Sears Holdings Corporation said total domestic comparable store sales for the quarter-to-date period
declined 7.4 percent, comprised of decreases of 5.7 percent at Kmart and
9.2 percent at Sears Domestic.

Sears' Holiday update follows:

During the quarter, we continued to proactively transform our business to a member-centric integrated retailer leveraging our Shop Your Way™ (“SYW”) program and platform. As previously stated, we are transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices. We are driving this transformation by investing in capabilities to enable members access to the broadest possible assortment of products and services, enhancing our membership benefits associated with SYW, developing digital and social relationships with our members, using data and analytics to make targeted offers and decisions delivered in real time and expanding our reach through Marketplace and delivery options.

We believe that we are making progress in this transformation, as we are seeing continued increases in our SYW member engagement metrics with 69 percent of our sales in the nine-week period ended January 4, 2014 derived from members as compared to 58 percent last year. We are intentionally transitioning business models in a thoughtful manner and are making the investments which we believe will demonstrate the value of SYW to our members. Throughout this transition, we have continued with traditional promotional programs and marketing expenditures while investing in our member-centric model, which has impacted our margin and expenses. For the nine-week period ended January 4, 2014 we spent $69 million more on SYW points expense compared to the same period last year.

Comparable store sales for the quarter-to-date (“QTD”) and year-to-date (“YTD”) periods ended January 6, 2014 for its Kmart and Sears Domestic stores were as follows:


QTD


YTD

Kmart

-5.7%


-3.7%

Sears Domestic

-9.2%


-4.2%

Total

-7.4%


-3.9%


Total domestic comparable store sales for the quarter-to-date period declined 7.4 percent, comprised of decreases of 5.7 percent at Kmart and 9.2 percent at Sears Domestic. Kmart's quarter-to-date comparable store sales decline reflects declines in most categories including consumer electronics, grocery & household and toys. Sears Domestic's quarter-to-date comparable store sales decline is attributable to decreases in most categories including consumer electronics, tools and home appliances. Sears Canada comparable store sales for the quarter-to-date period ended January 6, 2014 were -4.4 percent.

We currently expect consolidated Adjusted EBITDA, which excludes certain significant items as set forth below, for the fourth quarter will be between $(65) million and $65 million, as compared to $429 million in last year's fourth quarter. We expect fourth quarter domestic Adjusted EBITDA of between $(80) million and $20 million, as compared to $365 million for last year's fourth quarter. We expect that Sears Canada fourth quarter Adjusted EBITDA will be between $15 million and $45 million, as compared to $64 million last year. Please see the Adjusted EBITDA reconciliation below.

For the full year, consolidated Adjusted EBITDA is expected to be between $(284) million and $(414) million, as compared to $626 million last year. We expect domestic Adjusted EBITDA of between $(308) million and $(408) million, as compared to $557 million last year. We expect that Sears Canada Adjusted EBITDA will be between $(6) million and $24 million, as compared to $69 million last year.

We currently expect our reported net loss attributable to Holdings' shareholders for the quarter ending February 1, 2014 will be between $250 million and $360 million, or between $2.35 and $3.39 loss per diluted share. This includes $41 million of pension expense, $29 million for store closures and severance and $12 million from gains on sales of assets. Adjusted for these items, net loss is expected to be between $213 million and $316 million, or between $2.01 and $2.98 loss per diluted share. The ranges exclude the impact related to the Sears Canada real estate transactions previously announced, restructuring activities including severance, store closings and impairment charges, an estimated non-cash charge of approximately $145 million related to the establishment of an additional valuation allowance against our state separate entity deferred tax assets, as well as other tax related matters and any non-cash impairment charges for fixed assets. In the fourth quarter of the prior year, the Company reported a net loss attributable to Holdings' shareholders of $489 million, or $4.61 loss per diluted share, which included a non-cash charge of $455 million related to pension settlements, non-cash impairment charges of $330 million and other adjustments which can be found in our 8-K filed on February 28, 2013. Adjusted for these items, the Company reported net income of $119 million, or $1.12 per diluted share.

For the full year ending February 1, 2014, the Company expects our reported net loss attributable to Holdings' shareholders will be between $1.3 billion and $1.4 billion, or between $11.85 and $12.88 loss per diluted share, which includes the fourth quarter-to-date items noted above, as well as the year-to-date adjustments disclosed in our third quarter 10-Q report filed on November 21, 2013.  Adjusted for these items, net loss is expected to be between $811 million and $914 million, or between $7.64 and $8.61 loss per diluted share. The ranges exclude the impact related to the Sears Canada real estate transactions previously announced, fourth quarter restructuring activities including severance, store closings and impairment charges, an estimated non-cash charge of approximately $145 million related to the establishment of an additional valuation allowance against our state separate entity deferred tax assets, as well as other tax related matters and any non-cash impairment charges for fixed assets. For the full year ended February 2, 2013, the Company reported a net loss attributable to Holdings' shareholders of $930 million, or $8.78 loss per diluted share, which included a non-cash charge of $455 million related to pension settlements, a non-cash impairment charge of $330 million and other adjustments which can be found in our 8-K report filed on February 28, 2013. Adjusted for these items, net loss was $215 million, or $2.03 loss per diluted share.

As of January 4, 2014, we had total cash of approximately $1.0 billion and availability under our credit facilities of $2.3 billion ($1.8 billion under our domestic facility and $0.5 billion under our Sears Canada facility, prior to taking into consideration possible reserves) and $6 million in commercial paper outstanding, with commercial paper capacity of $500 million. The cash balance does not include $300 million Canadian in proceeds from the Sears Canada real estate transactions announced on November 11, 2013, which are expected to be received January 10, 2014.

As previously announced, we are evaluating separating both our Lands' End business and Sears Auto Center (“SAC”) business. On December 6, 2013 we filed with the Securities and Exchange Commission a registration statement on Form 10 related to the spin-off of Lands' End through a potential pro rata distribution to Holdings' shareholders. We are considering strategic alternatives for our SAC business, any of which would be subject to approval by Holdings' Board of Directors and other conditions. In addition, we continue to reduce unprofitable stores as leases expire and in some cases accelerate closings when circumstances dictate.

Finally, as previously announced in October, we also are continuing to work with the board and management of Sears Canada with a goal of increasing the value of our 51 percent interest and realizing significant cash proceeds to support our transformation and to create value for our shareholders. As of January 8, 2014, the market value of this interest was $670 million.