Exhibit 13 ublic "-//w3c//dtd html 4.0 transitional//en">SEARS 2000 ANNUAL REPORT 17Management's Discussion and Analysis
Sears, Roebuck and Co. and its consolidated subsidiaries ("the Company") is a multi-line retailer providing a wide array of merchandise and services in the United States, Puerto Rico and Canada. As of December 30, 2000,operating results for the Company were reported for four domestic segments and one international segment. The domestic segments include the Company's operations in the United States and Puerto Rico.
The Company's segments are defined as follows:
Retail - consisting of:

Full-line Stores - 863 Full-line Stores, averaging 88,000 selling square feet, located primarily in the best malls in the nation and offering:

- Softlines - A complete selection of fashionable, quality apparel and accessories for the whole family, plus cosmetics, fine jewelry and home fashions, at value prices; includes leading national brands as well asexclusive Sears brands such as Canyon River Blues, Fieldmaster, Crossroads, Apostrophe, TKS Basics and Circle of Beauty.

 

- Hardlines - A full assortment of appliances, electronics and home improvement products including fitness and lawn and garden equipment; includes major national brands as well as exclusive Sears brands such as Kenmore,Craftsman, WeatherBeater and DieHard.

Specialty Stores - More than 2,100 Specialty Stores, located primarily in free-standing, off-the-mall locations or high-traffic neighborhood shopping centers.

- Hardware Stores - 274 neighborhood Hardware Stores under the Sears Hardware and Orchard Supply Hardware names, averaging 20,000 to 40,000 selling square feet, that carry Craftsman tools, a wide assortment of nationalbrands and other home improvement products.

 

- Dealer Stores - 790 independently-owned stores, primarily located in smaller communities and averaging 5,000 selling square feet, that offer appliances, electronics, lawn and garden merchandise, hardware andautomobile batteries and carry exclusive Sears brands such as Craftsman, Kenmore and DieHard.

 

- Commercial Sales - Showrooms dedicated to appliance and home improvement products for commercial customers.

- The Great Indoors - Four stores for home decorating and remodeling, averaging 100,000 selling square feet, dedicated to the four main rooms of the house: kitchen, bedroom, bathroom and great room.

- Automotive Stores - 822 Sears Auto Centers and 229 NTB National Tire & Battery stores that offer tires, DieHard and other brands of batteries and related services. Automotive Stores also included the Parts Group,which sold automotive parts through Parts America and Western Auto stores until November 2, 1998, when the Company sold the Parts Group.

- Outlet Stores - 34 stores averaging 30,000 selling square feet that offer appliances, electronics and lawn and garden merchandise.

- Homelife Furniture Stores - included in 1998 and 1999 until January 30, 1999, when the Company sold Homelife.

Services - consisting of:

Home Services - A broad range of services including service contracts, product installation and repair services primarily for products sold in the Company's retail outlets, major home improvements and other homeservices such as pest control and carpet cleaning.

Direct Response - Direct marketing of goods and services such as insurance (credit protection, life and health), clubs and services memberships, merchandise through specialty catalogs and impulse and continuitymerchandise.

Credit - Manages the Company's portfolio of credit card receivables arising primarily from purchases of merchandise and services from the Company's domestic operations. The domestic credit card receivables portfolioconsists primarily of Sears Card, SearsCharge Plus and Sears Gold MasterCard account balances.

Corporate - Includes activities that are of an overall holding company nature, primarily consisting of administrative activities, and the Sears Online investment initiatives related to selling merchandise via Companyweb sites, the costs of which are not allocated to the Company's businesses.

International - International operations are conducted in Canada through Sears Canada Inc. ("Sears Canada"), a 54.5% owned subsidiary. Sears Canada offers a diverse array of shopping options, with 125 Full-line Storesand 176 Specialty Stores, a general merchandise catalog, credit services and a broad range of home-related services.

Throughout management's analysis of consolidated operations and financial condition, certain prior year information has been reclassified to conform to the current year presentation and all references to earnings pershare relate to diluted earnings per common share.

In 2000, in response to the Securities and Exchange Commission's Staff Accounting Bulletin No. 101, the Company changed its method of recording licensed business revenue to include only net commission income fromlicensees. The Company's licensees include third-party concessions primarily operated in domestic and Canadian Full-line Stores, as well as licensees of home improvement products, which are included in the Services segment. Changing the method ofrecording licensed business revenues reduced reported revenues by $1.52, $1.59 and $1.62 billion in 2000, 1999 and 1998, respectively, and had no effect on net income or earnings per share.