale of joint venture interests for which Sears Canada received $65 million ($71 million Canadian) in cash proceeds.

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BENEFIT PLANS

9 Months Ended

Oct. 31, 2015

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						39 Weeks Ended
millions	October 31, 2015			November 1, 2014			October 31, 2015			November 1, 2014
Components of net periodic expense:
Interest cost	$	54		$	68		$	162		$	219
Expected return on plan assets	(62		)	(75		)	(187		)	(244		)
Amortization of experience losses	65			30			196			92
Net periodic expense	$	57		$	23		$	171		$	67

Contributions

During the 13- and 39-week periods ended October 31, 2015, we made total contributions of $117 million and $246 million, respectively, to our pension and postretirement plans. During the 13- and 39-week periods ended November 1, 2014, we made total contributions of $161 million and $366 million, respectively, to our pension and postretirement plans. We anticipate making aggregate contributions to our defined benefit and postretirement plans of approximately $71 million over the remainder of 2015.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Condensed Consolidating Statement of Operations) (Detail) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services	[1],[2]	$ 5,750	$ 7,207	$ 17,843	$ 23,099
Cost of sales, buying and occupancy		4,488	5,606	13,628	17,928
Selling and administrative		1,630	2,011	5,005	6,218
Depreciation and amortization		94	148	330	455
Impairment charges		17	0	71	25
Gain on sales of assets		(97)	(68)	(730)	(148)
Total costs and expenses		6,132	7,697	18,304	24,478
Operating Income (Loss)		(382)	(490)	(461)	(1,379)
Interest Expense		(74)	(78)	(249)	(221)
Investment Income, Net		17	97	(27)	133
Other income		0	2	0	4
Loss before income taxes		(439)	(469)	(737)	(1,463)
Income Tax Expense (Benefit)		(14)	(159)	189	(188)
Equity (deficit) in earnings in subsidiaries		0	0	0	0
Net loss		(453)	(628)	(548)	(1,651)
Loss attributable to noncontrolling interests		(1)	80	(1)	128
Net Income (Loss) Attributable to Parent		(454)	(548)	(549)	(1,523)
Parent [Member]
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	0	2	1
Depreciation and amortization		0	0	0	0
Impairment charges		0		0	0
Gain on sales of assets		0	0	0	0
Total costs and expenses		1	0	2	1
Operating Income (Loss)		(1)	0	(2)	(1)
Interest Expense		(60)	(52)	(204)	(156)
Investment Income, Net		(3)	91	(14)	91
Other income			0		0
Loss before income taxes		(64)	39	(220)	(66)
Income Tax Expense (Benefit)		0	0	0	0
Equity (deficit) in earnings in subsidiaries		(390)	(667)	(329)	(1,585)
Net loss		(454)	(628)	(549)	(1,651)
Loss attributable to noncontrolling interests		0	0	0	0
Net Income (Loss) Attributable to Parent		(454)	(628)	(549)	(1,651)
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services		5,766	6,638	17,954	21,154
Cost of sales, buying and occupancy		4,616	5,272	13,997	16,679
Selling and administrative		1,706	1,958	5,326	6,028
Depreciation and amortization		76	116	276	347
Impairment charges		17		71	10
Gain on sales of assets		(97)	(66)	(722)	(133)
Total costs and expenses		6,318	7,280	18,948	22,931
Operating Income (Loss)		(552)	(642)	(994)	(1,777)
Interest Expense		(117)	(123)	(355)	(344)
Investment Income, Net		8	0	28	18
Other income			0		0
Loss before income taxes		(661)	(765)	(1,321)	(2,103)
Income Tax Expense (Benefit)		33	31	332	78
Equity (deficit) in earnings in subsidiaries		138	(29)	342	145
Net loss		(490)	(763)	(647)	(1,880)
Loss attributable to noncontrolling interests		0	0	0	0
Net Income (Loss) Attributable to Parent		(490)	(763)	(647)	(1,880)
Non-Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services		725	1,186	2,160	4,238
Cost of sales, buying and occupancy		291	767	838	2,527
Selling and administrative		245	237	741	1,204
Depreciation and amortization		18	32	54	108
Impairment charges		0		0	15
Gain on sales of assets		0	(2)	(8)	(15)
Total costs and expenses		554	1,034	1,625	3,839
Operating Income (Loss)		171	152	535	399
Interest Expense		(21)	(23)	(63)	(70)
Investment Income, Net		136	126	332	373
Other income			2		4
Loss before income taxes		286	257	804	706
Income Tax Expense (Benefit)		(47)	(190)	(143)	(266)
Equity (deficit) in earnings in subsidiaries		0	0	0	0
Net loss		239	67	661	440
Loss attributable to noncontrolling interests		(1)	0	(1)	0
Net Income (Loss) Attributable to Parent		238	67	660	440
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Merchandise sales and services		(741)	(617)	(2,271)	(2,293)
Cost of sales, buying and occupancy		(419)	(433)	(1,207)	(1,278)
Selling and administrative		(322)	(184)	(1,064)	(1,015)
Depreciation and amortization		0	0	0	0
Impairment charges		0		0	0
Gain on sales of assets		0	0	0	0
Total costs and expenses		(741)	(617)	(2,271)	(2,293)
Operating Income (Loss)		0	0	0	0
Interest Expense		124	120	373	349
Investment Income, Net		(124)	(120)	(373)	(349)
Other income			0		0
Loss before income taxes		0	0	0	0
Income Tax Expense (Benefit)		0	0	0	0
Equity (deficit) in earnings in subsidiaries		252	696	(13)	1,440
Net loss		252	696	(13)	1,440
Loss attributable to noncontrolling interests		0	80	0	128
Net Income (Loss) Attributable to Parent		$ 252	$ 776	$ (13)	$ 1,568

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $315 million and $329 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $1.0 billion and $1.1 billion for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at owned Sears locations, participation in the Shop Your Way® program and corporate shared services of $14 million and $18 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $45 million and $41 million for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Condensed Consolidating Statement of Cash Flows) (Detail) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities				$ (2,054)	$ (1,942)
Proceeds from sales of property and investments	[1],[2]			2,708	316
Purchases of property and equipment		$ (66)	$ (76)	(152)	(202)
Cash Divested from Deconsolidation				0	(207)
Proceeds from Divestiture of Interest in Consolidated Subsidiaries				0	169	[3]
Net investing with Affiliates				0	0
Net cash provided by investing activities				2,556	76
Proceeds from Issuance of Long-term Debt					400
Repayments of long-term debt				(1,387)	(61)
Increase in short-term borrowings, primarily 90 days or less				471	364
Proceeds from sale-leaseback financing	[1]			508	0
Separation of Lands' End, Inc.				0	(31)
Intercompany dividend				0	0
Debt issuance costs				(50)	(20)
Net borrowing with Affiliates				0	0
Net cash provided by (used in) financing activities				(458)	1,167
Effect of exchange rate changes on cash and cash equivalents				0	(3)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				44	(702)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				250	1,028
CASH AND CASH EQUIVALENTS, END OF PERIOD		294	326	294	326
Lands' End, Inc. pre-separation funding				0	515
Parent [Member]
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities				$ 249	233
Proceeds from sales of property and investments					0
Purchases of property and equipment					0
Cash Divested from Deconsolidation					0
Proceeds from Divestiture of Interest in Consolidated Subsidiaries					169
Net investing with Affiliates				$ (249)	(402)
Net cash provided by investing activities				(249)	(233)
Proceeds from Issuance of Long-term Debt					0
Repayments of long-term debt				0	0
Increase in short-term borrowings, primarily 90 days or less				0	0
Proceeds from sale-leaseback financing				0
Separation of Lands' End, Inc.					0
Intercompany dividend				0	0
Debt issuance costs				0	0
Net borrowing with Affiliates				0	0
Net cash provided by (used in) financing activities				0	0
Effect of exchange rate changes on cash and cash equivalents					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	0	0
Lands' End, Inc. pre-separation funding					0
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities				(2,691)	(2,473)
Proceeds from sales of property and investments				2,703	250
Purchases of property and equipment				(146)	(170)
Cash Divested from Deconsolidation					0
Proceeds from Divestiture of Interest in Consolidated Subsidiaries					0
Net investing with Affiliates				0	0
Net cash provided by investing activities				2,557	80
Proceeds from Issuance of Long-term Debt					400
Repayments of long-term debt				(1,385)	(51)
Increase in short-term borrowings, primarily 90 days or less				471	364
Proceeds from sale-leaseback financing				$ 508
Separation of Lands' End, Inc.					(31)
Intercompany dividend					0
Debt issuance costs				$ (50)	(20)
Net borrowing with Affiliates				627	975
Net cash provided by (used in) financing activities				171	2,152
Effect of exchange rate changes on cash and cash equivalents					0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				37	(241)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				219	537
CASH AND CASH EQUIVALENTS, END OF PERIOD		256	296	256	296
Lands' End, Inc. pre-separation funding					515
Non-Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities				642	539
Proceeds from sales of property and investments				5	66
Purchases of property and equipment				(6)	(32)
Cash Divested from Deconsolidation					(207)
Proceeds from Divestiture of Interest in Consolidated Subsidiaries					0
Net investing with Affiliates				(378)	(573)
Net cash provided by investing activities				(379)	(746)
Proceeds from Issuance of Long-term Debt					0
Repayments of long-term debt				(2)	(10)
Increase in short-term borrowings, primarily 90 days or less				0	0
Proceeds from sale-leaseback financing				0
Separation of Lands' End, Inc.					0
Intercompany dividend				(254)	(241)
Debt issuance costs				0	0
Net borrowing with Affiliates				0	0
Net cash provided by (used in) financing activities				(256)	(251)
Effect of exchange rate changes on cash and cash equivalents					(3)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				7	(461)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				31	491
CASH AND CASH EQUIVALENTS, END OF PERIOD		38	30	38	30
Lands' End, Inc. pre-separation funding					0
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Net cash used in operating activities				(254)	(241)
Proceeds from sales of property and investments				0	0
Purchases of property and equipment				0	0
Cash Divested from Deconsolidation					0
Proceeds from Divestiture of Interest in Consolidated Subsidiaries					0
Net investing with Affiliates				627	975
Net cash provided by investing activities				627	975
Proceeds from Issuance of Long-term Debt					0
Repayments of long-term debt				0	0
Increase in short-term borrowings, primarily 90 days or less				0	0
Proceeds from sale-leaseback financing				0
Separation of Lands' End, Inc.					0
Intercompany dividend				254	241
Debt issuance costs				0	0
Net borrowing with Affiliates				(627)	(975)
Net cash provided by (used in) financing activities				(373)	(734)
Effect of exchange rate changes on cash and cash equivalents					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	$ 0	0
Lands' End, Inc. pre-separation funding					$ 0

[1] Holdings received cash proceeds of $2.7 billion ($2.6 billion, net of closing costs) from the Seritage transaction and $429 million ($426 million, net of closing costs) from the JV transactions. Proceeds from the Seritage transaction are included in Proceeds from sales of property and investments ($2.6 billion), and Proceeds from sale-leaseback financing ($82 million) for the 39 weeks ended October 31, 2015. Proceeds from the JV transactions are included in Proceeds from sale-leaseback financing ($426 million) for the 39 weeks ended October 31, 2015.

[2] The Seritage transaction was partially financed through the sale of common shares and limited partnership units (the "rights offering"), totaling $1.6 billion, including $745 million received from ESL and its affiliates.

[3] All proceeds were received from ESL and its affiliates.

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GUARANTOR/NON-GUARANTOR SUBSIDIARY FINANCIAL INFORMATION (Condensed Consolidating Balance Sheet) (Detail) - USD ($) $ in Millions		Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014	Feb. 01, 2014
Current assets
Cash and cash equivalents		$ 294	$ 250	$ 326	$ 1,028
Intercompany receivables		0	0	0
Accounts receivable	[1]	475	429	546
Merchandise inventories		6,208	4,943	6,464
Prepaid expenses and other current assets		242	241	255
Total current assets		7,219	5,863	7,591
Total property and equipment, net		2,668	4,449	4,561
Goodwill and intangible assets		2,359	2,366	2,373
Other assets		523	531	644
Investment in subsidiaries		0	0	0
TOTAL ASSETS		12,769	13,209	15,169
Current liabilities
Short-term borrowings	[2]	686	615	2,096
Current portion of long-term debt and capitalized lease obligations		71	75	75
Merchandise payables		2,295	1,621	2,431
Intercompany payables		0	0	0
Short-term deferred tax liabilities		422	480	481
Other current liabilities		3,044	3,285	3,331
Total current liabilities		6,518	6,076	8,414
Long-term debt and capitalized lease obligations	[3]	2,124	3,110	2,769
Pension and postretirement benefits		2,133	2,404	1,320
Deferred gain on sale-leaseback		775	0	0
Sale-leaseback financing obligation		164	0	0
Long-term deferred tax liabilities		537	715	710
Other long-term liabilities		1,811	1,849	1,830
Total Liabilities		14,062	14,154	15,043
EQUITY (DEFICIT)
Shareholder's equity		(1,300)	(951)	120
Noncontrolling interest		7	6	6
Total Equity		(1,293)	(945)	126	2,183
TOTAL LIABILITIES AND EQUITY (DEFICIT)		12,769	13,209	15,169
Parent [Member]
Current assets
Cash and cash equivalents		0	0	0	0
Intercompany receivables		0	0	0
Accounts receivable		9	0	103
Merchandise inventories		0	0	0
Prepaid expenses and other current assets		39	38	43
Total current assets		48	38	146
Total property and equipment, net		0	0	0
Goodwill and intangible assets		0	0	0
Other assets		6	13	117
Investment in subsidiaries		11,328	11,700	13,013
TOTAL ASSETS		11,382	11,751	13,276
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		11,987	11,103	12,101
Short-term deferred tax liabilities		3	3	1
Other current liabilities		28	34	4
Total current liabilities		12,018	11,140	12,106
Long-term debt and capitalized lease obligations		681	1,590	1,238
Pension and postretirement benefits		0	0	0
Deferred gain on sale-leaseback		0
Sale-leaseback financing obligation		0
Long-term deferred tax liabilities		56	56	0
Other long-term liabilities		0	0	0
Total Liabilities		12,755	12,786	13,344
EQUITY (DEFICIT)
Shareholder's equity		(1,373)	(1,035)	(68)
Noncontrolling interest		0	0	0
Total Equity		(1,373)	(1,035)	(68)
TOTAL LIABILITIES AND EQUITY (DEFICIT)		11,382	11,751	13,276
Guarantor Subsidiaries [Member]
Current assets
Cash and cash equivalents		256	219	296	537
Intercompany receivables		0	0	0
Accounts receivable		441	390	409
Merchandise inventories		6,208	4,943	6,464
Prepaid expenses and other current assets		611	797	796
Total current assets		7,516	6,349	7,965
Total property and equipment, net		1,852	3,524	3,610
Goodwill and intangible assets		270	277	284
Other assets		700	494	433
Investment in subsidiaries		25,701	25,350	25,589
TOTAL ASSETS		36,039	35,994	37,881
Current liabilities
Short-term borrowings		686	615	2,096
Current portion of long-term debt and capitalized lease obligations		69	72	71
Merchandise payables		2,295	1,621	2,431
Intercompany payables		15,194	15,188	14,579
Short-term deferred tax liabilities		427	485	501
Other current liabilities		2,215	2,395	2,355
Total current liabilities		20,886	20,376	22,033
Long-term debt and capitalized lease obligations		3,058	3,736	3,668
Pension and postretirement benefits		2,128	2,400	1,316
Deferred gain on sale-leaseback		775
Sale-leaseback financing obligation		164
Long-term deferred tax liabilities		0	0	0
Other long-term liabilities		865	889	774
Total Liabilities		27,876	27,401	27,791
EQUITY (DEFICIT)
Shareholder's equity		8,163	8,593	10,090
Noncontrolling interest		0	0	0
Total Equity		8,163	8,593	10,090
TOTAL LIABILITIES AND EQUITY (DEFICIT)		36,039	35,994	37,881
Non-Guarantor Subsidiaries [Member]
Current assets
Cash and cash equivalents		38	31	30	491
Intercompany receivables		27,181	26,291	26,681
Accounts receivable		25	39	34
Merchandise inventories		0	0	0
Prepaid expenses and other current assets		269	274	288
Total current assets		27,513	26,635	27,033
Total property and equipment, net		816	925	951
Goodwill and intangible assets		2,089	2,089	2,089
Other assets		2,129	2,763	2,535
Investment in subsidiaries		0	0	0
TOTAL ASSETS		32,547	32,412	32,608
Current liabilities
Short-term borrowings		0	0	0
Current portion of long-term debt and capitalized lease obligations		2	3	4
Merchandise payables		0	0	0
Intercompany payables		0	0	0
Short-term deferred tax liabilities		0	0	0
Other current liabilities		1,470	1,716	1,823
Total current liabilities		1,472	1,719	1,827
Long-term debt and capitalized lease obligations		39	40	36
Pension and postretirement benefits		5	4	4
Deferred gain on sale-leaseback		0
Sale-leaseback financing obligation		0
Long-term deferred tax liabilities		976	981	917
Other long-term liabilities		1,181	1,205	1,305
Total Liabilities		3,673	3,949	4,089
EQUITY (DEFICIT)
Shareholder's equity		28,874	28,463	28,519
Noncontrolling interest		0	0	0
Total Equity		28,874	28,463	28,519
TOTAL LIABILITIES AND EQUITY (DEFICIT)		32,547	32,412	32,608
Eliminations [Member]
Current assets
Cash and cash equivalents		0	0	0	$ 0
Intercompany receivables		(27,181)	(26,291)	(26,681)
Accounts receivable		0	0	0
Merchandise inventories		0	0	0
Prepaid expenses and other current assets		(677)	(868)	(872)
Total current assets		(27,858)	(27,159)	(27,553)
Total property and equipment, net		0	0	0
Goodwill and intangible assets		0	0	0
Other assets		(2,312)	(2,739)	(2,441)
Investment in subsidiaries		(37,029)	(37,050)	(38,602)
TOTAL ASSETS		(67,199)	(66,948)	(68,596)
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		(27,181)	(26,291)	(26,680)
Short-term deferred tax liabilities		(8)	(8)	(21)
Other current liabilities		(669)	(860)	(851)
Total current liabilities		(27,858)	(27,159)	(27,552)
Long-term debt and capitalized lease obligations		(1,654)	(2,256)	(2,173)
Pension and postretirement benefits		0	0	0
Deferred gain on sale-leaseback		0
Sale-leaseback financing obligation		0
Long-term deferred tax liabilities		(495)	(322)	(207)
Other long-term liabilities		(235)	(245)	(249)
Total Liabilities		(30,242)	(29,982)	(30,181)
EQUITY (DEFICIT)
Shareholder's equity		(36,964)	(36,972)	(38,421)
Noncontrolling interest		7	6	6
Total Equity		(36,957)	(36,966)	(38,415)
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$ (67,199)	$ (66,948)	$ (68,596)

[1] Includes $85 million, $80 million and $61 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively, of net amounts receivable from SHO, and a net amount receivable from Lands' End of $4 million, $5 million and $5 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively. Also, includes $8 million of net amounts receivable from Seritage at October 31, 2015.

[2] Includes a $400 million secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, at November 1, 2014 and January 31, 2015.

[3] Includes $11 million of Senior Secured Notes and $3 million of Subsidiary Notes held by ESL and its affiliates at October 31, 2015. Includes $205 million of Senior Secured Notes and $3 million of Subsidiary Notes held by ESL and its affiliates at November 1, 2014 and January 31, 2015. Also includes $201 million and $299 million of Senior Unsecured Notes held by ESL and its affiliates at October 31, 2015 and January 31, 2015, respectively.

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BORROWINGS (Total Borrowings) (Detail) - USD ($) $ in Millions	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014	Sep. 30, 2014	Sep. 15, 2014
Short-term borrowings:
Unsecured commercial paper	$ 9	$ 2	$ 91
Secured borrowings	677	213	1,605
Long-term debt, including current portion:
Notes and debentures outstanding	1,989	2,913	2,564
Capitalized lease obligations	206	272	280
Debt and Capital Lease Obligations	2,881	3,800	4,940
Fair value of long-term debt	2,200	2,900	2,300
Esl Investments Inc [Member]
Short-term borrowings:
Secured short-term loan	$ 0	$ 400	$ 400	$ 200	$ 200

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EQUITY (Income Tax Expense Allocated to Each Component of Other Comprehensive Income) (Loss) (Detail) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Other comprehensive income (loss) Pension and postretirement adjustments, net of tax amount
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Adjustment, before Tax	[1]	$ (65)	$ 30	$ (196)	$ 98
Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, Tax	[1]	0	0	0	(3)
Pension and postretirement adjustments, net of tax	[1]	65	30	196	95
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax				0	(2)
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax				0	0
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax				0	(2)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, before Tax		0	(11)	0	4
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax		0	0	0	(1)
Currency translation adjustments, net of tax		0	(11)	0	3
Other Comprehensive Income (Loss), Sears Canada Deconsolidation, Before Tax		0	(186)	0	(186)
Other Comprehensive Income (Loss), Sears Canada Deconsolidation, Tax		0	0	0	0
Other Comprehensive Income (Loss), Sears Canada Deconsolidation, Net of Tax		0	186	0	186
Other Comprehensive Income (Loss), before Tax		65	(167)	196	(86)
Other Comprehensive Income (Loss), Tax		0	0	0	(4)
Total other comprehensive income (loss)		$ 65	$ (167)	$ 196	$ (90)

[1] Included in the computation of net periodic benefit expense. See Note 7 to the Condensed Consolidated Financial Statements.

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RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Oct. 31, 2015

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Presentation of Debt Issuance Costs

In April 2015, the Financial Accounting Standards Board ("FASB") issued an accounting standards update which simplifies the presentation of debt issuance costs by requiring that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with discounts or premiums. In August 2015, the FASB issued an accounting standards update which adds paragraphs about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements, and allows for the presentation of debt issuance costs as an asset regardless of whether or not there is an outstanding balance on the line-of-credit arrangement. These updates will be effective for the Company in the first quarter of 2016, and early adoption of the updates is permitted. The adoption of the new standards is not expected to have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Consolidation

In February 2015, the FASB issued an accounting standards update which revises the consolidation model. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Extraordinary and Unusual Items

In January 2015, the FASB issued an accounting standards update which eliminates the concept of an extraordinary item. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity

In November 2014, the FASB issued an accounting standards update which clarifies how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features-including the embedded derivative feature being evaluated for bifurcation-in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. This update was effective and adopted by the Company in the first quarter of 2015. The adoption of the new standard did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Presentation of Financial Statements - Going Concern

In August 2014, the FASB issued an accounting standards update which requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the financial statements are issued. If substantial doubt exists, additional disclosures are required. This update will be effective for the Company in the first quarter of 2017, and early application is permitted. The adoption of the new standard is not expected to have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures.

Revenue from Contracts with Customers

In May 2014, the FASB issued an accounting standards update which replaces the current revenue recognition standards. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard was initially released as effective for fiscal years beginning after December 15, 2016, however, the FASB has decided to defer the effective date of this accounting standard update for one year. The update may be applied retrospectively for each period presented or as a cumulative-effect adjustment at the date of adoption. The Company is evaluating the effect of adopting this new standard.

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity

In April 2014, the FASB issued an accounting standards update which modifies the requirements for disposals to qualify as discontinued operations and expands related disclosure requirements. The update was effective and adopted by the Company in the first quarter of 2015 and did not have a material impact on the Company's consolidated financial position, results of operations, cash flows or disclosures. The adoption of the update may impact whether future disposals qualify as discontinued operations and therefore could impact the Company's financial statement presentation and disclosures.

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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (Tables)

9 Months Ended

Oct. 31, 2015

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 October 31, 2015, November 1, 2014 and January 31, 2015:

millions	Total Fair Value Amounts at October 31, 2015		Level 1		Level 2		Level 3
Equity method investments(1)	$	86	$	86	$	—	$	—

millions	Total Fair Value Amounts at November 1, 2014		Level 1		Level 2		Level 3
Equity method investments(1)	$	225	$	225	$	—	$	—

millions	Total Fair Value Amounts at January 31, 2015		Level 1		Level 2		Level 3
Equity method investments(1)	$	111	$	111	$	—	$	—

__________________

⁽¹⁾  Included within Other assets on the Condensed Consolidated Balance Sheets.

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EQUITY (Components of Accumulated Other Comprehensive Loss) (Detail) - USD ($) $ in Millions	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Equity [Abstract]
Pension and postretirement adjustments (net of tax of $(296) for all periods presented)	$ (1,832)	$ (2,028)	$ (893)
Currency translation adjustments (net of tax of $0 for all periods presented)	(2)	(2)	(2)
Accumulated other comprehensive loss	$ (1,834)	$ (2,030)	$ (895)

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BORROWINGS (Wholly owned Insurance Subsidiary and Intercompany Securities) (Details) $ in Billions	Oct. 31, 2015 USD ($)	Jan. 31, 2015 USD ($)	Nov. 01, 2014 USD ($)	May. 31, 2006 USD ($)	Nov. 30, 2003 USD ($) Store
Debt Instrument [Line Items]
Mortgage-backed securities owned					$ 1.3
Asset-backed securities issued				$ 1.8
Subsidiaries [Member]
Debt Instrument [Line Items]
Number of stores | Store					125
Securitized trademark rights [Member]
Debt Instrument [Line Items]
Carrying Amount Of Asset Securitized	$ 1.0	$ 1.0	$ 1.0
Securitized real estate assets [Member]
Debt Instrument [Line Items]
Carrying Amount Of Asset Securitized	$ 0.6	$ 0.7	$ 0.7

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions		Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Current assets
Cash and cash equivalents		$ 294	$ 250	$ 326
Accounts receivable	[1]	475	429	546
Merchandise inventories		6,208	4,943	6,464
Prepaid expenses and other current assets		242	241	255
Total current assets		7,219	5,863	7,591
Property and equipment (net of accumulated depreciation and amortization of $2,925, $4,001 and $3,864)		2,668	4,449	4,561
Goodwill		269	269	269
Trade names and other intangible assets		2,090	2,097	2,104
Other assets		523	531	644
TOTAL ASSETS		12,769	13,209	15,169
Current liabilities
Short-term borrowings	[2]	686	615	2,096
Current portion of long-term debt and capitalized lease obligations		71	75	75
Merchandise payables		2,295	1,621	2,431
Other current liabilities		1,927	2,087	2,100
Unearned revenues		793	818	825
Other taxes		324	380	406
Short-term deferred tax liabilities		422	480	481
Total current liabilities		6,518	6,076	8,414
Long-term debt and capitalized lease obligations	[3]	2,124	3,110	2,769
Pension and postretirement benefits		2,133	2,404	1,320
Deferred gain on sale-leaseback		775	0	0
Sale-leaseback financing obligation		164	0	0
Other long-term liabilities		1,811	1,849	1,830
Long-term deferred tax liabilities		537	715	710
Total Liabilities		$ 14,062	$ 14,154	$ 15,043
Commitments and contingencies
EQUITY (DEFICIT)
Total Equity (Deficit)		$ (1,293)	$ (945)	$ 126
TOTAL LIABILITIES AND EQUITY (DEFICIT)		$ 12,769	$ 13,209	$ 15,169

[1] Includes $85 million, $80 million and $61 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively, of net amounts receivable from SHO, and a net amount receivable from Lands' End of $4 million, $5 million and $5 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively. Also, includes $8 million of net amounts receivable from Seritage at October 31, 2015.

[2] Includes a $400 million secured short-term loan with JPP II, LLC and JPP, LLC, entities affiliated with ESL, at November 1, 2014 and January 31, 2015.

[3] Includes $11 million of Senior Secured Notes and $3 million of Subsidiary Notes held by ESL and its affiliates at October 31, 2015. Includes $205 million of Senior Secured Notes and $3 million of Subsidiary Notes held by ESL and its affiliates at November 1, 2014 and January 31, 2015. Also includes $201 million and $299 million of Senior Unsecured Notes held by ESL and its affiliates at October 31, 2015 and January 31, 2015, respectively.

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BASIS OF PRESENTATION

9 Months Ended

Oct. 31, 2015

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 1,687 full-line and specialty retail stores in the United States, operating through Kmart and Sears. Through the third quarter of 2014, we conducted our operations under three reportable segments: Kmart, Sears Domestic and Sears Canada. Following the de-consolidation of Sears Canada in the third quarter of 2014 discussed below, we have operated under two reportable segments: Kmart and Sears Domestic.

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 January 31, 2015.

Depreciation Expense

Depreciation expense included within depreciation and amortization expense reported on the Condensed Consolidated Statements of Operations was $93 million, $325 million, $144 million and $441 million for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014, respectively.

Vendor Credits

During the 39-week period ended October 31, 2015, the Company received $126 million related to one-time credits from vendors associated with prior supply arrangements, which have been reflected as a credit within cost of sales, buying and occupancy on the Condensed Consolidated Statement of Operations.

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 and pension plan contributions. We have incurred losses and experienced negative operating cash flows for the past several years; accordingly, the Company has taken a number of actions to enhance its financial flexibility and fund its continued transformation, support its operations and meet its obligations.

As we progress in our transformation, we are primarily focusing on profitability instead of revenues, market share and other metrics which relate to, but do not necessarily drive profit. This approach may negatively impact our sales, however, it should also reduce the risk of material profit declines. We believe that our focus on profitability will contribute to a meaningful performance in 2015 and beyond. If we continue to experience operating losses, and we are not able to generate sufficient liquidity through some combination of actions, the availability under our Domestic Credit Facility might be fully utilized and we would need to secure additional sources of funds. Moreover, if the borrowing base (as calculated pursuant to the indenture) falls below the principal amount of the notes plus the principal amount of any other indebtedness for borrowed money that is secured by liens on the collateral for the notes on the last day of any two consecutive quarters, it could trigger an obligation to repurchase notes in an amount equal to such deficiency.

We also continue to take action to evolve and transition our capital structure toward a structure that is more flexible, long-term oriented and less dependent on inventory and receivables. During the 39-week period ended October 31, 2015, the Company completed its previously announced rights offering and sale-leaseback transaction with Seritage Growth Properties and received aggregate gross proceeds from the transaction of $2.7 billion. In addition, as discussed in Note 2, the Company completed an amendment and extension of its existing domestic credit facility in which the maturity date for $1.971 billion of the domestic credit facility has been extended to July 2020, while $1.304 billion retains the existing maturity date of April 2016. Finally, as also discussed in Note 2, the Company completed a tender offer for $936 millionprincipal amount of its outstanding 6 5/8% Senior Secured Notes Due 2018.These actions have substantially enhanced our liquidity and achieved our objective of reducing our reliance on inventory as a source of financing. We intend to continue taking significant actions to alter our capital structure, as circumstances allow, to position Holdings for success and profitability, which could include further reductions in debt or changes in the composition of our debt.

Sears Canada Rights Offering

On October 2, 2014, the Company announced that its board of directors had approved a rights offering of up to 40 million shares of Sears Canada Inc. ("Sears Canada"). In connection with the rights offering, each holder of Holdings' common stock received one subscription right for each share of common stock held at the close of business on October 16, 2014, the record date for the rights offering. On October 16, 2014, ESL Partners, L.P. and Edward S. Lampert, our Chairman and Chief Executive Officer and Chairman and Chief Executive Officer of ESL Investments Inc. and related entities (collectively "ESL") exercised a portion of its pro rata portion of the basic subscription rights to the offering, resulting in the sale of approximately 18 million common shares of Sears Canada to ESL. After the sale of Sears Canada shares to ESL on October 16, 2014, the Company was the beneficial holder of approximately 34 million shares, or 34%, of the common shares of Sears Canada. As such, the Company no longer maintained control of Sears Canada resulting in the de-consolidation of Sears Canada. The Sears Canada rights offering closed on November 7, 2014 and was oversubscribed. Accordingly, the Company sold a total of 40 million common shares of Sears Canada and received total aggregate proceeds of $380 million for the rights offering by the closing date.

We accounted for the de-consolidation of Sears Canada in accordance with accounting standards applicable to consolidation and de-recognized the assets, liabilities, accumulated other comprehensive income and non-controlling interest related to Sears Canada and recognized a gain of approximately $70 million recorded within Interest and investment income on the Consolidated Statement of Operations and within gain on sales of investments on the Consolidated Statements of Cash Flows for the year ended January 31, 2015, of which $42 million relates to the remeasurement of our retained equity interest to its fair value.

Also, we determined that we have the ability to exercise significant influence over Sears Canada as a result of our ownership interest in Sears Canada and as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL. Accordingly, we accounted for our retained investment in the common shares of Sears Canada as an equity method investment in accordance with accounting standards applicable to investments. We elected the fair value option for the equity method investment in Sears Canada in accordance with accounting standards applicable to financial instruments. The fair value of our equity method investment is recorded in Other assets on the Condensed Consolidated Balance Sheet and is disclosed in Note 4, and the change in fair value is recorded in Interest and investment income (loss) on the Condensed Consolidated Statement of Operations.

In addition, since the Company has retained an equity interest in Sears Canada, the operating results for Sears Canada through October 16, 2014 are presented within the consolidated operations of Holdings and the Sears Canada segment in the accompanying Condensed Consolidated Financial Statements in accordance with accounting standards applicable to presentation of financial statements.

At both October 31, 2015 and January 31, 2015, the Company was the beneficial holder of approximately 12 million, or 12%, of the common shares of Sears Canada. At November 1, 2014, Sears Holdings was the beneficial holder of approximately 23 million, or 23%, of the common shares of Sears Canada.

Separation of Lands' End, Inc.

On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The separation was structured to be tax free to our U.S. shareholders for U.S. federal income tax purposes. Prior to the separation, Lands' End, Inc. ("Lands' End") entered into an asset-based senior secured revolving credit facility, which provided for maximum borrowings of approximately $175 million with a letter of credit sub-limit, and a senior secured term loan facility of approximately $515 million. The proceeds of the term loan facility were used to fund a $500 million dividend to Holdings and pay fees and expenses associated with the foregoing facilities. We accounted for this spin-off in accordance with accounting standards applicable to spin-off transactions. Accordingly, we classified the carrying value of net assets of $323 million contributed to Lands' End as a reduction of capital in excess of par value in the Consolidated Statement of Equity (Deficit) for the year ended January 31, 2015.

Additionally, as a result of Mr. Lampert's role as our Chairman and Chief Executive Officer, and Chairman and Chief Executive Officer of ESL, and the continuing arrangements between Holdings and Lands' End (as further described in Note 13), Holdings has determined that it has significant influence over Lands' End. Accordingly, the operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing operations of Holdings and the Sears Domestic segment in the accompanying Condensed Consolidated Financial Statements.

In connection with the separation, Holdings and certain of its subsidiaries entered into various agreements with Lands' End under the terms described in Note 13.

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SUMMARY OF SEGMENT DATA (Detail) - USD ($) $ in Millions		3 Months Ended			9 Months Ended
		Oct. 31, 2015		Nov. 01, 2014	Oct. 31, 2015		Nov. 01, 2014	Jan. 31, 2015
Segment Reporting Information [Line Items]
Merchandise sales and services	[1],[2]	$ 5,750		$ 7,207	$ 17,843		$ 23,099
COSTS AND EXPENSES
Cost of sales, buying and occupancy	[1]	4,488	[3]	5,606	13,628	[3]	17,928
Selling and administrative		1,630		2,011	5,005		6,218
Depreciation and amortization		94		148	330		455
Impairment charges		17		0	71		25
Gain on sales of assets		(97)		(68)	(730)		(148)
Total costs and expenses		6,132		7,697	18,304		24,478
Operating Income (Loss)		(382)		(490)	(461)		(1,379)
TOTAL ASSETS		12,769		15,169	12,769		15,169	$ 13,209
Payments to Acquire Property, Plant, and Equipment		66		76	152		202
Hardlines [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		2,452		3,149	7,690		10,144
Apparel and Soft Home [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		1,340		1,867	4,191		6,170
Food and Drug [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		916		1,052	2,754		3,240
Services [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		541		599	1,629		1,860
Other [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		501		540	1,579		1,685
Kmart [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		2,247		2,707	7,062		8,527
COSTS AND EXPENSES
Cost of sales, buying and occupancy		1,774		2,147	5,562		6,790
Selling and administrative		585		708	1,802		2,128
Depreciation and amortization		17		25	56		72
Impairment charges		10			12		2
Gain on sales of assets		(12)		(24)	(173)		(76)
Total costs and expenses		2,374		2,856	7,259		8,916
Operating Income (Loss)		(127)		(149)	(197)		(389)
TOTAL ASSETS		3,655		4,259	3,655		4,259
Payments to Acquire Property, Plant, and Equipment		10		11	21		31
Kmart [Member] | Hardlines [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		620		793	1,986		2,502
Kmart [Member] | Apparel and Soft Home [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		701		842	2,274		2,728
Kmart [Member] | Food and Drug [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		915		1,050	2,749		3,234
Kmart [Member] | Services [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		3		5	10		13
Kmart [Member] | Other [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		8		17	43		50
Sears Domestic [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		3,503		3,889	10,781		12,484
COSTS AND EXPENSES
Cost of sales, buying and occupancy		2,714		3,002	8,066		9,552
Selling and administrative		1,045		1,131	3,203		3,487
Depreciation and amortization		77		110	274		334
Impairment charges		7			59		8
Gain on sales of assets		(85)		(44)	(557)		(73)
Total costs and expenses		3,758		4,199	11,045		13,308
Operating Income (Loss)		(255)		(310)	(264)		(824)
TOTAL ASSETS		9,114		10,910	9,114		10,910
Payments to Acquire Property, Plant, and Equipment		56		52	131		139
Sears Domestic [Member] | Hardlines [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		1,832		2,029	5,704		6,542
Sears Domestic [Member] | Apparel and Soft Home [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		639		770	1,917		2,562
Sears Domestic [Member] | Food and Drug [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		1		2	5		6
Sears Domestic [Member] | Services [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		538		574	1,619		1,770
Sears Domestic [Member] | Other [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services		$ 493		514	$ 1,536		1,604
Sears Canada [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services				611			2,088
COSTS AND EXPENSES
Cost of sales, buying and occupancy				457			1,586
Selling and administrative				172			603
Depreciation and amortization				13			49
Impairment charges							15
Gain on sales of assets				0			1
Total costs and expenses				642			2,254
Operating Income (Loss)				(31)			(166)
TOTAL ASSETS				0			0
Payments to Acquire Property, Plant, and Equipment				13			32
Sears Canada [Member] | Hardlines [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services				327			1,100
Sears Canada [Member] | Apparel and Soft Home [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services				255			880
Sears Canada [Member] | Food and Drug [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services				0			0
Sears Canada [Member] | Services [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services				20			77
Sears Canada [Member] | Other [Member]
Segment Reporting Information [Line Items]
Merchandise sales and services				$ 9			$ 31

[1] Includes merchandise sales to Sears Hometown and Outlet Stores, Inc. ("SHO") of $315 million and $329 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $1.0 billion and $1.1 billion for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively. Pursuant to the terms of the separation, merchandise is sold to SHO at cost.

[2] Includes revenue from Lands' End, Inc. ("Lands' End") for retail services and rent for Lands' End Shops at owned Sears locations, participation in the Shop Your Way® program and corporate shared services of $14 million and $18 million for the 13 weeks ended October 31, 2015 and November 1, 2014, respectively, and $45 million and $41 million for the 39 weeks ended October 31, 2015 and November 1, 2014, respectively.

[3] Includes rent expense (consisting of straight-line rent expense offset by amortization of a deferred gain on sale-leaseback) of $22 million and $27 million for the 13- and 39-weeks ended October 31, 2015, respectively, and installment expenses of $17 million and $22 million for the 13- and 39-weeks ended October 31, 2015, respectively, pursuant to the master lease with Seritage Growth Properties ("Seritage"). There was no such rent or installment expenses incurred for the 13- and 39-weeks ended November 1, 2014.

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

9 Months Ended

Oct. 31, 2015

Store Closings Conversions And Real Estate Transactions [Abstract]

Restructuring and Related Costs

Store closing costs and severance recorded for the 13- and 39-week periods ended October 31, 2015 and November 1, 2014 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	$	5	$	—	$	(5	)	$	1	$	—	$	1
Sears Domestic	1		—		(3		)	—		—		(2		)
Total for the 13-week period ended October 31, 2015	$	6	$	—	$	(8	)	$	1	$	—	$	(1	)
Kmart	$	31	$	6	$	—		$	11	$	2	$	50
Sears Domestic	10		3		1			6		4		24
Sears Canada	—		1		—			—		—		1
Total for the 13-week period ended November 1, 2014	$	41	$	10	$	1		$	17	$	6	$	75
Kmart	$	14	$	2	$	22		$	4	$	—	$	42
Sears Domestic	3		2		(12		)	1		2		(4		)
Total for the 39-week period ended October 31, 2015	$	17	$	4	$	10		$	5	$	2	$	38
Kmart	$	46	$	10	$	11		$	17	$	5	$	89
Sears Domestic	12		5		3			7		12		39
Sears Canada	1		10		5			—		—		16
Total for the 39-week period ended November 1, 2014	$	59	$	25	$	19		$	24	$	17	$	144

_____________

⁽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 13- and 39-week periods ended October 31, 2015, and the 13-week period ended November 1, 2014 are recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations. Costs for the 39-week period ended November 1, 2014 include $10 million recorded within Impairment charges and $7 million recorded within Depreciation and amortization on the Condensed Consolidated Statement of Operations.

Schedule of Restructuring Reserve by Type of Cost

Store closing cost accruals of $158 million, $153 million and $207 million at October 31, 2015, November 1, 2014 and January 31, 2015, respectively, were as follows:

millions	Severance Costs			Lease Termination Costs			Other Charges			Total
Balance at November 1, 2014	$	22		$	112		$	19		$	153
Store closing costs	31			55			(4		)	82
Payments/utilizations	(10		)	(11		)	(7		)	(28		)
Balance at January 31, 2015	43			156			8			207
Store closing costs	4			12			5			21
Payments/utilizations	(19		)	(42		)	(9		)	(70		)
Balance at October 31, 2015	$	28		$	126		$	4		$	158

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BORROWINGS (Domestic Credit Agreement) (Details) $ in Millions	1 Months Ended	9 Months Ended		12 Months Ended
	Oct. 31, 2010 USD ($)	Oct. 31, 2015 USD ($)	Nov. 01, 2014 USD ($)	Jan. 31, 2015 USD ($)	Nov. 02, 2013 USD ($)
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 3,275.0
Line of credit facility, additional borrowing capacity under Accordion feature		1,000.0
Line of credit facility, additional borrowing capacity under FILO Tranche feature		500.0
Line of credit facility, permitted short-term borrowings under prior agreement		500.0
Line of credit facility, permitted short-term borrowings under amended agreement		750.0
Line of credit facility, amount outstanding		$ 677.0	$ 1,605.0	$ 213.0
Fixed charge coverage ratio, minimum		1.0
Domestic Credit Agreement [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 2,000.0
Domestic Credit Agreement [Member] | Minimum [Member]
Debt Instrument [Line Items]
Commitment fees		0.375%
Limit of availability under the credit facility to make restricted payments		15.00%
Domestic Credit Agreement [Member] | Maximum [Member]
Debt Instrument [Line Items]
Commitment fees		0.625%
Domestic Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.00%
Domestic Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.50%
Domestic Credit Agreement [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.00%
Domestic Credit Agreement [Member] | Base Rate [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.50%
Senior Secured Note [Member]
Debt Instrument [Line Items]
Debt instrument, face amount		$ 0.0
Debt instrument, maturity date	Oct. 15, 2018
Senior secured note, interest rate		6.625%	6.625%	6.625%
Long-term Debt	$ 1,000.0	$ 304.0	$ 1,240.0	$ 1,240.0
Term Loan [Member]
Debt Instrument [Line Items]
Debt instrument, maturity date		Jun. 30, 2018
Term Loan [Member] | Secured Debt [Member]
Debt Instrument [Line Items]
Debt instrument, face amount					$ 1,000.0
Debt instrument, periodic payment		$ 2.5
Long-term debt		983.0	993.0	990.0
Long-term Debt		$ 977.0	985.0	983.0
Term Loan [Member] | Secured Debt [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt instrument, floor interest rate		1.00%
Term Loan [Member] | Secured Debt [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		1.00%
Debt instrument, applicable margin on variable rate		4.50%
Term Loan [Member] | Secured Debt [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, applicable margin on variable rate		3.50%
Term Loan [Member] | Secured Debt [Member] | Federal Funds Rate [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		0.50%
Domestic Credit Agreement [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 1,304.0
Debt instrument, maturity date		Jul. 20, 2020
Line of credit facility, remaining borrowing capacity		$ 963.0	234.0	808.0
Credit agreement, covenant terms		The Amended 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 least 15%, exceptions that may be subject to certain maximum amounts and an exception that requires that the restricted payment is funded from cash on hand and not from borrowings under the credit facility. Further, the Amended Domestic Credit Agreement includes customary covenants that restrict our ability to make dispositions, prepay debt, and make investments, subject, in each case, to various exceptions. The Amended 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.
Letters of credit outstanding, amount		$ 654.0	$ 671.0	$ 667.0
Domestic Credit Agreement [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		1,000.0
Domestic Credit Agreement [Member] | Second Lien [Member]
Debt Instrument [Line Items]
Line of credit facility, amount outstanding		304.0
Line of credit facility, remaining borrowing capacity		1,700.0
Extended Maturity [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 1,971.0
Extended Maturity [Member] | Domestic Credit Agreement [Member]
Debt Instrument [Line Items]
Commitment fees		0.50%
Extended Maturity [Member] | Domestic Credit Agreement [Member] | Minimum [Member]
Debt Instrument [Line Items]
Commitment fees		0.50%
Extended Maturity [Member] | Domestic Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.25%
Extended Maturity [Member] | Domestic Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.75%
Extended Maturity [Member] | Domestic Credit Agreement [Member] | Base Rate [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.25%
Extended Maturity [Member] | Domestic Credit Agreement [Member] | Base Rate [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.75%

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LEGAL PROCEEDINGS

9 Months Ended

Oct. 31, 2015

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, pricing 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. 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. Additionally, some of these claims or actions, such as the qui tam claims, have the potential for significant statutory penalties.

In May and June of 2015, four shareholder lawsuits were filed in the Delaware Chancery Court, which have since been consolidated into a single action. A consolidated complaint has been filed, naming Holdings, the members of our Board of Directors, ESL Investments, Inc., Seritage, our CEO, and another large shareholder of Holdings, alleging, among other things, breaches of fiduciary duties in connection with the Seritage transaction. Among other forms of relief, the plaintiffs are currently seeking damages in unspecified amounts and equitable relief related to the Seritage transaction. The Company believes that the Seritage transaction has provided substantial benefits to Holdings and its shareholders and believes further that the plaintiffs' claims are legally without merit. Holdings intends to contest these lawsuits vigorously.

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.