Transformation Update & Financial Results Q4 2016 March 9, 2017

Cautionary Statement

Regarding Forward-Looking Information This presentation contains forward-looking statements under the federal securities laws, including statements about our transformation through our integrated retail strategy, the opportunities, some of which are quantified, presented by a framework for profit, our plans to redeploy and reconfigure our assets, our liquidity and ability to exercise financial flexibility as we meet our obligations and possible strategic transactions. Forward-looking statements, including these, are based on the current beliefs and expectations of our management and are subject to significant risks, assumptions and uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. In addition, the framework for profit is not intended to provide guidance or predict results; instead, it is intended to provide dimensional context for the potential opportunities for increasing profitability if we are successful in achieving the potential results outlined, which is subject to significant assumptions, uncertainties and risks, including those identified in the presentation relating to maintaining, reversing or otherwise improving or achieving certain performance metrics, including member penetration, level of member engagement and retention rates. There can be no assurance that any of these efforts will be successful. The following additional factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: our ability to offer merchandise and services that our customers want, including our proprietary brand products; our ability to successfully implement our integrated retail strategy to transform our business; our ability to successfully manage our inventory levels; initiatives to improve our liquidity through inventory management and other actions; competitive conditions in the retail and related services industries; worldwide economic conditions and business uncertainty, including the availability of consumer and commercial credit, changes in consumer confidence and spending, the impact of changing fuel prices, and changes in vendor relationships; vendors’ lack of willingness to provide acceptable payment terms or otherwise restricting financing to purchase inventory or services; possible limits on our access to 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; our ability to successfully achieve our plans to generate liquidity through potential transactions or otherwise; our extensive reliance on computer systems, including legacy systems, to implement our integrated retail strategy, process transactions, summarize results, maintain customer, member, associate and Company data, and otherwise manage our business, which may be subject to disruptions or security breaches; the impact of seasonal buying patterns, including seasonal fluctuations due to weather conditions, which are difficult to forecast with certainty; our dependence on sources outside the United States for significant amounts of our merchandise; our 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; and the timing and amount of required pension plan funding. 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. The unaudited and estimated financial results for the fourth quarter of 2016 contained in this presentation reflect a number of complex and subjective judgments and estimates about the appropriateness of certain reported amounts and disclosures. Our financial statements for the fourth quarter of 2016 are not finalized. We are required to consider all available information through the finalization of our financial statements and their possible impact on our financial condition and results of operations for the period, including the impact of such information on the complex judgments and estimates referred to above. As a result, subsequent information or events may lead to material differences between the information about the results of operations described herein. You should consider this possibility in reviewing the financial information for the period described above.

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Non-GAAP Financial Measures In addition to our net income (loss) attributable to Sears Holdings' shareholders determined in accordance with Generally Accepted Accounting Principles ("GAAP"), for purposes of evaluating operating performance, we use Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), 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 Statements of Operations excluding income tax benefit, interest expense, interest and investment 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 is a non-GAAP measurement, management believes that it is an important indicator of ongoing operating performance, and useful to investors, because:

• Adjusted 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, including impairment charges related to fixed assets and intangible assets, closed store and severance charges, pension expense, one-time credits from vendors, amortization of the deferred Seritage gain, expenses associated with legal matters, transaction costs associated with strategic initiatives and other expenses. 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.

See the appendix for reconciliations of the differences between the non-GAAP financial measures used in this presentation with the most comparable financial measures calculated in accordance with GAAP.

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Transformation Progress To Date

4 4

Operational Highlights For The Fourth Quarter

Improved Operating Performance

Sustained Member Engagement

Continued Innovation Strategic Shop Your Way® Partnerships

Continued to closely manage expenses

Solid Home Services business results

Home Services GoToAssist Mobile Solution

DieHard® 360° Assessment and Edge Plans

5 ‘Best of Year Awards’ from Reviewed.com for Kenmore

Maintained member penetration at >70%

Increasing focus on frequency of usage

SYW card with Citi Activehours launch Uber expansion Expanded to 30,000+

restaurants

Building On Our Positive Momentum

Enhancing Performance

Targeting cost savings in 2017 of

at least $1.0 billion

Notable improvement in Q4 Adjusted EBITDA

Increasing Financial Flexibility

Targeting reduction in debt and pension obligations of at least $1.5 billion

Generated up to $1.0 billion in additional liquidity

Creating Value From Our Assets

Marketing real estate properties targeting

at least $1.0 billion

Sale of Craftsman® brand for $775 million in cash plus ongoing revenue stream

Next Phase Of Our Transformation

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Simplify and implement organizational structure change and greater consolidation of Sears and Kmart corporate and support functions

Transition to an integrated value chain model including optimized product assortment, pricing, sourcing and inventory management

Enhancing Performance

Actively manage real estate portfolio to unlock value

Pursue strategic options for our Kenmore® and DieHard® brands and Sears Home Services and Sears Auto Centers businesses

Creating Value From Our

Assets

Increase liquidity through Craftsman® and announced real estate transactions

Reduce outstanding debt and pension obligations through improving profitability, asset sales and working capital management

Increasing Financial Flexibility

Focus investments on strategic transformation and Shop Your Way® ecosystem

Value-enhancing partnerships in-store and online Driving Our

Transformation

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Substantial Value In Craftsman® Sale

Closed transaction with Stanley Black& Decker for the sale of the Craftsman brand

Net Present Value of transaction calculated at over $900 million

– $525 million at closing (subject to closing costs and an adjustment for working capital changes) and $250 million in three years

– Sears Holdings will receive payments of between 2.5% and 3.5% on new Stanley Black & Decker sales of Craftsman products for the next 15 years

Sears Holdings to continue sourcing and selling Craftsman-branded products in all of its retail channels

– Agreement includes perpetual license, royalty-free for 15 years and at a 3% royalty rate thereafter

An Innovative Deal Structure That Creates Value And Retains Access To Brand

Agreement maintains both financial flexibility provided to Sears Holdings by the transaction and protections of pension plan

PBGC consents to the sale of Craftsman-related assets “ring-fenced” under March 2016 agreement

The Company will grant a lien on, and subsequently contribute to its pension plans, the value of the $250 million cash payment from Stanley, Black & Decker at end of year three, the value of the payment to be fully credited against some of Sears Holdings’ minimum pension obligations in 2017, 2018 and 2019

Lien granted to PBGC on 15-year income stream for new sales of Craftsman® products by Stanley Black & Decker and $100 million of real estate assets

Supportive Agreement With Pension Benefit Guaranty Corporation (PBGC)

Q4 2016 Q4 2015 FY 2016 FY 2015

Revenues $6,052 $7,303 $22,138 $25,146

Comp Store Sales (10.3)% (7.1)% (7.4)% (9.2)%

Gross Margin $1,287 $1,595 $4,686 $5,810

Gross Margin Rate 21.3% 21.8% 21.2% 23.1%

SG&A Expenses $1,579 $1,852 $6,109 $6,857

Net Loss $(607) $(580) $(2,221) $(1,129)

Adjusted EBITDA(1) $(61) $(137) $(808) $(836)

(1) Adjusted EBITDA is shown inclusive of additional rent expense of $47 million and $55 million in Q4 2016 and Q4 2015, respectively, and $197 million and $133 million in FY2016 and FY2015, respectively, from our Seritage/JV transaction. From the inception of Seritage to date, we have received recapture notices on 25 properties, which is estimated to reduce rent expense by approximately $14 million on an annual basis. We have also exercised our right to terminate the lease on 36 properties, which is estimated to reduce rent expense by approximately $12 million on an annual basis.

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Results Summary

Approximately $3.6 billion in ‘Total Liquidity and Liquid Assets’ as of Q4 2016 Additional $775 million of liquidity now available from recently executed transactions

After the application of the Craftsman proceeds to pay down outstanding borrowings under our Domestic Credit Agreement, the excess cash on hand and the availability under our Credit Facility will be approximately $740 million on March 9, 2017, an increase of $575 million as compared to January 28, 2017

The Company has up to $500 million of FILO loan capacity depending on inventory levels at the time of issuance

Substantial Liquidity And Financial Flexibility

Current Financial Position And Liquid Assets

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(1) Reflects effect of springing fixed charge coverage ratio covenant and borrowing base level. (2) The short-term borrowing basket provides the ability to borrow with maturities inside of the ABL Maturity of July 2020. The short-term borrowing basket can be paid down and

re-borrowed as desired. Availability on the short-term borrowing basket for Q4 2016 is stated less $500 million real estate loan outstanding.

Amounts in millions Q4 2016

Cash $286 Availability on Credit Facility (1) $165 Availability on Short-Term Borrowing Basket (2) $250

Total Liquid Availability $701 Equity In Inventory $2,911

Total Liquidity & Liquid Assets $3,612

Note: ‘Total Liquid Availability’ increased from Q4 2016 by approximately $775 million. The increased liquid availability reflects:

Improvements from the previously announced amendment to the credit facility, including increased capacity on the short-term borrowing basket from $250 million to $500 million

Proceeds of $105 million from the sale of three properties in February 2017

Cash proceeds generated from the Craftsman sale

Key Takeaways

Additional options to create value from a range of assets, improve operational performance and enhance financial flexibility

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Comprehensive restructuring underway targeting at least $1.0 billion annualized cost savings

2

Fourth quarter 2016 operating results represent notable year-over-year Adjusted EBITDA improvement

1

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Targeting at least $1.5 billion reduction of debt and pension obligations, as well as funding of our transformation, through improving profitability, asset sales and working capital management

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We continue to drive our strategic transformation through Shop Your Way®, creating value for our members through rewards, services and partnerships

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Appendix

(1) Comparable store sales amounts 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), as well as sales from sears.com and kmart.com shipped directly to customers and have been adjusted for the change in the unshipped sales reserves recorded at the end of each reporting period.

(2) Comp Non-Store Sales represents revenue from ongoing business operations not directly associated with a store, as well as revenue from our ongoing relationships with Sears Hometown and Outlet Stores, Inc. and Lands’ End. Note, the majority of the Comp Non-Store Sales decline is attributed to reduced revenue from Sears Hometown and Outlet Stores, Inc.

Q4 2016

Revenue Changes

11

Am

ount

in m

illio

ns

Revenue declined 9.8% on a comparable basis, including the impact of both store and non-store sales(1)

$(655)

Q4 2015As Reported

ClosedStores

Q4 2015Comp Basis

Comp StoreSales

CompNon-Store Sales

Q4 2016As Reported

$7,303

$(596)

$(100)

$6,052 $(555)

$6,707

(2) (1)

Kmart (8.0)%

Sears Domestic: (12.3)%

Total Domestic(1): (10.3)%

Q4 Comp Store Sales

12

(1) Primarily consists of non-cash reserves, additional Seritage/JV rent expense of $47 million and $55 million, respectively, in Q4 2016 and Q4 2015, and amortization of deferred Seritage gain.

$6

$(99)

$(76)

$(139)

$1,595

$1,420

$1,287

Q4 2015As Reported

Closed StoreImpact

Other Q4 2015Comp Basis

Volume Rate Q4 2016As Reported

(1)

Am

ount

in m

illio

ns

Gross margin declined 9.4% on a comparable basis and gross margin rate increased by 10 bps

$(133)

Attributed to an increase in promotional markdowns, as well as an increase in Shop Your Way® points expense, which was partially offset by reductions in traditional advertising spend recorded in SG&A.

Rate Impact

Q4 2016

Gross Margin Changes

Q4 2015As Reported

Non-Operating Q4 2015Comp Basis

SG&A Q4 2016As Reported

Expense Increase Expense Decrease

(1)

$1,852 $27

$1,579

$1,879

$(300)

Am

ount

in m

illio

ns

(1) Consists of closed store reserves, pension expense, legal expenses, transaction costs and other expenses.

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$893M in 2016

Full Year $2.3B since 2012

Broader Reduction

SG&A expenses declined 16.0% on a comparable basis

Q4 2016

Expense Changes

Full Year 2016

Revenue Changes

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(1) Comp Non-Store Sales represents revenue from ongoing business operations not directly associated with a store, as well as revenue from our ongoing relationships with Sears Hometown and Outlet Stores, Inc. and Lands’ End. Note, the majority of the Comp Non-Store Sales decline is attributed to reduced revenue from Sears Hometown and Outlet Stores, Inc.

(2) Comparable store sales amounts 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), as well as sales from sears.com and kmart.com shipped directly to customers and have been adjusted for the change in the unshipped sales reserves recorded at the end of each reporting period.

Full Year 2015As Reported

ClosedStores

Full Year 2015Comp Basis

Comp StoreSales

CompNon-Store Sales

Full Year 2016As Reported

Am

ount

in m

illio

ns

$25,146

$(1,267) $(374)

$22,138 $(1,367)

$23,879

(1)

Revenue declined 7.3% on a comparable basis, including the impact of both store and non-store sales(1)

$(1,741)

Kmart: (5.3)%

Sears Domestic: (9.3)%

Total Domestic(2): (7.4)%

Full Year Comp Store Sales

Full Year 2015As Reported

Closed StoreImpact

Other Full Year 2015Comp Basis

Volume Rate Full Year 2016As Reported

$5,810

$(323) $(384)

$(225)

$(192)

$4,686

$5,262

(1)

Am

ount

in m

illio

ns

15

Full Year 2016

Gross Margin Changes

(1) Primarily consists of non-cash reserves, additional Seritage/JV rent expense of $197 million and $133 million, respectively, in 2016 and 2015, amortization of deferred Seritage gain and one-time credits from vendors.

Gross margin declined 10.9% on a comparable basis and gross margin rate decreased by 80 bps

$(576)

Full Year 2015As Reported

Non-Operating Full Year 2015Comp Basis

SG&A Full Year 2016As Reported

Expense Increase Expense Decrease

(1)

$6,857 $145

$6,109

$7,002

$(893)

Am

ount

in m

illio

ns

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Full Year 2016

Expenses Changes

(1) Consists of closed store reserves, pension expense, legal expenses, transaction costs and other expenses.

SG&A expenses declined 12.8% on a comparable basis

Consolidated Results

17

Q4 & Full Year 2016

Significant Items

18

Q4 & Full Year 2016

Consolidated Adjusted EBITDA

19

Q4 & Full Year 2016

Adjusted Segment Results

20

Q4 2016

Adjusted Segment Results

21

Full Year 2016

Reconciliation to GAAP

22

Q4 2016

Reconciliation to GAAP

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Full Year 2016