**  
UNITED STATESSECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 FORM 10-Q     X QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORTHEQUARTERLY PERIOD ENDED JULY 1, 2000             OR         TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934 
Commission file number 1-416   
SEARS, ROEBUCK AND CO.(Exact name of registrant as specifiedin its charter)New York(State of Incorporation)36-1750680(I.R.S. Employer Identification No.)  3333 Beverly Road, Hoffman Estates,Illinois(Address of principal executive offices)60179(Zip Code)Registrant's telephone number,including area code: (847) 286-2500    
Registrant [1] has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities ExchangeAct of 1934 during the preceding 12 months and [2] has been subject tosuch filing requirements for the past 90 days.Yes X No As of July 29, 2000, the Registranthad 342,854,648 common shares, $.75 par value, outstanding.
  
SEARS, ROEBUCK AND CO.
INDEX TO QUARTERLY REPORT ON FORM 10-Q13 AND 26 WEEKS ENDED JULY 1, 2000
          PARTI - FINANCIAL INFORMATIONPageItem 1.Financial Statements  Condensed ConsolidatedStatements of Income (Unaudited) 13 Weeks and 26 Weeks Ended July 1,2000 and July 3, 19991 Condensed ConsolidatedBalance Sheets July 1, 2000 (Unaudited), July 3,1999 (Unaudited)and January 1, 20002 Condensed ConsolidatedStatements of Cash Flows (Unaudited) 26 Weeks Ended July 1, 2000 and July3, 19993 Notes to CondensedConsolidated Financial Statements (Unaudited)4 IndependentAccountants' Review Report8   Item 2.Management'sDiscussion and Analysis of Operations, FinancialConditionand Liquidity9      
PART II - OTHER INFORMATION   Item 1.Legal Proceedings17Item 4. Submissionof Matters to a Vote of Security-Holders18Item 6.Exhibits andReports on Form 8-K19   
     PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSSEARS, ROEBUCK AND CO.CONDENSED CONSOLIDATED STATEMENTSOF INCOME(Unaudited)  *(millions,except per share data)*13 Weeks Ended26 Weeks EndedJuly 1, 2000July 3,1999July 1,2000July 3,1999Merchandisesales and services$8,975$8,599$16,804$16,127Creditrevenues1,1011,0372,2452,165Totalrevenues10,0769,63619,04918,292Costsand expensesCostof sales, buying and occupancy6,6066,27112,47511,929Sellingand administrative2,1122,0584,0663,977Depreciationand amortization210215419424Provisionfor uncollectible accounts215215460506Interest310313626647Totalcosts and expenses9,4539,07218,04617,483Operatingincome6235641,003809Otherincome (expense)5(12)6(14)Incomebefore income taxes and minority interest 6285521,009795Incometaxes(232)(209)(372)(301)Minorityinterest(8)(12)(14)(17)Netincome$388$331$623$477Earningsper share: Basic$1.12 $0.87$1.77$1.25Diluted$1.11$0.86$1.76$1.24Cashdividends declared per share$0.23$0.23$0.46$0.46Averagecommon and common equivalent shares outstanding348.4383.6354.2384.4Seeaccompanying notes.    
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
  *(millions)*(Unaudited)July 1,2000July 3,1999January 1, 2000AssetsCurrentassets        Cash andcash equivalents$345 $397 $729Retainedinterest in transferred credit card receivables 1,985   3,600   3,144Credit cardreceivables, net 17,125   16,771   18,033Other receivables 311  384  404Merchandiseinventories 5,628  5,000  5,069Prepaidexpenses, deferred charges and other assets561604579Deferredincome taxes 764  729  709Total currentassets 26,719  27,485  28,667         Propertyand equipment, net 6,345  6,332  6,450Deferredincome taxes 318  531  367Other assets   1,487  1,502  1,470Total assets$34,869 $35,850 $36,954               Liabilities        Currentliabilities        Short-termborrowings$2,557 $3,814 $2,989Currentportion of long-term debt and capitalized leases 2,338  612  2,165Accountspayable and other liabilities 6,319  5,977  6,992Unearnedrevenues 1,086  950  971Other taxes 462  451  584Total currentliabilities 12,762  11,804  13,701         Long-termdebt and capitalized leases 12,245  14,042  12,884Postretirementbenefits 2,070  2,258  2,180Minorityinterest and other liabilities 1,343  1,463  1,350Total liabilities 28,420  29,567  30,115         Commitmentsand Contingent Liabilities                 Shareholders'Equity        Common shares 323  323  323Capitalin excess of par value 3,542  3,566  3,554Retainedearnings  6,414  5,149  5,952Treasurystock - at cost (3,418)  (2,233)  (2,569)DeferredESOP expense (113)  (160)  (134)Accumulatedother comprehensive loss (299)  (362)  (287)Total shareholders'equity 6,449  6,283  6,839         Total liabilitiesand shareholders' equity$34,869 $35,850 $36,954               Total commonshares outstanding  343.0  380.3  369.1                  Seeaccompanying notes.             
SEARS, ROEBUCK AND CO.
CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS(Unaudited)
  *(millions)*26 Weeks EndedJuly 1,July 3, 2000 1999CASH FLOWSFROM OPERATING ACTIVITIES:     Net income$623 $477Adjustmentsto reconcile net income to net cash     providedby (used in) operating activities:     Depreciation,amortization and other noncash items 466  464Provisionfor uncollectible accounts 460  506Loss(Gain) on sales of property and investments(1)2Changein (net of acquisitions):Deferredincome taxes (2)  81Retainedinterest in transferred credit card receivables 1,159  694Credit cardreceivables 437  758Merchandiseinventories (564)  (234)Other operatingassets 70  (14)Other operatingliabilities (822)  (732)Net cashprovided by operating activities  1,826  2,002      CASH FLOWSFROM INVESTING ACTIVITIES:     Acquisitionof businesses, net of cash acquired (1)  (16)Proceedsfrom sales of property and investments 19  101Purchasesof property and equipment (395)  (575)Purchasesof long-term investments (17)  (21)Net cashused in investing activities (394)  (511)            CASH FLOWSFROM FINANCING ACTIVITIES:           Proceedsfrom long-term debt 307  909Repaymentsof long-term debt (766)  (1,313)Decreasein short-term borrowings, primarily 90 days or less (432)  (830)Repaymentsof ESOP note receivable 100  58Common sharespurchased (901)  (202)Common sharesissued for employee stock plans 41  42Dividendspaid to shareholders (164)  (257)Net cashused in financing activities (1,815)  (1,593)      Effect ofexchange rate on cash and invested cash (1)  4      Net decreasein cash and cash equivalents (384)  (98)      Balanceat beginning of year 729  495      Balanceat end of period$345 $397                See accompanyingnotes.         
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)
 
1. Condensed Consolidated FinancialStatements The Condensed Consolidated BalanceSheets as of July 1, 2000 and July 3, 1999, the related Condensed ConsolidatedStatements of Income for the 13 and 26 weeks ended July 1, 2000 and July3, 1999, and the Condensed Consolidated Statements of Cash Flows for the26 weeks ended July 1, 2000 and July 3, 1999, are unaudited. The interimfinancial statements reflect all adjustments (consisting only of normalrecurring accruals) which are, in the opinion of management, necessaryfor a fair statement of the results for the interim periods presented.The condensed consolidated financial statements should be read in conjunctionwith the consolidated financial statements and notes thereto included inthe Sears, Roebuck and Co. (the "Company" or "Sears") 1999 Annual Reportto Shareholders and Annual Report on Form 10-K. The results of operationsfor the interim periods should not be considered indicative of resultsto be expected for the full year.
Certain reclassifications have beenmade to the 1999 financial statements to conform with the current yearpresentation. 2. Shareholders' Equity and DividendRestrictionsUnder terms of indentures enteredinto in 1981 and thereafter, Sears cannot take specified actions, includingthe declaration of cash dividends, which would cause its unencumbered assets,as defined, to fall below 150% of its liabilities, as defined. At July1, 2000, approximately $4.5 billion could be paid in dividends to shareholdersunder the most restrictive indentures.
On March 10, 1999, the Board of Directorsapproved a common share repurchase program to acquire up to $1.5 billionof the Company's common shares by December 31, 2001. The shares are purchasedon the open market or through privately negotiated transactions. As ofJuly 1, 2000, approximately 41.5 million common shares have been acquiredunder this repurchase program at a cost of approximately $1.37 billion.During the second quarter of 2000, the Company repurchased 10.3 millionshares at a cost of $393 million.  
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)
3. Earnings Per Share
The following table sets forth thecomputations of basic and diluted earnings per share:   *(millions,except per share data)*            13 Weeks Ended             26 Weeks EndedJuly 1, July 3, July 1, July 3,   2000 1999 2000 1999Basic:Netincome$388$331$623$477Averageshares outstanding346.6381.1352.9382.0*Earningsper share - basic**$**1.12**$**0.87**$**1.77**$**1.25*Diluted:Netincome$388$331$623$477Averageshares outstanding346.6381.1352.9382.0Dilutiveeffect of stock options1.82.51.32.4Averageshares and equivalent shares outstanding348.4383.6354.2384.4*Earningsper share - diluted**$**1.11**$**0.86**$**1.76**$**1.24*In each period, certain outstandingoptions were excluded from the computation of diluted earnings per sharebecause they would have been antidilutive. As of July 1, 2000, optionsto purchase 11.1 million shares of stock at prices ranging from $37 to$64 and $33 to $64 per share were excluded from the 13 and 26 week 2000calculations, respectively. As of July 3, 1999, options to purchase 7.3million shares of stock at prices ranging from $47 to $64 and $45 to $64per share were excluded from the 13 and 26 week 1999 calculations, respectively.4. Comprehensive Income The following table sets forth thecomputation of comprehensive income:*(millions)*                     13 Weeks Ended                            26 Weeks EndedJuly 1, July 3, July 1, July 3,   2000 1999 2000 1999Netincome$388$331$623$477Othercomprehensive income (loss):Unrealizedgain (loss) on investments(5)(41)(9)42Foreigncurrency translation adjustments(10)14(3)20Totalother comprehensive income(15)(27)(12)62Totalcomprehensive income$373$304$611$539     
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS
(Unaudited)
Accumulated other comprehensive lossis comprised of foreign currency translation charges of $115, $105 and$112 million as of July 1, 2000, July 3, 1999 and January 1, 2000, respectively;the Company's minimum pension liability (net of tax) of $194, $299 and$194 million as of July 1, 2000, July 3, 1999 and January 1, 2000, respectively;and an unrealized gain on investments (net of tax) of $10, $42 and $19million as of July 1, 2000, July 3, 1999 and January 1, 2000, respectively.5. Segment Disclosures The following tables set forth revenue,operating income (expense) and total assets by segment:
For the 13 weeks ended July 1, 2000*millions*RetailServicesCreditCorporateInternationalConsolidatedRevenue$ 7,290$ 732$ 1,033$ --$ 1,021$ 10,076Operatingincome (expense)19099398(94)30623Totalassets10,4441,12318,3121,7603,23034,869 
         For the 13 weeks ended July 3, 1999 *millions*RetailServicesCreditCorporateInternationalConsolidatedRevenue$ 6,997$ 736$ 973$ --$ 930$ 9,636Operatingincome (expense)17394315(63)45564Totalassets10,1091,02819,7312,2102,77235,850 
         For the 26 weeks ended July 1, 2000 *millions*RetailServicesCreditCorporateInternationalConsolidatedRevenue$ 13,603$ 1,355$ 2,104$ --$ 1,987$ 19,049Operatingincome (expense)193164780(182)481,003Totalassets10,4441,12318,3121,7603,23034,869For the 26 weeks ended July 3, 1999*millions*RetailServicesCreditCorporateInternationalConsolidatedRevenue$ 13,131$ 1,383$ 2,036$ --$ 1,742$ 18,292Operatingincome (expense)104169610(136)62809Totalassets10,1091,02819,7312,2102,77235,850 6. Effect of New Accounting Standardsand StatementsIn June 1998, the Financial AccountingStandards Board ("FASB") issued Statement of Financial Accounting Standards("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities."This statement (as amended) is now required to be adopted in years beginningafter June 15, 2000. The Company is currently evaluating this statement'sprovisions and has not yet determined what effect it might have on theconsolidated financial position and results of operations of the Company.The Company intends to adopt the standard for the 2001 fiscal year.  
SEARS, ROEBUCK AND CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited) 
7. Effect of New SEC Staff GuidanceIn December 1999, the Securitiesand Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101,"Revenue Recognition in Financial Statements" ("SAB 101"), which effectivelychanges previous guidance related to the recording of licensed businessrevenues for retail companies. As a result, the Company changed its methodof recording licensed business revenue in the first quarter of 2000. UnderSAB 101, the Company now recognizes as revenue only the commission receivedfrom the licensed business partner. Prior to implementation of SAB 101,the Company had recognized the gross revenues of licensees. This changein licensed business reporting reduces revenues and expenses by equal amountsand therefore does not have an impact on operating income. Prior year financialstatements have been restated to reflect the reclassification under SAB101.
8. Restructuring Charge The Company implemented certain cost-reductionstrategies during the third quarter of 1999 resulting in a $46 millionpre-tax restructuring charge. Of the $46 million charge, $25 million relatedto the closing of 33 automotive stores in three geographic markets and$21 million related to severance costs for headquarters staff reductionsof approximately 450 employees. The staff reductions and the closing ofthe 33 stores both occurred during the third quarter of 1999. Of the $25million charge for the 33 closed stores, approximately $3 million relatedto severance costs, $21 million was to reduce the carrying value of theclosed store assets to their estimated fair value, less costs to sell and$1 million was for other related costs. The Company paid $3 million and$11 million of restructuring costs during the 13 and 26 week periods endedJuly 1, 2000. Future cash payments are expected to be insignificant.
9. Legal Proceedings There have been no material developmentsin any material legal proceedings since the Company's disclosure in itsAnnual Report on Form 10-K for the fiscal year ended January 1, 2000.SEARS, ROEBUCK AND CO.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT

To the Shareholders and Board of Directorsof Sears, Roebuck and Co.
We have reviewed the accompanying CondensedConsolidated Balance Sheets of Sears, Roebuck and Co. as of July 1, 2000and July 3, 1999, and the related Condensed Consolidated Statements ofIncome for the 13-week and 26-week periods ended July 1, 2000 and July3, 1999 and the Condensed Consolidated Statements of Cash Flows for the26-week periods ended July 1, 2000 and July 3, 1999. These financial statementsare the responsibility of the Company's management.
We conducted our reviews in accordancewith standards established by the American Institute of Certified PublicAccountants. A review of interim financial information consists principallyof applying analytical procedures to financial data and of making inquiriesof persons responsible for financial and accounting matters. It is substantiallyless in scope than an audit conducted in accordance with auditing standardsgenerally accepted in the United States of America, the objective of whichis the expression of an opinion regarding the financial statements takenas a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not awareof any material modifications that should be made to such condensed consolidatedfinancial statements for them to be in conformity with accounting principlesgenerally accepted in the United States of America.
We have previously audited, in accordancewith auditing standards generally accepted in the United States of America,the Consolidated Balance Sheet of Sears, Roebuck and Co. as of January1, 2000, and the related Consolidated Statements of Income, Shareholders'Equity, and Cash Flows for the year then ended (not presented herein);and in our report dated February 7, 2000, we expressed an unqualified opinionon those consolidated financial statements. In our opinion, the informationset forth in the accompanying Condensed Consolidated Balance Sheet as ofJanuary 1, 2000, is fairly stated, in all material respects, in relationto the Consolidated Balance Sheet from which it has been derived. 
Deloitte & Touche LLPChicago, IllinoisAugust 2, 2000  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999

Analysis of Operations
Operating results for theCompany are reported for four domestic segments and one international segment.The domestic segments include the Company's operations in the United Statesand Puerto Rico. The Company's segments are defined as follows:  -  
*Retailconsisting of:*-  *Full-line stores * 
-  *Specialty stores (Hardwarestores, Dealer stores, Contract Sales, The Great Indoors and Auto stores)* 
- 
*Corporateconsisting of administrative activities of a holding company nature, thecosts of which are not allocated to the Company's businesses (includesthe Company's On-line investments)*- 
*Services consistingof:*-  Home Services
-  Direct Response
- 
*Internationalconsisting of retail, services, credit, corporate and On-line operationsconducted in Canada through Sears Canada, Inc. ("Sears Canada"), a 54.5%owned consolidated subsidiary*- 
*Credit which managesdomestic Credit Card operations*
For the 13 weeks ended July 1, 2000,net income was $388 million, or $1.11 per share, compared to $331 million,or $0.86 per share for the comparable 1999 period. For the 26 weeks endedJuly 1, 2000, net income was $623 million, or $1.76 per share comparedto $477 million, or $1.24 per share for the comparable 1999 period. Theincreases in net income and earnings per share were primarily due to increasedoperating income in the Retail and Credit segments coupled with a reductionin outstanding shares due to the Company's share repurchase program.
Operating income (expense) by segmentwas as follows:*(millions)*13 Weeks Ended26 Weeks EndedJuly 1,July 3,July 1,July 3,2000199920001999Retail$190$173$193$104Services9994164169Credit398315780610Corporate(94)(63)(182)(136)International30454862Totaloperating income$623$564$1,003$809        
The Company's consolidated effectivetax rate for the 13 weeks ended July 1, 2000 was 36.9% compared to 37.9%in the prior year period. The decrease in the effective tax rate is primarilydue to the favorable resolution of certain domestic tax audit issues.  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999

Due to holiday buying patterns, merchandisesales are traditionally higher in the fourth quarter than other quarterlyperiods and a disproportionate share of operating income is typically earnedin the fourth quarter. This business seasonality results in performancefor the 13 and 26 weeks ended July 1, 2000 which is not necessarily indicativeof performance for the balance of the year. The Company makes availableby phone a recorded message on the sales performance of its domestic stores.The message is updated weekly and can be heard by calling (847) 286-6111. 
**Retail**
Retail revenues increased 4.2% to $7.3billion and 3.6% to $13.6 billion for the 13 and 26 weeks ended July 1,2000, respectively, from the comparable 1999 period. Excluding the effectof the HomeLife divestiture in the first quarter of 1999, retail revenuesincreased $521 million or 4.0% for the 26 week period. Retail revenuesand related information are as follows: (millions,except number of stores)13 Weeks26 Weeks July1,July 3,July 1,July 3,   2000 1999 Change 2000 1999 ChangeRevenues:Full-linestores$5,652$5,4374.0%$10,595$10,2323.5%Specialtystores1,6381,5605.0%3,0082,8993.8%TotalRetail revenues$7,290$6,9974.2%$13,603$13,1313.6%Numberof Full-line stores858848Numberof Specialty stores2,1742,127TotalRetail stores3,0322,975 Comparablestore salespercentage increase 2.7%  0.9%    2.7%  1.3%  
For the 13 week period, Full-line storesrevenues increased 4.0% over the second quarter of 1999.Hardlines revenues increased 5.6% in thesecond quarter of 2000. Strong gains in electronics and home appliances,and an increase in home improvement were partially offset by a decreasein home office sales.

Softlines revenues increased 1.2% in thesecond quarter of 2000. Revenue increases in footwear, children's apparel,housewares, fine jewelry, dresses, cosmetics and fragrances, and intimateapparel were partially offset by decreases in men's apparel, floor coverings,window-shop and Junior's.
For the 26 week period, Full-line storerevenues increased 3.5% over 1999 as hardlines increased 6.5% and softlinesdecreased 0.5%.  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999

For the 13 week period ended July 1,2000, Specialty stores revenues increased 5.0% from the comparable 1999period primarily due to strong comparable store sales increases in SearsDealer stores. Sears Dealer store revenues also benefited from 73 net newstore openings. The Great Indoors also produced strong revenue gains overthe comparable 1999 period. Auto stores revenues decreased 1.9% from thecomparable 1999 period due to the closure of 33 NTB stores in the thirdquarter of 1999 and comparable store sales decreases. 
Specialty stores revenues increased3.8% for the 26 week period ended July 1, 2000 compared to 1999. The prioryear includes revenues from HomeLife which was sold on January 30, 1999.Excluding HomeLife revenues in the prior year, Specialty stores revenuesincreased 5.5% primarily due to new store growth and strong comparablestore sales increases in the Sears Dealer and The Great Indoors stores,and comparable store increases in the Hardware stores, partially offsetby Auto store comparable store sales decreases.
Retail gross margin as a percentageof Retail revenues for the second quarter of 2000 declined 50 basis pointsfrom the second quarter of 1999. The decline is primarily due to increasedmarkdown activity in the Full-line stores particularly across the softlinesbusinesses. For the 26 week period, retail gross margin was flat.
Retail selling and administrative expenseas a percentage of Retail revenues for the second quarter of 2000 improved40 basis points from the second quarter of 1999. The improvement was primarilydue to increased marketing efficiency. For the 26 week period, the retailselling and administration expense rate improved 40 basis points.
Retail depreciation and amortizationexpense for the second quarter of 2000 decreased $4 million or 2.4% fromthe comparable 1999 period. For the 26 week period, retail depreciationand amortization expense decreased $4 million. 
**Services**
Services revenues, which are generatedby the Home Services and Direct Response businesses, decreased 0.5% inthe second quarter of 2000 versus the comparable 1999 period. Both HomeServices and Direct Response businesses showed slight revenue decreases.In Home Services, lower repair service revenues and significantly lowerrevenues from Sears Termite and Pest Control offset improvements in Coolingand Heating. For the 26 week period, Services revenues decreased 2.0%.
Services gross margin as a percentageof Services revenues for the second quarter of 2000 improved 50 basis points.The increase in gross margin rate is primarily due to margin rate improvementsin the Sears Repair Services business partially offset by a lower marginrate in the Sears Home Improvement business.
Services selling and administrativeexpense as a percentage of Services revenues improved 20 basis points inthe second quarter of 2000 from the comparable 1999 period. The decreasedselling and administrative expense ratio was primarily due to productivityinitiatives in Home Services that reduced payroll, benefits and marketingcosts.
For the 26 week period, Services grossmargin rate decreased 60 basis points and selling and administrative expenseimproved 50 basis points.
Services depreciation and amortizationincreased 2.0% in the second quarter of 2000 from the comparable 1999 periodand increased 2.4% for the comparable 26 week period.  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999
**Credit**
Domestic Credit revenues increased6.2% to $1.0 billion and 3.3% to $2.1 billion, respectively for the 13and 26 weeks ended July 1, 2000 from the comparable prior year periods.The increase in Credit revenues in the second quarter was primarily attributableto yield improvement and higher securitization income. The yield improvementreflects performance pricing and higher late fees. Securitization of $910million of credit card receivables in June 2000 added $22 million of securitizationincome to credit revenues and income. A lower average level of owned creditcard receivables and retained interest assets partially offset the aboverevenue increases. A summary of Credit information (for the managed portfolio)is as follows:    13 Weeks Ended 26 Weeks EndedJuly 1,July 3,July 1,July 3,  2000 1999 2000 1999 Sears creditcards as a % of sales(1) 46.5%  48.2%  46.8%  48.6% Averageaccount balance(as of July 1, 2000 and July 3, 1999)      $1,163  $1,182               Averagemanaged credit card receivables (*millions*)$25,244 $26,469 $25,698 $27,039
(1) 1999 Sears credit cards share has been restated to conform with the currentyear calculation which excludes HomeLife      sales and now includes The Great Indoorssales and Sears On-line sales.  Sears credit cards include Sears Card,Premier,      Sears Charge Plus, Sears Gold Mastercard,Sears Mastercard, Starter Card, Easy Pay, and Commercial One Card.

The percentage of merchandise salesand services transacted with Sears credit cards in the second quarter of2000 declined to 46.5% compared to 48.2% a year ago due to greater consumerpreference for the use of cash, checks and third party credit cards. Thepayment rate during the second quarter of 2000 was also higher than inthe comparable prior year quarter, contributing to the decrease in averagemanaged receivables.
Credit selling and administrative expenseas a percentage of Credit revenues improved 310 basis points in the secondquarter of 2000 and 280 basis points for the 26 week period from the comparable1999 periods. The second quarter improvement was primarily due to loweraccount servicing and collection costs. The year to date expense reductionalso reflects lower legal expenses.  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999
The domestic provision for uncollectibleaccounts and related information is as follows:        13 WeeksEnded     26 WeeksEnded*(millions)*July 1, July 3, July 1, July 3,  2000 1999 2000 1999             Provisionfor uncollectible accounts$206$206$441$490 Net creditcharge-offs as a percentage ofaverage managed credit card receivables(1)(2) 5.09%  7.11%  5.39%  7.08%  20001999July 1,April 1,Jan. 1,Oct. 2,July 3,20002000200019991999Domesticmanaged credit card receivables - delinquency rate (1)7.15%7.20%7.58%7.57%7.29%           Allowancefor uncollectible accounts $725$725$725$773$850           Allowance% of domestic owned credit card receivables4.46%4.48%4.26%4.78%5.27%           
(1) The domestic managednet charge-off rate includes all of the accounts in the domestic portfolio.Twelvepercent of the accounts were converted to the new Total Systems Services,Inc. ("TSYS") account processing system in October 1998, 38% were convertedin March 1999, and 50% were converted in April 1999. Balances are generallycharged off earlier under the TSYS system than under the proprietary system.Delinquency rates calculated on the Company's pre-TSYS proprietary systemare not comparable to delinquencies calculated on the TSYS system due todifferences in methodology. For a description of the anticipated effectson charge-offs and delinquency rates of the TSYS conversion, see Searsquarterly report on Form 10-Q dated May 14, 1998.
(2) The net charge-offrate is affected by seasonality, periodic sales of uncollectible accountsto third parties, bankruptcy trends and other general economic trends.
The domestic provision for uncollectibleaccounts was flat at $206 million for the 13 weeks ended July 1, 2000 anddecreased 10.0% to $441 million for the 26 weeks ended July 1, 2000 fromthe comparable prior year periods. The decrease was attributable to loweraverage owned credit card receivable balances and improvement in portfolioquality as net charge-offs declined from the comparable prior year periodand delinquencies continued to show favorable trends.  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999

Interest expense is discussed withinthe Credit segment since the majority of the Company's interest expenseis allocated to the Credit segment. Interest expense is combined with thefunding costs on receivables sold through securitizations to representtotal funding costs as follows:    13 Weeks Ended 26 Weeks Ended*(millions)*July 1,July 3,July 1,July 3,  2000 1999 2000 1999             Consolidatedinterest expense(1)$310$313$626$647Fundingcost on securitized receivables102106205212Totalfunding costs$412$419$831$859         
(1) Credit segmentinterest expense was $271 and $273 for the second quarter of 2000 and 1999,respectively, and $555 and $562 for the 26 weeks ended July 1, 2000 andJuly 3, 1999, respectively.
Consolidated interest expense decreasedin the first and second quarters of 2000 compared to 1999 due to loweron-book debt levels caused primarily by a decrease in domestic owned creditcard receivables and retained interest assets. This decrease in debt levelswas partially offset by a higher average funding rate in the first andsecond quarter of 2000 versus 1999. The funding cost on securitized receivableswas slightly lower in both the first and second quarters of 2000 due tolower levels of average securitized balances. 
**Corporate**
Corporate expenses increased $31 millionin the second quarter of 2000 and $46 million for the first 26 weeks of2000 compared to similar periods in 1999. The increases were primarilydue to a higher level of investment in the Sears On-line initiatives.
**International**
International revenues for the secondquarter of 2000 increased 9.8% from the same period a year ago. Sears Canadaenjoyed strong increases in retail and credit revenues. For the 26 weekperiod, International revenues increased 14.1%.
International gross margin as a percentageof International merchandise and services revenues decreased 190 basispoints in the second quarter of 2000 from the comparable prior year quarter.The decrease in gross margin rate was primarily due to increased promotionalmarkdowns and increased costs related to the Eaton's acquisition. For the26 week period, International gross margin decreased 110 basis points largelydue to promotional markdowns and integration costs related to the Eaton'sacquisition.
International selling and administrativeexpense as a percentage of total International revenues decreased 10 basispoints in the second quarter of 2000 from the second quarter of 1999. Forthe 26 week period, the International selling and administrative rate increased30 basis points primarily due to costs associated with remodeling and relaunchingstores acquired as part of the Eaton's acquisition.
  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999

**Financial Condition**
The consolidated owned net credit cardreceivables balances of $17.13 billion, $16.77 billion and $18.03 billionas of July 1, 2000, July 3, 1999 and January 1, 2000, respectively, excludecredit card receivables transferred to a securitization Master Trust asfollows:  *(millions)*July 1,  July 3, January 1, 2000 1999 2000DomesticManagedcredit card receivables$25,144$26,103$26,754Securitizedbalances sold(6,893)(6,381)(6,579)Retainedinterest in transferred creditcard receivables(1,985)(3,600)(3,144)Othercustomer receivables5810437Domesticowned credit card receivables16,32416,22617,068Internationalcredit card receivables1,5571,4301,725Consolidatedcredit card receivables17,88117,65618,793Less:Allowance for uncollectible accounts756885760Creditcard receivables, net$17,125$16,771$18,033
Consolidated credit card receivablesin the second quarter of 2000 (before allowance for uncollectible accounts)increased $225 million over the second quarter of 1999. Domestic managedcredit card receivables decreased from the second quarter of 1999 primarilydue to declining market share of sales on the Sears Card and faster paymentrates. Domestic owned credit card receivables are slightly higher thanlast year as a net reduction in securitized and transferred receivablesmore than offset the decline in managed receivables. Compared to 1999 year-end,consolidated credit card receivables (before allowance for uncollectibleaccounts) decreased $912 million due to the normal seasonal nature of theretail industry as well as the aforementioned declining market share.
As of July 1, 2000, consolidated merchandiseinventories on the first-in, first-out (FIFO) basis were $6.25 billion,compared with $5.69 billion at July 3, 1999 and $5.66 billion at January1, 2000. The increase in inventory levels from the second quarter of 1999and January 1, 2000 is primarily due to increased hardlines and softlinesinventories in the Full-line stores and increased Specialty store inventoriesto support revenue growth and additional new store openings. Internationalinventory increases are due to the acquisition of Eaton stores and continuedrevenue growth.  
SEARS, ROEBUCK AND CO.
ITEM 2. MANAGEMENT'S DISCUSSION ANDANALYSIS OFOPERATIONS, FINANCIAL CONDITION ANDLIQUIDITY FOR THE13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999
Total funding for the Company at July1, 2000 was $24.0 billion compared with $24.8 billion a year earlier primarilyresulting from a decline in the domestic managed credit card receivablesportfolio. Total funding includes debt recorded on the balance sheet andinvestor certificates related to credit card receivables sold through securitizationsas follows: July 1, July 3, January 1,*(millions)*2000 1999 2000         Short-termborrowings$2,557$3,814$2,989Long-termdebt and capitalized lease obligations14,58314,65415,049Securitizedbalances sold6,8936,3816,579Totalfunding$24,033$24,849$24,617
The Company accesses a variety of capitalmarkets to preserve flexibility and diversify its funding sources. Theprimary funding sources utilized include unsecured commercial paper, mediumterm notes, senior debt and securitization.
**Liquidity**
Based upon the cash flow expected tobe generated from future operations and the Company's ability to cost-effectivelyaccess multiple sources of funding, the Company believes sufficient resourceswill be available to maintain its planned level of operations, capitalexpenditures, dividends and share repurchases in the foreseeable future.
**Cautionary Statement RegardingForward-Looking Information**
Certain statements made in this Reportare forward-looking statements made in reliance on the safe harbor provisionsof the Private Securities Litigation Reform Act of 1995. As such, theyinvolve risks and uncertainties that could cause actual results to differmaterially. The Company's forward-looking statements are based on assumptionsabout many important factors, including ongoing competitive pressures inthe retail industry, changes in consumer spending, delinquency and charge-offtrends in the credit card receivables portfolio, general North Americaneconomic conditions (such as interest rates and consumer confidence), anticipatedcash flow, the Company's ability to cost-effectively access multiple sourcesof funding, the ability of the Company to implement its marketing plansand cost reduction efforts and normal business uncertainty. In addition,the Company typically earns a disproportionate share of its operating incomein the fourth quarter due to holiday buying patterns, which are difficultto forecast with certainty. While the Company believes that its assumptionsare reasonable, it cautions that it is impossible to predict the impactof certain factors which could cause actual results to differ materiallyfrom expected results. The Company intends its forward looking statementsto speak only as of the time of such statements, and does not undertaketo update or revise them as more information becomes available.  
SEARS, ROEBUCK AND CO.
PART II. OTHER INFORMATION

Item 1. Legal ProceedingsThere have been no material developmentsin any material legal proceedings since the Company's disclosure in itsAnnual Report on Form 10-K for the fiscal year ended January 1, 2000.     SEARS, ROEBUCK AND CO.
PART II. OTHER INFORMATION
 Item4. Submissionof Matters to a Vote of Security-Holders. OnMay 11, 2000, the Company held its annual meeting of shareholders at theMerchandise Review Center - Sears Store Support in Hoffman Estates, Illinois.              HallAdams, Jr., James R. Cantalupo, W. James Farrell, and Richard C. Notebaertwere elected to Class C of the Board of Directors for three year termsexpiring at the 2003 annual meeting of shareholders. The shareholders approvedthe recommendation of the Audit Committee that Deloitte & Touche LLPbe appointed auditors for 2000. The shareholders also approved the Sears,Roebuck and Co. 2000 Employees Stock Plan. A shareholder proposal regardingthe classified Board of Directors was approved by a majority of votes casts.The votes on these matters were as follows:               1.Electionof Directors     NameFor Withheld    HallAdams, Jr. 299,637,192 6,719,755     JamesR. Cantalupo 298,004,157 8,352,790     W.James Farrell 299,630,075 6,726,872     RichardC. Notebaert 299,670,886 6,686,061            2.Appointmentof Deloitte & Touche LLP as auditors for 2000.ForAgainstAbstain302,527,5532,037,8061,791,588          3.Approvalof the Sears, Roebuck and Co. 2000 Employees Stock PlanForAgainstAbstainBroker Non-Votes168,685,62685,187,5573,166,69449,317,070                4.Shareholderproposal regarding the classified Board of Directors.ForAgainstAbstainBroker Non-Votes   131,807,005 118,161,197 7,071,675 49,317,070                 
SEARS, ROEBUCK AND CO.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form8-K.(a) Exhibits. An Exhibit Index has been filed aspart of this Report on Page E-1.(b) Reports on Form 8-K. The Registrant filed a Current Reporton Form 8-K dated April 17, 2000 to report, under Item 5, that the Registrantissued a press release to report its first quarter earnings and to furnish,under Item 7, a copy of the press release.
The Registrant filed a Current Reporton Form 8-K dated April 18, 2000 to report, under Item 5, on the Registrant'sanalyst meeting and, under Item 7, to furnish excerpts from the presentationgiven at the meeting.    SEARS, ROEBUCK AND CO.
SIGNATURE
Pursuant to the requirements of theSecurities Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized. Sears,Roebuck and Co.(Registrant)        August15, 2000By/s/Glenn R. RichterGlenn R. Richter Vice President and Controller (Principal Accounting Officerand duly authorized officer of Registrant)   
E-1
EXHIBIT INDEX
SEARS, ROEBUCK AND CO.13 AND 26 WEEKS ENDED JULY 1, 2000AND JULY 3, 1999
 ExhibitNo. 3(a).Restated Certificateof Incorporation as in effect on May 13, 1996 (incorporated by referenceto Exhibit 3(a) to Registrant's Statement No. 333-8141).3(b).By-laws, asamended to February 1, 2000 (incorporated by reference to Exhibit 3.(ii)to Registrant's Annual Report on Form 10-K for the fiscal year ended January1, 2000).4.Registranthereby agrees to furnish the Commission, upon request, with the instrumentsdefining the rights of holders of each issue of long-term debt of the Registrantand its consolidated subsidiaries.*10.RetirementAgreement between Sears, Roebuck and Co. and Arthur C. Martinez.*12(a).Computationof ratio of income to fixed charges for Sears and consolidated subsidiariesfor each of the five years ended January 1, 2000 and for the six- and twelve-monthperiods ended July 3, 2000.12(b).Computationof ratio of income to combined fixed charges and preferred share dividendsfor Sears and consolidated subsidiaries (incorporated by reference to Exhibit12.(b) to Registrant's Annual Report on Form 10-K for the fiscal year endedJanuary 1, 2000).*15.Acknowledgementof awareness from Deloitte & Touche LLP, dated August 2, 2000, concerningunaudited interim financial information.*27.Financial DataSchedule.                     
* Filed herewith.

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