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<CENTER><FONT FACE="Arial"><FONT SIZE=+1>UNITED STATES</FONT></FONT></CENTER>
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<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=+1>SECURITIES AND EXCHANGE COMMISSION</FONT></FONT></CENTER>
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<CENTER><FONT FACE="Arial"><FONT SIZE=-1>Washington, D.C. 20549</FONT></FONT></CENTER>
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<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=+3>FORM 10-Q</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<CENTER><TABLE BORDER=0 WIDTH="618" >
<TR ALIGN=CENTER>
<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>X</FONT></FONT></CENTER>
</TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE </FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
</TR>

<TR>
<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%"> </TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SECURITIES EXCHANGE ACT OF 1934
FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>QUARTERLY PERIOD ENDED OCTOBER
2, 1999</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
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<TR>
<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%"> </TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
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<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%"> </TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OR</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
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<TR>
<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%"> </TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
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<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%"> </TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
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<TR>
<TD VALIGN=CENTER WIDTH="8%"> </TD>

<TD VALIGN=CENTER WIDTH="2%"> </TD>

<TD VALIGN=CENTER WIDTH="5%"> </TD>

<TD VALIGN=CENTER WIDTH="78%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SECURITIES EXCHANGE ACT OF 1934</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>
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<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Commission file number 1-416</FONT></FONT></CENTER>

<CENTER> </CENTER>
</TD>

<TD></TD>
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<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

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<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=+4>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>(Exact name of registrant as specified
in its charter)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<CENTER> </CENTER>

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<CENTER><FONT FACE="Arial"><FONT SIZE=-1>New York </FONT></FONT></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>36-1750680</FONT></FONT> </CENTER>
</TD>
</TR>

<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2> (State of Incorporation) </FONT></FONT></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>  (I.R.S. Employer Identification
No.)</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>
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<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> 3333 Beverly Road, Hoffman
Estates, Illinois</FONT></FONT></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>60179</FONT></FONT> </CENTER>
</TD>
</TR>

<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>(Address of principal executive
offices)</FONT></FONT></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2> (Zip Code)</FONT></FONT> </CENTER>
</TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-2>                                     
                                          
                      </FONT></FONT>
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<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>Registrant's telephone number,
including area code: (847) 286-2500</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER> </CENTER>

<CENTER><TABLE BORDER=0 WIDTH="666" >
<TR>
<TD VALIGN=CENTER COLSPAN="11">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>Registrant [1] has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=CENTER COLSPAN="11" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>1934 during the preceding 12 months
and [2] has been subject to such filing requirements for the past 90 days.</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=CENTER COLSPAN="3" WIDTH="36%" HEIGHT="25"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="25"></TD>

<TD VALIGN=CENTER COLSPAN="3" WIDTH="14%" HEIGHT="25"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="25"></TD>

<TD VALIGN=CENTER COLSPAN="2" WIDTH="27%" HEIGHT="25"></TD>

<TD VALIGN=CENTER WIDTH="19%" HEIGHT="25"></TD>
</TR>

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<TD VALIGN=CENTER COLSPAN="3" WIDTH="36%" HEIGHT="16"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="16">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>Yes</FONT></FONT></CENTER>
</TD>

<TD VALIGN=CENTER COLSPAN="3" WIDTH="14%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-1>X </FONT></FONT></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="16"> <FONT FACE="Arial,Helvetica"><FONT SIZE=-1>N</FONT></FONT>o</TD>

<TD VALIGN=CENTER COLSPAN="2" WIDTH="27%" HEIGHT="16"></TD>

<TD VALIGN=CENTER WIDTH="19%" HEIGHT="16"></TD>
</TR>

<TR>
<TD VALIGN=CENTER COLSPAN="3" WIDTH="36%" HEIGHT="23"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=CENTER COLSPAN="3" WIDTH="14%" HEIGHT="23"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=CENTER COLSPAN="2" WIDTH="27%" HEIGHT="23"></TD>

<TD VALIGN=CENTER WIDTH="19%" HEIGHT="23"></TD>
</TR>

<TR>
<TD VALIGN=CENTER COLSPAN="11" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>As of September 30, 1999, the
Registrant had 377,953,859 common shares, $.75 par value, outstanding.</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=CENTER WIDTH="25%" HEIGHT="1"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="1"></TD>

<TD VALIGN=CENTER COLSPAN="3" WIDTH="15%" HEIGHT="1"></TD>

<TD VALIGN=CENTER WIDTH="2%" HEIGHT="1"></TD>

<TD VALIGN=CENTER COLSPAN="3" WIDTH="32%" HEIGHT="1"></TD>

<TD VALIGN=CENTER COLSPAN="2" WIDTH="23%" HEIGHT="1"></TD>
</TR>
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<CENTER><TABLE BORDER=0 COLS=1 WIDTH="100%" >
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<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>INDEX TO QUARTERLY REPORT ON FORM
10-Q</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<CENTER>
<HR ALIGN=LEFT SIZE=4 WIDTH="100%"></CENTER>


<P><B><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></B> <B><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></B>
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><U> </U>                                  
                                          
                                          
  
<U>Page</U></FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>PART I - FINANCIAL INFORMATION.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>     Item 1.     
Financial Statements.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                    
Condensed Consolidated Statements of Income (Unaudited) -</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                    
13 and 39 Weeks Ended October 2, 1999 and October 3, 1999             
1</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                    
Condensed Consolidated Balance Sheets -</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                    
October 2, 1999 (Unaudited), October 3, 1998 (Unaudited)</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                    
and January 2, 1999.                                       
                                   
2</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                     
Condensed Consolidated Statements of Cash Flows (Unaudited) -</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                     
39 Weeks Ended October 2, 1999 and October 3, 1998.                       
3</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                     
Notes to Condensed Consolidated Financial Statements (Unaudited)     
4</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                     
Independent Accountants' Review Report.                                    
        
8</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Item 2.           
Management's Discussion and Analysis of Operations, Financial</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                     
Condition and Liquidity.                                      
                                
9</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR> 

<P><FONT FACE="Arial"><FONT SIZE=-1>PART II - OTHER INFORMATION.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>     Item 1.      
Legal Proceedings.                                       
                                   
20</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>     Item 6.      
Exhibits and Reports on Form 8-K.                                     
               
21</FONT></FONT>
<CENTER> </CENTER>

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<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>PART I. FINANCIAL INFORMATION</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 1. FINANCIAL STATEMENTS</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>CONDENSED CONSOLIDATED STATEMENTS
OF INCOME</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>(Unaudited)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER>
<HR ALIGN=LEFT SIZE=0 WIDTH="100%"></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER> </CENTER>

<CENTER><TABLE BORDER=0 WIDTH="652" >
<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="10"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions,
except per share data)</FONT></FONT></I></TD>

<TD VALIGN=CENTER COLSPAN="5" WIDTH="21%" HEIGHT="10">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=CENTER WIDTH="9%" HEIGHT="10"></TD>

<TD VALIGN=CENTER COLSPAN="5" WIDTH="21%" HEIGHT="10">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="19">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="19">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="19">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="19">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="10">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="10">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="10">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="10">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>Merchandise
sales and services</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>8,490</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>8,701</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>25,354</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>25,854</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Credit
revenues</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,048</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,102</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>3,213</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>3,496</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>    
Total revenues</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>9,538</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>9,803</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>28,567</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>29,350</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Costs
and expenses</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Cost of sales, buying and occupancy</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,338</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,458</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>19,013</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>19,296</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Selling and administrative</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,068</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,043</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,036</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,059</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Depreciation and amortization</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>205</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>204</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>629</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>623</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2> 
Provision for uncollectible accounts</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>190</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>288</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>696</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,037</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Interest</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>308</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>341</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>955</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,078</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Restructuring and impairment charges</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>46</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>296</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>46</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>296</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="21"><FONT FACE="Arial"><FONT SIZE=-2>    
Total costs and expenses</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>9,155</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>9,630</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>27,375</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>28,389</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="10"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="10"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Operating
income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>383</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>173</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,192</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>961</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="21"><FONT FACE="Arial"><FONT SIZE=-2>Other
income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>15</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>15</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="21"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="21">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>24</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="33"><FONT FACE="Arial"><FONT SIZE=-2>Income
before income taxes, minority interest and </FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>   extraordinary loss</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>398</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>188</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,193</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>985</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2> Income
taxes</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(151)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(113)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(452)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(428)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>Minority
interest</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>(11)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2><U>( 7</U>)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>(28)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2><U>(20</U>)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>Income
before extraordinary loss</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>236</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>68</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>713</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>537</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>Extraordinary
loss (net of income tax benefit of $13) </FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___--</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__(24)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___--</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="24">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__(24)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>Net
income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>236</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>44</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>713</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>513</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>Earnings
per share - basic:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>  
Income before extraordinary loss </FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.62</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.17</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.87</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.38</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>  
Extraordinary loss</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><U>--</U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>(0.06)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___--</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2><U>(0.06</U>)</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>  
Net income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.62</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.11</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.87</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="19"> 
<BR><FONT SIZE=-2>$</FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.32</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="27"><FONT FACE="Arial"><FONT SIZE=-2>Earnings
per share - diluted:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="27">
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="27">
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="27">
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="27"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="27">
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>  
Income before extraordinary loss</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.62</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.17</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.86</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.36</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>  
Extraordinary loss</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___--</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2><U>(0.06</U>)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__--</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2><U>(0.06</U>)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>  
Net income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.62</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.11</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.86</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.30</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="33"><FONT FACE="Arial"><FONT SIZE=-2>Cash
dividends declared per share</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.23</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.23</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.69</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="33"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="33"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="33">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>0.69</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Average
common and common equivalent shares </FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>   outstanding</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>381.5</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>391.4</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>383.4</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>393.7</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="9"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>See
accompanying notes.</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>
</TR>
</TABLE></CENTER>

<CENTER>- 1 -</CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>CONDENSED CONSOLIDATED BALANCE
SHEETS</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR ALIGN=LEFT SIZE=4 WIDTH="99%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><TABLE WIDTH="633" >
<TR>
<TD VALIGN=BOTTOM WIDTH="58%" HEIGHT="13"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="26%" HEIGHT="13">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>(Unaudited)</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="13"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="13"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="13"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="17">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="17">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="17">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>January 2,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="12">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="12">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="12">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Current
assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Cash
and cash equivalents</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>281</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>327</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>495</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Retained
interest in transferred credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,153</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,577</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,294</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Credit
card receivables, net</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,879</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,792</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>17,972</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Other
receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>356</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>358</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>397</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Merchandise
inventories</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,556</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,864</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,816</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%" HEIGHT="12"><FONT FACE="Arial"><FONT SIZE=-2> 
Prepaid expenses, deferred charges and other assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>609</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>577</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>506</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Deferred
income taxes</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>600</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>806</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>791</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>   
Total current assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>27,434</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>29,301</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>29,271</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Property
and equipment, net</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,415</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,493</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,380</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Deferred
income taxes</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>517</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>676</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>572</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Other assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,510</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,262</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,452</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>   
Total assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>35,876</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>37,732</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>37,675</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<HR WIDTH="100%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<HR WIDTH="100%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<HR WIDTH="100%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Current
liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Short-term
borrowings</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,393</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,439</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,624</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Current
portion of long-term debt and capitalized leases</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,393</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,143</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,414</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Accounts
payable and other liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,443</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,379</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,732</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Unearned
revenues</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>811</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%">
<DIV ALIGN=right> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>823</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>815</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  Other
taxes</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__452</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__419</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__524</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>   
Total current liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>12,492</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>15,203</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>14,109</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Long-term
debt and capitalized leases</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>13,245</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>13,022</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>13,631</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Postretirement
benefits</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,216</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,432</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,346</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Minority
interest and other liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,594</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,403</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,523</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>   
Total liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>29,547</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>32,060</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>31,609</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Commitments
and Contingent Liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Shareholders'
Equity</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Common shares</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>323</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>323</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>323</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Capital
in excess of par value</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,563</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,587</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,583</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Retained
earnings </FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,297</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,402</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,848</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Treasury
stock - at cost</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(2,316)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(2,109)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(2,089)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Deferred
ESOP expense</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(154)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(185)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(175)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>Accumulated
other comprehensive income (loss)</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(384)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(346)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(424)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>   
Total shareholders' equity</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_6,329</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_5,672</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_6,066</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>  
Total liabilities and shareholders' equity</FONT></FONT> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT SIZE=-2><FONT FACE="Arial">35,876</FONT> </FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT SIZE=-2><FONT FACE="Arial">37,732</FONT> </FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT SIZE=-2><FONT FACE="Arial">37,675</FONT> </FONT> </DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT> 
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT> 
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT SIZE=-2> </FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%"><FONT SIZE=-2> </FONT> 
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%"><FONT FACE="Arial"><FONT SIZE=-2>   
Total common shares outstanding</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>377.7</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>383.1</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>383.5</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="58%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="58%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="58%" HEIGHT="22"><FONT FACE="Arial"><FONT SIZE=-2>See
accompanying notes.</FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="22"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="22"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="58%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<CENTER>- 2 -</CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>(Unaudited)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER>
<HR ALIGN=LEFT WIDTH="100%"></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER> </CENTER>

<CENTER><TABLE BORDER=0 WIDTH="566" >
<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="27%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>CASH FLOWS
FROM OPERATING ACTIVITIES:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Net income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>713</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>513</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Adjustments
to reconcile net income to net cash</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>provided
by (used in) operating activities:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>   
Depreciation, amortization and other noncash items</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>681</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>675</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>   
Extraordinary loss on early extinguishment of debt</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>--</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>37</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>   
Provision for uncollectible accounts</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>696</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,037</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>   
Restructuring and impairment charges</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>46</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>296</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%" HEIGHT="12"><FONT FACE="Arial"><FONT SIZE=-2>   
Gain on sales of property and investments</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(8)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="12"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="12">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(18)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>   
Change in (net of acquisitions):</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Deferred income taxes</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>233</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>14</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Retained interest in transferred credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,141</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(1,261)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>450</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,893</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Merchandise inventories</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(793)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(852)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Other operating assets</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(75)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(60)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Other operating liabilities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_(347)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%">
<DIV ALIGN=right> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_(360)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>       
Net cash provided by operating activities </FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,737</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,914</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="9"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="9"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>CASH FLOWS
FROM INVESTING ACTIVITIES:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="6"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Acquisition
of businesses, net of cash acquired</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(16)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(34)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Proceeds
from sales of property and investments</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>113</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>23</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Purchases
of property and equipment</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2><U>_(855</U>)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_(1,015)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>       
Net cash used in investing activities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(758)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(1,026)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>CASH FLOWS
FROM FINANCING ACTIVITIES:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Proceeds
from long-term debt</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>999</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,023</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Repayments
of long-term debt</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(1,413)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(2,516)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>(Decrease)
increase in short-term borrowings, primarily 90 days or less</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(1,249)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>245</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Repayments
of ESOP note receivable</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>58</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>23</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Common shares
purchased</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(298)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(522)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Common shares
issued for employee stock plans</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>51</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>104</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Dividends
paid to shareholders</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_(345)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_(270)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>     
Net cash used in financing activities</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(2,197)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(913)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Effect of
exchange rate on cash and invested cash</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>____4</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___(6)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Net decrease
in cash and cash equivalents</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(214)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(31)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Balance
at beginning of year</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_495</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>_358</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>Balance
at end of period</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>281</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>327</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> 
<HR WIDTH="100%"></TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> 
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="73%"><FONT FACE="Arial"><FONT SIZE=-2>See accompanying
notes.</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>
</TABLE></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER> - 3 -</CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>(Unaudited)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR ALIGN=LEFT SIZE=4 WIDTH="100%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>


<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>1.      
<U>Condensed Consolidated Financial Statements</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>The Condensed Consolidated Balance
Sheets as of October 2, 1999 and October 3, 1998, the related Condensed
Consolidated Statements of Income for the 13 and 39 weeks ended October
2, 1999 and October 3, 1998, and the Condensed Consolidated Statements
of Cash Flows for the 39 weeks ended October 2, 1999 and October 3, 1998
are unaudited. The interim financial statements reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion
of management, necessary for a fair statement of the results for the interim
periods presented. The condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Sears, Roebuck and Co. (the "Company" or "Sears")
1998 Annual Report to Shareholders and Annual Report on Form 10-K. The
results of operations for the interim periods should not be considered
indicative of results to be expected for the full year.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Certain reclassifications have been
made to the 1998 financial statements to conform with the current year
presentation.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></DIR>
<FONT FACE="Arial"><FONT SIZE=-1>2.      
<U>Shareholders' Equity and Dividend Restrictions</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>Under terms of indentures entered
into in 1981 and thereafter, Sears cannot take specified actions, including
the declaration of cash dividends, which would cause its unencumbered assets,
as defined, to fall below 150% of its liabilities, as defined. At October
2, 1999, approximately $5.4 billion could be paid in dividends to shareholders
under the most restrictive indentures.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>On February 3, 1998, the Board of Directors
extended, for an additional two years, the common share repurchase program
which was used to acquire shares for distribution in connection with the
expected exercise of stock options, the grant of restricted shares and
the exchange of deferred shares under the Company's stock plans. The program
authorized the Company to acquire up to 20 million Sears common shares
on the open market. By the end of the first quarter of 1999, all 20 million
common shares authorized to be purchased under this repurchase program
had been acquired.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>On March 10, 1999, the Board of Directors
approved a common share repurchase program to acquire up to $1.5 billion
of the Company's common shares by December 31, 2001. The shares will be
purchased on the open market or through privately negotiated transactions.
As of October 2, 1999, approximately 4.0 million common shares have been
acquired under this repurchase program at a cost of approximately $159
million.</FONT></FONT>
<BR> 
<BR> 

<P>                                          
                            
- 4 -
<BR> </DIR>

<CENTER> </CENTER>

<CENTER><TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>(Unaudited)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<HR ALIGN=LEFT SIZE=4 WIDTH="99%">
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>3. <U>Earnings Per Share</U></FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>    The following table
sets forth the computations of basic and diluted earnings per share:</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT>
<CENTER><TABLE BORDER=0 WIDTH="609" >
<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions,
except per share data)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="22%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="22%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Basic:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Net
income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>236</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>44</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>713</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>513</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="18"><U><FONT FACE="Arial"><FONT SIZE=-2>Average
shares outstanding________________________</FONT></FONT></U></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___379.8</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___388.6</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___381.3</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__390.4</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="8"><I><U><FONT FACE="Arial"><FONT SIZE=-2>Earnings
per share - basic_________________________</FONT></FONT></U></I></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="8"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>___0.62</FONT></FONT></U></I></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="8"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>___0.11</FONT></FONT></U></I></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="8"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>___1.87</FONT></FONT></U></I></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="8"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="8"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="8">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>__1.32</FONT></FONT></U></I></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Diluted:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Net
income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>236</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>44</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>713</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>513</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Average
shares outstanding</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>379.8</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>388.6</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>381.3</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>390.4</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Dilutive
effect of stock options</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___1.7</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___2.8</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___2.1</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__3.3</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="14"><U><FONT FACE="Arial"><FONT SIZE=-2>Average
shares and equivalent shares outstanding_______</FONT></FONT></U></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="14">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___381.5</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="14">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___391.4</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="14">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___383.4</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="14"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="14">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__393.7</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="46%" HEIGHT="7"><I><U><FONT FACE="Arial"><FONT SIZE=-2>Earnings
per share - diluted________________________</FONT></FONT></U></I></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>___0.62</FONT></FONT></U></I></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>____0.11</FONT></FONT></U></I></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>____1.86</FONT></FONT></U></I></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"><I><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7">
<DIV ALIGN=right><I><U><FONT FACE="Arial"><FONT SIZE=-2>___1.30</FONT></FONT></U></I></DIV>
</TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>In each period, certain outstanding
options were excluded from the computation of diluted earnings per share
because they would have been antidilutive. As of October 2, 1999, options
to purchase 12.3 million and 7.1 million shares of stock at prices ranging
from $39 to $64 and $43 to $64 per share were excluded from the 13 and
39 week 1999 calculations, respectively. As of October 3, 1998, options
to purchase 5.8 million and 5.7 million shares of stock at prices ranging
from $50 to $64 and $54 to $64 per share were excluded from the 13 and
39 week 1998 calculations, respectively.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></DIR>
<FONT FACE="Arial"><FONT SIZE=-1>4.      
<U>Comprehensive Income</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>The following table sets forth the
computation of comprehensive income:</FONT></FONT></DIR>
 
<CENTER><TABLE BORDER=0 WIDTH="606" >
<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="41%" HEIGHT="16"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="22%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="23%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="20"></TD>

<TD VALIGN=TOP WIDTH="41%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="41%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="41%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="7%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="3%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="7%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="9%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="7%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="3%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="5"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Net
income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>236</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>44</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>713</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>513</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Other
comprehensive income (loss):</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Unrealized gain (loss) on investments</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(18)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>--</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>24</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>--</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Foreign currency translation adjustments</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__(4)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__(22)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__16</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___(35)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Total other comprehensive income (loss)</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__(22)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__(22)</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__40</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>___(35)</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Total
comprehensive income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>214</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>22</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>753</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>478</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="5%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="41%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16"></TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR>                                          
                                        
- 5 -
<BR> 
<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>(Unaudited)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT> 
<HR WIDTH="100%"></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<DIR><FONT FACE="Arial"><FONT SIZE=-1>Accumulated other comprehensive income
(loss) is comprised of foreign currency translation charges of $109, $129
and $125 million as of October 2, 1999, October 3, 1998 and January 2,
1999, respectively, the Company's minimum pension liability of $299, $217
and $299 million as of October 2, 1999, October 3, 1998 and January 2,
1999, respectively, and an unrealized gain on investments of $24 million
as of October 2, 1999.</FONT></FONT>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>
</DIR>
<FONT FACE="Arial"><FONT SIZE=-1>5.      
<U>Segment Disclosures</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>The following table sets forth revenue,
operating income (expense) and total assets by segment:</FONT></FONT>

<P><B><FONT FACE="Arial"><FONT SIZE=-2>For the 13 weeks ended October 2,
1999</FONT></FONT></B>
<BR>_____________________________________________________________________________________
<BR> 
<CENTER><TABLE COLS=7 WIDTH="70%" >
<TR>
<TD><I><FONT FACE="Arial"><FONT SIZE=-2>millions</FONT></FONT></I> 
<BR>
<HR WIDTH="100%"></TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Retail</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Services</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Credit </FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2> Corporate</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2> International</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Consolidated</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Revenue</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 6,800</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$     
775</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$    985</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$    
--</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$   978</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 9,538</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Operating income (expense)</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>18</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>87</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> 316</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(77)</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>39</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>383</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Total assets</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>10,574</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,046</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>19,295</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,023</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,938</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> 35,876</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
 _____________________________________________________________________________________</DIR>
<FONT FACE="Arial"><FONT SIZE=-2>             
<B>For the 13 weeks ended October 3, 1998</B></FONT></FONT>
<BR>          ________________________________________________________________________________
<DIR> 
<CENTER><TABLE COLS=7 WIDTH="70%" >
<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2><I>millions</I> </FONT></FONT> 
<BR>
<HR WIDTH="100%"></TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Retail</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Services</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Credit</FONT></FONT></CENTER>

<CENTER>
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Corporate</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>International</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Consolidated</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Revenue</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 7,093</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 827</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 1,044</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> $   
--</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 839</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 9,803</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Operating income (expense)</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(207)</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>107</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>291</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(43) </FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>25</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>173</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Total assets</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>11,372</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>934</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>20,625</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,171</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,630</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> 37,732</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
_________________________________________________________________________________</DIR>

<DIR><B><FONT FACE="Arial"><FONT SIZE=-2>For the 39 weeks ended October
2, 1999</FONT></FONT></B>
<BR> _________________________________________________________________________________
<CENTER><TABLE COLS=7 WIDTH="70%" >
<TR>
<TD><I><FONT FACE="Arial"><FONT SIZE=-2>millions</FONT></FONT></I> 
<HR WIDTH="100%"></TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Retail</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Services</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Credit</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Corporate</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>International</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Consolidated</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Revenue</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 20,474</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 2,301</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 3,021</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$    -- </FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 2,771</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 28,567</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Operating income (expense)</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>122</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> 256</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>926</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> (213)</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>101</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,192</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Total assets</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>10,574</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,046</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>19,295</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,023</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,938</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>35,876</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
 _____________________________________________________________________________________</DIR>
<FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT>
<DIR><B><FONT FACE="Arial"><FONT SIZE=-2>For the 39 weeks ended October
3, 1998</FONT></FONT></B>
<BR>_____________________________________________________________________________________
<BR> 
<CENTER><TABLE COLS=7 WIDTH="70%" >
<TR>
<TD><I><FONT FACE="Arial"><FONT SIZE=-2>millions</FONT></FONT></I> 
<HR WIDTH="100%"></TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Retail</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Services</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Credit</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Corporate</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>International</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>

<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>Consolidated</FONT></FONT> 
<HR WIDTH="100%"></CENTER>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Revenue</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$21,214</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 2,317</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 3,307</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$    
-- </FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 2,512</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$ 29,350</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Operating income (expense)</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(68)</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>284</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>829</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2> (156)</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>72</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>961</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD><FONT FACE="Arial"><FONT SIZE=-2>Total assets</FONT></FONT></TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>11,372</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>934</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>20,625</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,171</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,630</FONT></FONT></DIV>
</TD>

<TD>
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>37,732</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
 _____________________________________________________________________________________</DIR>

<DIR> </DIR>
<FONT FACE="Arial"><FONT SIZE=-1>6.      
<U>Effect of New Accounting Standards and Statements</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities."
In May 1999, the FASB voted to delay the adoption of SFAS No. 133 by one
year. This statement is now required to be adopted in years beginning after
June 15, 2000. The Company is currently evaluating the effect this statement
might have on its consolidated financial position and results of operations.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR>                                          
                                
- 6 -
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER> </CENTER>
</DIR>
 
<CENTER><TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>(Unaudited)</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<HR ALIGN=LEFT SIZE=4 WIDTH="100%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>


<P><FONT FACE="Arial"><FONT SIZE=-1> 7.      
<U>Disposition of Businesses</U></FONT></FONT>
<OL><FONT FACE="Arial"><FONT SIZE=-1>On January 30, 1999, the Company completed
the sale of its HomeLife furniture business. On November 18, 1998, the
Company had entered into an agreement to exchange its interest in the HomeLife
furniture business for $100 million in cash, a $10 million note receivable
and a 19% equity ownership in the new HomeLife business. The Company recorded
a pre-tax charge of $33 million ($21 million after-tax) in the fourth quarter
of 1998 to adjust the carrying value of HomeLife's assets to their estimated
fair market value, less cost to sell. The completion of the sale did not
have a material effect on the first quarter 1999 results of operations
or financial condition<FONT COLOR="#000080">.</FONT></FONT></FONT>

<P><FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>On August 16,
1998, the Company entered into an Agreement and Plan of Merger of Western
Auto, a wholly-owned subsidiary, and Advance Auto Parts whereby Sears agreed
to exchange its interest in Western Auto for $175 million in cash and approximately
40% equity ownership interest in the resulting combined company. The transaction
was consummated on November 2, 1998. Based on the terms of the sale, the
Company recorded a pre-tax charge of $296 million ($225 million after-tax)
in the third quarter of 1998 to adjust the carrying value of Western Auto's
assets to their estimated fair market value, less cost to sell.</FONT></FONT></FONT>
<BR> </OL>
<FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>8.      
<U>Restructuring Charge</U></FONT></FONT></FONT>
<OL><FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>The Company
implemented certain cost-reduction strategies during the third quarter
of 1999 resulting in a $46 million (pre-tax) restructuring charge. Of the
$46 million charge, $25 million relates to the closing of 33 automotive
stores in three geographic markets and $21 million relates to severance
costs for headquarters staff reductions of approximately 450 employees.
The staff reductions and the closing of the 33 stores both occurred during
the third quarter of 1999. Of the $25 million charge for the 33 closed
stores, approximately $3 million relates to severance costs, $21 million
is to reduce the carrying value of the closed store assets to their estimated
fair value, less costs to sell, and $1 million is for other related costs.
As of October 2, 1999, future cash payments to settle restructuring obligations
approximate $31 million, which is expected to be paid primarily in the
fourth quarter of 1999 and the year 2000.  The Company anticipates
annual savings of approximately $40 million (pre-tax) related to these
cost-reduction efforts.</FONT></FONT></FONT>
<BR><FONT COLOR="#000000"> </FONT></OL>
<FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>9.      
<U>Debt Extinguishment</U></FONT></FONT></FONT>
<OL><FONT FACE="Arial"><FONT SIZE=-1>On October 2, 1998, the Company retired
debt with a face value of $300 million, which was due in May 2000. The
transaction generated an extraordinary loss of $37 million and a related
income tax benefit of $13 million, resulting in an after tax loss of $24
million. The loss resulted primarily from the write-off of the related
unamortized discount. The debt was refinanced with the issuance of commercial
paper.</FONT></FONT></OL>
<FONT FACE="Arial"><FONT SIZE=-1>10.     <U>Legal Proceedings</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>There have
been no material developments in any legal proceedings since the Company's
disclosure in its Annual Report on Form 10-K for the fiscal year ended
January 2, 1999 other than those reported in the Company's Quarterly Reports
on Form 10-Q for the quarters ended April 3, 1999 and July 3, 1999 which
describe certain material events that occurred in the quarterly period
covered by this Report.</FONT></FONT></FONT>
<BR> 
<BR>                                          
                               
- 7 -
<BR> 
<BR> 
<BR> 

<P><FONT FACE="Arial"><FONT COLOR="#000080"><FONT SIZE=-1> </FONT></FONT></FONT></DIR>
 
<CENTER><TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1><FONT COLOR="#000000">SEARS, ROEBUCK</FONT>
AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>INDEPENDENT ACCOUNTANTS' REVIEW
REPORT</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<CENTER>
<HR ALIGN="LEFT" WIDTH="92%" SIZE=4></CENTER>
 
<BR> 

<P><FONT FACE="Arial"><FONT SIZE=-1>To the Shareholders and Board of Directors</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>of Sears, Roebuck and Co.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>We have reviewed the accompanying Condensed
Consolidated Balance Sheets of Sears, Roebuck and Co. as of October 2,
1999 and October 3, 1998, and the related Condensed Consolidated Statements
of Income for the 13-week and 39-week periods ended October 2, 1999 and
October 3, 1998 and the Condensed Consolidated Statements of Cash Flows
for the 39-week periods ended October 2, 1999 and October 3, 1998. These
financial statements are the responsibility of the Company's management.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>We conducted our reviews in accordance
with standards established by the American Institute of Certified Public
Accountants. A review of interim financial information consists principally
of applying analytical procedures to financial data and of making inquiries
of persons responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Based on our reviews, we are not aware
of any material modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally accepted
accounting principles.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>We have previously audited, in accordance
with generally accepted auditing standards, the Consolidated Balance Sheet
of Sears, Roebuck and Co. as of January 2, 1999, 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 11,
1999, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
Condensed Consolidated Balance Sheet as of January 2, 1999, is fairly stated,
in all material respects, in relation to the Consolidated Balance Sheet
from which it has been derived.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Deloitte & Touche LLP</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Chicago, Illinois</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>November 4, 1999</FONT></FONT>
<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER>- 8 -</CENTER>

<CENTER> </CENTER>
 
<CENTER><TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<HR ALIGN="LEFT" WIDTH="92%" SIZE=4>

<P><B><U><FONT FACE="Arial"><FONT SIZE=-1>Analysis of Operations</FONT></FONT></U></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>Operating results for the Company are
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:</FONT></FONT>
<BR> 
<BR> 
<BR> 
<CENTER><TABLE COLS=2 WIDTH="87%" >
<TR>
<TD><FONT SIZE=-1><FONT FACE="Symbol">·  </FONT><FONT FACE="Arial,Helvetica"><I><U>Retail</U></I>
consisting of: </FONT></FONT> 
<BR><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>   -Full-Line
Stores</FONT></FONT> 
<BR><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>   -Specialty
Retail Group</FONT></FONT> 
<BR><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>   (Home stores
and Auto stores)</FONT></FONT></TD>

<TD><FONT SIZE=-1><FONT FACE="Symbol">·  </FONT><I><U><FONT FACE="Arial">Corporate</FONT></U></I></FONT><I>
</I><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>consisting of administrative
activities of a holding company nature, the costs of which are not allocated
to the Company's businesses  (includes e-commerce)</FONT></FONT></TD>
</TR>

<TR>
<TD></TD>

<TD></TD>
</TR>

<TR>
<TD><FONT SIZE=-1><FONT FACE="Symbol">·  </FONT><FONT FACE="Arial"><I><U>Services</U></I>
consisting of:</FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-1>   - Home Services</FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-1>   - Sears Direct (Direct
Response Marketing)</FONT></FONT></TD>

<TD><FONT SIZE=-1><FONT FACE="Symbol">·  </FONT><I><FONT FACE="Arial,Helvetica"><U>International</U>
</FONT></I><FONT FACE="Arial,Helvetica">consisting of retail, services
and </FONT></FONT> 
<BR><FONT FACE="Arial,Helvetica"><FONT SIZE=-1> credit operations
conducted in Canada through</FONT></FONT> 
<BR><FONT FACE="Arial,Helvetica"><FONT SIZE=-1> Sears Canada, Inc.
("Sears Canada"), a 54.7%</FONT></FONT> 
<BR><FONT FACE="Arial,Helvetica"><FONT SIZE=-1> owned consolidated
subsidiary</FONT></FONT></TD>
</TR>

<TR>
<TD></TD>

<TD></TD>
</TR>

<TR>
<TD><FONT SIZE=-1><FONT FACE="Symbol">·  </FONT><FONT FACE="Arial"><I><U>Credit</U></I>
which manages domestic Sears Card</FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-1>   operations</FONT></FONT></TD>

<TD></TD>
</TR>
</TABLE></CENTER>
 
<BR><FONT FACE="Arial"><FONT SIZE=+1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>For the 13 weeks ended October 2, 1999,
net income was $236 million, or $0.62 per share, as compared to $44 million,
or $0.11 per share for the comparable 1998 period. Third quarter 1999 net
income includes a restructuring charge for staff reductions and the exit
of certain automotive retail markets, which reduced net income by $29 million,
or $0.07 per share. Third quarter 1998 net income included non-comparable
items, primarily the sale of Western Auto and the early extinguishment
of debt, which in aggregate reduced net income by $254 million, or $0.65
per share. Excluding these non-comparable items, earnings per share would
have been $0.69 in the third quarter of 1999 compared with third quarter
1998 earnings per share of $0.76, a 9.2% decrease. The decrease in net
income was primarily due to declines in the Retail and Services segments
and higher expenses in the Corporate segment, partially offset by improved
performance of the Credit and International segments and a lower number
of outstanding shares.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>For the 39 weeks ended October 2, 1999,
net income was $713 million, or $1.86 per share compared to $513 million,
or $1.30 per share for the comparable 1998 period. 1999 net income included
non-comparable expenses of $29 million, or $0.07 per share. The year-ago
period net income included non-comparable expenses of $215 million, or
$0.54 per share. Excluding non-comparable items, earnings per share increased
4.9% over the prior year period. The increase is primarily the result of
improved performance in the Credit and International segments and a lower
number of outstanding shares, partially offset by higher Corporate expenses
and declines in Retail and Services operating income.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Reported operating income (expense)
by segment, which includes all non-comparable items, was as follows:</FONT></FONT>
<BR> 
<CENTER><TABLE WIDTH="518" >
<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="6"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="26%" HEIGHT="6">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="26%" HEIGHT="6">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20"><FONT FACE="Arial"><FONT SIZE=-2>October
2,</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20"><FONT FACE="Arial"><FONT SIZE=-2>October
3,</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20"><FONT FACE="Arial"><FONT SIZE=-2>October
3,</FONT></FONT></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>Retail</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>           
18</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(207)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>122</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(68)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Services</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>87</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>107</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>256</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>284</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Credit</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>316</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>291</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>926</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>829</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Corporate</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(77)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(43)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(213)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(156)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>International</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>39</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>25</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>101</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>72</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="39%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>Total
operating income</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>383</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>173</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,192</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>961</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>
</TABLE></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>- 9 -</FONT></FONT></CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR ALIGN=LEFT SIZE=4 WIDTH="100%">

<P> 

<P><FONT FACE="Arial"><FONT SIZE=-1>Operating income (expense) by segment,
excluding the non-comparable items, was as follows:</FONT></FONT>
<BR> 
<CENTER><TABLE WIDTH="528" >
<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="6"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="25%" HEIGHT="6">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="6"></TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="25%" HEIGHT="6">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20"><FONT FACE="Arial"><FONT SIZE=-2>October
2,</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20"><FONT FACE="Arial"><FONT SIZE=-2>October
3,</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="20"><FONT FACE="Arial"><FONT SIZE=-2>October
3,</FONT></FONT></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="16">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>Retail</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>43</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>89</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>147</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="24"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="24"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="24">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>228</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Services</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>87</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>107</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>256</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>284</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Credit</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>316</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>299</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>926</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>774</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Corporate</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(56)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(43)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(192)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(156)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>International</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__39</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__25</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__101</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>__72</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="40%" HEIGHT="32"><FONT FACE="Arial"><FONT SIZE=-2>Total
operating income, excluding </FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>   non-comparable items</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="32"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="32">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>429</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="32"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="32"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="32">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>477</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="32"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="32"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="32">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,238</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="32"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="32"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="32">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,202</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>The Company's consolidated effective
tax rate for the 13 weeks ended October 2, 1999 was 37.6% compared to 68.2%
in the prior year period. The third quarter 1998 tax rate was impacted
by certain components of the Western Auto impairment charge which were
not tax deductible. Excluding the impact of the impairment charge, the
third quarter 1998 consolidated tax rate would have been 38.1%. For the
39 weeks ended October 2, 1999, the consolidated effective tax rate was
37.6% as compared to 43.7% in the comparable 1998 period. The decrease
in tax rate for the comparable 39 week periods was due to the non-tax deductible
Western Auto charges.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Due to holiday buying patterns, merchandise
sales are traditionally higher in the fourth quarter than other quarterly
periods and a disproportionate share of operating income is typically earned
in the fourth quarter. This business seasonality results in performance
for the 13 and 39 weeks ended October 2, 1999 which is not necessarily
indicative of performance for the balance of the year. The Company makes
available by 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.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR>                                          
                                          
     
- 10 -
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<BR> 
<CENTER><TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE></CENTER>

<HR ALIGN=LEFT SIZE=4 WIDTH="100%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>
 

<P><B><U><FONT FACE="Arial"><FONT SIZE=-1>Retail</FONT></FONT></U></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>Retail revenues decreased 4.1% to $6.8
billion and 3.5% to $20.5 billion for the 13 and 39 weeks ended October
2, 1999, respectively, from the comparable 1998 periods due to the divestitures
of Western Auto and HomeLife. Excluding the effect of the divested businesses,
retail revenues increased $174 million or 2.6% and $577 million or 2.9%
for the 13 and 39 week periods, respectively. Retail revenues and related
information are as follows:</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT>
<CENTER><TABLE WIDTH="625" >
<TR>
<TD VALIGN=TOP COLSPAN="2" WIDTH="32%"><I><FONT FACE="Arial"><FONT SIZE=-2>(dollars
in millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="7" WIDTH="31%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="6%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="7" WIDTH="31%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="20"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%"> </TD>

<TD VALIGN=BOTTOM WIDTH="31%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>Change</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="6%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="9%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>Change</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="4"><FONT FACE="Arial"><FONT SIZE=-2>Revenues:</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Full-line stores</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,309</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,170</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2.7%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,050</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>15,667</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2.4%</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="18">
<DIV ALIGN=right> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Specialty Retail Group</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,491</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>1,923</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(22.5)%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>4,424</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>5,547</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(20.2)%</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Total Retail revenues</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6,800</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>7,093</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(4.1%)</FONT></FONT></DIV>

<DIV ALIGN=right> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>20,474</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>21,214</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(3.5)%</FONT></FONT></DIV>

<DIV ALIGN=right> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="7"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Number
of Full-line stores</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>852</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>838</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Number
of Specialty Retail </FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>  Group stores</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>2,109</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>2,797</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="18"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="4"><FONT FACE="Arial"><FONT SIZE=-2>Total
Retail stores</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2,961</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,635</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="4"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="4"></TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="31%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="6%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="1%"> </TD>

<TD VALIGN=BOTTOM WIDTH="31%"><FONT FACE="Arial"><FONT SIZE=-2>Comparable
store sales</FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>percentage increase  (decrease)</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.8%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(0.2)%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="6%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1.5%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>2.4%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>For the 13 week period, Full-line stores
revenues increased 2.7% over the third quarter of 1998.</FONT></FONT>
<DIR>
<DIR>
<DIR><FONT SIZE=-1><FONT FACE="Symbol">·</FONT><FONT FACE="Arial">
Apparel revenues increased 1.0% in the third quarter. Women's sportswear,
special sizes, infant's apparel, children's hardlines, cosmetics, fragrances
and fine jewelry posted strong sales increases. These increases were offset
by decreases in junior's, dresses, men's apparel, boy's and girl's apparel
and footwear.</FONT></FONT>

<P><FONT SIZE=-1><FONT FACE="Symbol">·</FONT><FONT FACE="Arial">
Hardlines revenues, comprised of home electronics, home appliances, home
office, home improvement, and licensed business sales, increased 5.1% in
the third quarter of 1999. Gains in home electronics, home appliances and
home office sales were partially offset by a decline in home improvement
sales.</FONT></FONT></DIR>
</DIR>
</DIR>
<FONT FACE="Arial"><FONT SIZE=-1>For the 39 week period, Full-line store
revenues increased 2.4% over 1998 as apparel increased 1.0% and hardlines
increased 3.7%.</FONT></FONT>
<BR> 
<BR> 
<BR>                                          
                                        
- 11 -
<BR> 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER> 
<HR ALIGN="LEFT" WIDTH="92%" SIZE=4></CENTER>


<P><FONT FACE="Arial"><FONT SIZE=-1>For the 13 week period ended October
2, 1999, Specialty Retail Group revenues decreased 22.5% from the comparable
1998 period.</FONT></FONT>
<DIR>
<DIR>
<DIR><FONT SIZE=-1><FONT FACE="Symbol">·</FONT><FONT FACE="Arial">
Home stores revenues decreased 11.3% from the 1998 level. The prior year
includes revenues from HomeLife which was sold on January 30, 1999. Excluding
HomeLife revenues in the prior year, Home stores revenues increased 7.7%
due to solid comparable store sales increases in both Hardware and Sears
Dealer stores. Sears Dealer and Hardware store revenues also benefited
from 84 and 2 net new store openings, respectively. The Great Indoors also
produced strong revenue gains over the comparable 1998 period.</FONT></FONT>

<P><FONT SIZE=-1><FONT FACE="Symbol">·</FONT><FONT FACE="Arial">
Auto stores revenues decreased 36.3% from the comparable 1998 period. The
prior year includes revenues from Western Auto which was sold on November
2, 1998. Excluding the Western Auto revenues in the prior year, Auto revenues
decreased 4.9% as the Sears Tire Group continued to experience weak comparable
store sales.</FONT></FONT></DIR>
</DIR>
</DIR>
<FONT FACE="Arial"><FONT SIZE=-1>Specialty Retail Group revenues declined
20.2% for the 39 week period ended October 2, 1999 compared to 1998, largely
due to the HomeLife and Western Auto divestitures. Excluding the effect
of the divestitures, specialty retail Group revenues increased 4.6% for
the 39 week period due to new store growth and solid increases in Hardware
and Dealer stores' comparable store sales, partially offset by weak Auto
comparable store sales.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Retail gross margin as a percentage
of Retail revenues for the third quarter of 1999 declined 90 basis points
from the third quarter of 1998. For the 39 week period, Retail gross margin
declined 70 basis points. A greater level of promotional activity in the
Full-line stores and the exit of the higher margin Western Auto business
were significant causes of the decreased gross margin rate in both the
13 and 39 week periods.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Retail selling and administrative expense
as a percentage of Retail revenues for the third quarter of 1999 improved
20 basis points from the third quarter of 1998. The improvement was primarily
due to the exit of Western Auto and HomeLife, which contributed higher
SG&A costs relative to revenues. For the 39 week period, the Retail
selling and administrative expense rate improved 40 basis points.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Retail depreciation and amortization
expense for the third quarter of 1999 decreased $6 million or 3.9% from
the comparable 1998 period. The decrease reflects the HomeLife and Western
Auto divestitures. Excluding the impact of the divestitures, depreciation
and amortization increased $7 million due to the growth in the number of
Full-line and Specialty stores in operation. For the 39 week period, Retail
depreciation and amortization expense decreased $12 million due to the
HomeLife and Western Auto divestitures.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>The Retail segment operating income,
as reported, includes a $25 million (pre-tax) restructuring charge related
to the closing of 33 Auto stores in September 1999. The $25 million charge
reflects primarily the expected loss on the disposition of the stores and
related assets as well as severance costs for affected employees. The Company
anticipates annual cost savings of approximately $13 million related to
the closing of the 33 stores.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><B><U><FONT FACE="Arial"><FONT SIZE=-1>Services</FONT></FONT></U></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>Services revenues, which are generated
by the Home Services and Sears Direct businesses, decreased 6.3% in the
third quarter of 1999 versus the comparable 1998 period. Both Home Services
and Sears Direct businesses showed revenue decreases. For the 39 week period
ended October 2, 1999, Services revenue decreased less than 1.0% as revenue
was relatively flat across both the Home Services and Sears Direct businesses.</FONT></FONT>
<BR> 
<BR>                                          
                                     
- 12 -
<BR> 
<BR> 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR ALIGN="LEFT" WIDTH="92%" SIZE=4>

<P><FONT FACE="Arial"><FONT SIZE=-1>Services gross margin as a percentage
of Services revenues for the third quarter of 1999 increased 90 basis points
and Services selling and administrative expense as a percentage of Services
revenues increased 250 basis points in the third quarter of 1999 over the
comparable 1998 period. For the 39 week period, Services gross margin rate
increased 30 basis points and the selling and administrative expense rate
increased 120 basis points. The increased selling and administrative expense
rate has been caused by higher marketing and payroll costs on a declining
revenue base.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Services depreciation and amortization
increased 20.9% in the third quarter of 1999 from the comparable 1998 period
and increased 10.8% for the comparable 39 week periods, both primarily
due to the purchase of a new building and other capital assets by the Home
Services business.</FONT></FONT>
<BR> 

<P><B><U><FONT FACE="Arial"><FONT SIZE=-1>Credit</FONT></FONT></U></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>Domestic Credit revenues decreased
5.7% to $985 million and 8.6% to $3.02 billion, respectively, for the 13
and 39 weeks ended October 2, 1999 from the comparable prior year periods.
The decline in Credit revenues was primarily attributable to a lower average
level of owned credit card receivables and retained interest assets as
well as reduced late fees. A summary of Credit information (for the managed
portfolio) is as follows:</FONT></FONT>
<BR> 
<BR> 
<CENTER><TABLE WIDTH="645" >
<TR>
<TD VALIGN=TOP WIDTH="3%"> </TD>

<TD VALIGN=TOP WIDTH="48%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="21%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="21%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="3%" HEIGHT="20"></TD>

<TD VALIGN=TOP WIDTH="48%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="20"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="20">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="3%"> </TD>

<TD VALIGN=TOP WIDTH="48%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="3%"> </TD>

<TD VALIGN=TOP WIDTH="48%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="7%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="48%"><FONT FACE="Arial"><FONT SIZE=-2>Sears Card
as a % of sales</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>49.1%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>52.8%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>48.3%</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>52.7%</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="48%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="5"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="5"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="48%"><FONT FACE="Arial"><FONT SIZE=-2>Average
account balance <SUP>(1)</SUP></FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>(as of October 2, 1999 and October
3, 1998)</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,183 </FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,093 </FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,183 </FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,093 </FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="48%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM WIDTH="48%"><FONT FACE="Arial"><FONT SIZE=-2>Average
managed credit card receivables (<I>millions</I>)</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>25,992</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>27,597</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>26,707</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="2%"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>27,972</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
 
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="600" >
<TR>
<TD VALIGN=TOP HEIGHT="17">
<DIR>
<HR ALIGN="LEFT" WIDTH="84%" SIZE=0><FONT FACE="Arial"><SUP><FONT SIZE=-2>(1)</FONT></SUP><FONT SIZE=-1>
</FONT><FONT SIZE=-2>As</FONT><FONT SIZE=-1> </FONT><FONT SIZE=-2>of October
2, 1999, all accounts have been converted to the new credit account processing
system ("TSYS"). Under TSYS, only accounts with balances are included in
the calculation of average account balance. Therefore, the average account
balance statistic is higher under TSYS than it would be under the Company's
proprietary credit system, which was used for the October 3, 1998 average
account balance.</FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>_____________________________________________________________________________</FONT></FONT></DIR>
</TD>
</TR>
</TABLE>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>The percentage of merchandise sales
and services transacted with the Sears Card in the third quarter of 1999
declined to 49.1% compared to 52.8% a year ago due to greater preference
for the use of cash, checks and third party credit cards. The payment rate
during the third quarter of 1999 was also higher than in the comparable
prior year quarter, contributing to the decrease in average managed receivables.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Credit selling and administrative expense
as a percentage of Credit revenues increased 540 basis points in the third
quarter of 1999 and 390 basis points for the 39 week period from the comparable
1998 periods. The increase was primarily due to increased investments in
credit collection efforts, enhanced risk management systems and the launch
of the Sears Premier Card. Additional costs were also incurred for information
systems primarily related to the conversion to the TSYS account processing
system, which now tracks the activity and completes the processing of transactions
related to the managed credit card portfolio. This system conversion was
completed during the second quarter of 1999. The benefits from increased
spending on collections and risk management are reflected in the favorable
charge-off and delinquency statistics experienced over the past 39 week
period. The provision for uncollectible accounts in the 13 and 39 week
periods ended October 2, 1999 reflects these favorable trends.</FONT></FONT>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER>- 13 -</CENTER>

<CENTER> </CENTER>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR ALIGN=LEFT SIZE=0 WIDTH="100%">

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>The domestic provision for uncollectible
accounts and related information is as follows:</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<CENTER><TABLE WIDTH="70%" >
<TR>
<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="47%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="22%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="22%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM WIDTH="47%" HEIGHT="22"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="1%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM WIDTH="47%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="7%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="1%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="47%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>

<TD VALIGN=TOP WIDTH="7%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>

<TD VALIGN=TOP WIDTH="1%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="47%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Provision
for uncollectible accounts</FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>180</FONT></FONT></DIV>
</TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>281</FONT></FONT></DIV>
</TD>

<TD VALIGN=TOP WIDTH="7%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>671</FONT></FONT></DIV>
</TD>

<TD VALIGN=TOP WIDTH="1%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,016</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="47%"><FONT FACE="Arial"><FONT SIZE=-2>Net credit
charge-offs as a percentage of</FONT></FONT> 
<BR><FONT FACE="Arial"><FONT SIZE=-2>average managed credit card receivables<SUP>(1)</SUP></FONT></FONT></TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%">
<DIV ALIGN=right> </DIV>

<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6.39%</FONT></FONT></DIV>
</TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%">
<DIV ALIGN=right> </DIV>

<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>7.20%</FONT></FONT></DIV>
</TD>

<TD VALIGN=TOP WIDTH="7%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%">
<DIV ALIGN=right> </DIV>

<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>6.85%</FONT></FONT></DIV>
</TD>

<TD VALIGN=TOP WIDTH="1%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%">
<DIV ALIGN=right> </DIV>

<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>7.56%</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT>
<BR>                                          
                                          
    
_________________________________________
<CENTER><TABLE WIDTH="80%" >
<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>July 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>April 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="16">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>January 2,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="7">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="7">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="7">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="7"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="7">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2>Domestic
managed credit card receivables - </FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-2>delinquency
rate <SUP>(2)</SUP></FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>7.57%</FONT></FONT> </DIV>
</TD>

<TD VALIGN=TOP WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>7.29%</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>8.07%</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=TOP WIDTH="8%" HEIGHT="16">
<DIV ALIGN=right> </DIV>

<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>9.28%</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>Allowance
for uncollectible accounts </FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>773</FONT></FONT> </DIV>
</TD>

<TD VALIGN=TOP WIDTH="3%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>850</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>932</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>942</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="49%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>Allowance
% of domestic owned credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4.78%</FONT></FONT> </DIV>
</TD>

<TD VALIGN=TOP WIDTH="3%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5.27%</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5.72%</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5.44%</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>
</TABLE></CENTER>
 
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH="753" >
<TR>
<TD VALIGN=TOP HEIGHT="34"><FONT FACE="Arial,Helvetica"><FONT SIZE=-2><SUP>(1)The
1999 net charge-off rate includes all of the accounts in the domestic portfolio.
Twelve percent of the accounts were converted to the new TSYS account processing
system in October 1998, 38% were converted in March 1999, and 50% were
converted in April 1999. Balances are generally charged-off earlier under
the TSYS system than under the proprietary system.</SUP> </FONT></FONT> 

<P><SUP><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>(2)The October 2, 1999
and July 3, 1999 delinquency rates reflect 100% of the domestic managed
credit card receivable balances. At April 3, 1999 and January 2, 1999,
there were 50% and 12%, respectively, of the managed credit card accounts
on the TSYS system and the delinquency rates at these dates reflect only
those portions of the portfolio. Delinquency rates calculated on the Company's
pre-TSYS proprietary system are not comparable to delinquencies calculated
on the TSYS system due to differences in calculation methodology. For a
description of the anticipated effects on delinquency rates of the TSYS
conversion, see Sears Quarterly Report on Form 10-Q for the quarter ended
April 4, 1998.</FONT></FONT></SUP></TD>
</TR>
</TABLE>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>The domestic provision for uncollectible
accounts decreased 35.9% to $180 million and 34.0% to $671 million for
the 13 and 39 weeks ended October 2, 1999, respectively, from the comparable
prior year periods. The decrease was attributable to lower average owned
credit card receivable balances, and improvement in portfolio quality during
the 39 weeks ended October 2, 1999. Assuming continuing favorable trends
in delinquency and charge-off rates, the Company anticipates that the required
allowance for uncollectible accounts will be lower in the fourth quarter
of 1999 and that the 1999 year end ratio of the allowance as a percentage
of domestic owned credit card receivables will also be lower.</FONT></FONT>

<P>                                          
                                 
- 14 -
<BR> 
<BR> 
<BR> 
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR WIDTH="100%">

<P><FONT FACE="Arial"><FONT SIZE=-1>Interest expense is discussed within
the Credit segment since the majority of the Company's interest expense
is allocated to the Credit segment. Interest expense is combined with the
funding costs on receivables sold through securitizations to represent
total funding costs as follows:</FONT></FONT>
<BR> 
<CENTER><TABLE WIDTH="570" >
<TR>
<TD VALIGN=TOP WIDTH="45%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="23%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>13 Weeks Ended</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="5" WIDTH="23%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>39 Weeks Ended</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="45%" HEIGHT="22"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="22"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%" HEIGHT="22">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="45%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%"> </TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="11%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="45%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="3%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="8%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="45%" HEIGHT="19"><FONT FACE="Arial"><FONT SIZE=-2>Consolidated
interest expense<SUP>(1)</SUP></FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>308</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>341</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>955</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="19">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,078</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="45%" HEIGHT="17"><FONT FACE="Arial"><FONT SIZE=-2>Funding
cost on securitized receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>102</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>110</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>314</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="17"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="17">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>323</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="45%" HEIGHT="23"><FONT FACE="Arial"><FONT SIZE=-2>Total
funding costs</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>410</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="3%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>451</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="8%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,269</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="23">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,401</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>
</TABLE></CENTER>

<HR ALIGN="LEFT" WIDTH="84%" SIZE=0>
<DIR>
<DIR><SUP><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>(1)Credit segment
interest expense was $276 and $303 for the third quarter of 1999 and 1998,
respectively,</FONT></FONT></SUP>
<BR><SUP><FONT FACE="Arial,Helvetica"><FONT SIZE=-2>and $837 and $950 for
the 39 weeks ended October 2, 1999 and October 3, 1998, respectively.</FONT></FONT></SUP></DIR>
</DIR>

<HR ALIGN="LEFT" WIDTH="84%" SIZE=0>

<P><B> </B>

<P><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>Consolidated interest expense
decreased in the third quarter of 1999 compared to the third quarter of
1998 due to lower on-book debt levels caused primarily by a decrease in
retained interest assets. Interest expense also benefited from a lower
funding rate in the third quarter of 1999 vs. 1998. The funding cost on
securitized receivables was slightly lower in the third quarter of 1999
due to lower levels of average securitized balances and slightly lower
funding rates.</FONT></FONT>

<P> 
<BR><B><U><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>Corporate</FONT></FONT></U></B>

<P><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>Corporate expenses increased
$34 million in the third quarter of 1999 and $57 million for the 39 week
period compared to similar periods in 1998. The restructuring charge related
to staff reductions made in the third quarter of 1999 contributed $21 million
of the increase in the third quarter. The remainder of the increase was
primarily attributable to higher e-commerce costs. For the 39 week period
ended October 2, 1999, the restructuring charge, higher e-commerce costs
and additional spending on information systems projects increased Corporate
expenses. The Company anticipates annual pre-tax savings of $27 million
related to the staff reductions made during the third quarter of 1999.</FONT></FONT>

<P><B><U><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>International</FONT></FONT></U></B>

<P><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>International revenues for
the third quarter of 1999 increased 16.6% from the same period a year ago.
Sears Canada enjoyed strong retail and catalog sales performance. For the
39 week period, International revenues increased 10.3%.</FONT></FONT>

<P><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>International gross margin
as a percentage of International merchandise and services revenues increased
190 basis points in the third quarter of 1999 from the comparable prior
year quarter, reflecting a shift in balance of sale to higher margin apparel
merchandise and savings realized from merchandise sourcing initiatives.
For the 39 week period, International gross margin increased 150 basis
points.</FONT></FONT>

<P><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>International selling and
administrative expense as a percentage of total International revenues
increased 80 basis points in the third quarter of 1999 from the third quarter
of 1998. The increase was primarily due to higher employee-related costs.
For the 39 week period, the International selling and administrative expense
rate increased 40 basis points.</FONT></FONT>
<BR> 
<BR> 
<BR>                                          
                                     
- 15 -
<BR> 
<BR><B> </B>
<CENTER> </CENTER>

<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>OPERATIONS, FINANCIAL
CONDITION AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>13 AND 39 WEEKS ENDED
OCTOBER 2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR WIDTH="100%">

<P><B> </B>

<P><B><U><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>Financial Condition</FONT></FONT></U></B>

<P><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>The consolidated owned net
credit card receivables balances of $16.88 billion, $16.79 billion and
$17.97 billion as of October 2, 1999, October 3, 1998 and January 2, 1999,
respectively, exclude credit card receivables transferred to a securitization
Master Trust as follows:</FONT></FONT>
<BR> 
<BR> 
<CENTER><TABLE WIDTH="558" >
<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="1"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>January 2,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></CENTER>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM COLSPAN="2" WIDTH="10%" HEIGHT="1">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="1"><FONT FACE="Arial"><FONT SIZE=-2>Domestic</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="1"><FONT FACE="Arial"><FONT SIZE=-2> 
Managed credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="1"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>25,810</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="1"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>27,440</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="1"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="1">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>28,251</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="16"><FONT FACE="Arial"><FONT SIZE=-2> 
Securitized balances sold</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(6,499)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(6,478)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="16"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="16">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(6,626)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Retained interest in transferred credit</FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-2>card
receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(3,153)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(4,577)</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>(4,294)</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Other customer receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>50</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>220</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>112</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Domestic
owned credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,208</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,605</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>17,443</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>International
credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,479</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,303</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,503</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Consolidated
credit card receivables</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>17,687</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>17,908</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>18,946</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2> 
Less: Allowance for uncollectible accounts</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>808</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>1,116</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>974</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="52%" HEIGHT="26"><FONT FACE="Arial"><FONT SIZE=-2> 
Credit card receivables, net</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="26"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="26">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,879</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="26"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="26"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="26">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>16,792</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="26"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="26"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="26">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>17,972</FONT></FONT></DIV>
</TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=+2> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Consolidated credit card receivables
(before allowance for uncollectible accounts) decreased $221 million when
comparing the third quarter of 1999 with the third quarter of 1998. The
decrease is primarily due to a decrease in managed receivables. Managed
credit card receivables decreased from the third quarter of 1998 primarily
due to declining market share of sales on the Sears Card and faster payment
rates. Compared to 1998 year-end, consolidated credit card receivables
(before allowance for uncollectible accounts) decreased $1.26 billion due
to the normal seasonal nature of the retail industry as well as the aforementioned
declining market share.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>As of October 2, 1999, consolidated
merchandise inventories on the first-in, first-out (FIFO) basis were $6.25
billion, compared with $6.61 billion at October 3, 1998 and $5.50 billion
at January 2, 1999. The decrease in inventory levels from the third quarter
of 1998 reflects the dispositions of the Western Auto and HomeLife businesses.
The increase in inventory from January 2, 1999 reflects the normal seasonal
build-up of inventory, partially offset by the sale of HomeLife.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Total property and equipment, net of
accumulated depreciation, was $6.42 billion at October 2, 1999 compared
with $6.49 billion a year earlier. The decrease reflects the dispositions
of Western Auto and HomeLife, partially offset by the net addition of 14
Full-line stores and 56 Specialty stores, as well as remodeling activity
within the Full-line stores.</FONT></FONT>
<BR> 
<BR>                                          
                                       
- 16 -
<BR> 
<BR> 
<BR> 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT> 
<HR WIDTH="100%">

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Total funding for the Company at October
2, 1999 was $24.5 billion compared with $27.1 billion a year earlier. The
decrease in funding reflects the divestitures of HomeLife and Western Auto
and the decrease in the managed credit card receivables portfolio. Total
funding includes debt recorded on the balance sheet and investor certificates
related to credit card receivables sold through securitizations as follows:</FONT></FONT>
<BR> 

<P>                                          
                                          
    
_________________________________
<CENTER><TABLE WIDTH="519" >
<TR>
<TD VALIGN=TOP WIDTH="55%"> </TD>

<TD VALIGN=TOP COLSPAN="2" WIDTH="12%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 2,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=TOP WIDTH="4%"> </TD>

<TD VALIGN=TOP COLSPAN="2" WIDTH="12%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>October 3,</FONT></FONT></CENTER>
</TD>

<TD VALIGN=TOP WIDTH="5%"> </TD>

<TD VALIGN=TOP COLSPAN="2" WIDTH="11%">
<CENTER><FONT FACE="Arial"><FONT SIZE=-2>January 2,</FONT></FONT></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="55%"><I><FONT FACE="Arial"><FONT SIZE=-2>(millions)</FONT></FONT></I></TD>

<TD VALIGN=TOP COLSPAN="2" WIDTH="12%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=TOP WIDTH="4%"> </TD>

<TD VALIGN=TOP COLSPAN="2" WIDTH="12%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1998</FONT></FONT></U></CENTER>
</TD>

<TD VALIGN=TOP WIDTH="5%"> </TD>

<TD VALIGN=TOP COLSPAN="2" WIDTH="11%">
<CENTER><U><FONT FACE="Arial"><FONT SIZE=-2>1999</FONT></FONT></U></CENTER>
</TD>
</TR>

<TR>
<TD VALIGN=TOP WIDTH="55%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="11%"> </TD>

<TD VALIGN=TOP WIDTH="4%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="10%"> </TD>

<TD VALIGN=TOP WIDTH="5%"> </TD>

<TD VALIGN=TOP WIDTH="2%"> </TD>

<TD VALIGN=TOP WIDTH="9%"> </TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="55%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Short-term
borrowings</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="11%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>3,393</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="10%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>5,439</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>4,624</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="55%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Long-term
debt and capitalized lease obligations</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="11%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>14,638</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="10%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>15,165</FONT></FONT></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>15,045</FONT></FONT></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="55%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Securitized
balances sold</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="11%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>6,499</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="10%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>6,478</FONT></FONT></U></DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><U><FONT FACE="Arial"><FONT SIZE=-2>6,626</FONT></FONT></U></DIV>
</TD>
</TR>

<TR>
<TD VALIGN=BOTTOM WIDTH="55%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>Total
funding</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="11%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>24,530</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="4%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="10%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>27,082</FONT></FONT> </DIV>
</TD>

<TD VALIGN=BOTTOM WIDTH="5%" HEIGHT="18"></TD>

<TD VALIGN=BOTTOM WIDTH="2%" HEIGHT="18"><FONT FACE="Arial"><FONT SIZE=-2>$</FONT></FONT></TD>

<TD VALIGN=BOTTOM WIDTH="9%" HEIGHT="18">
<DIV ALIGN=right><FONT FACE="Arial"><FONT SIZE=-2>26,295</FONT></FONT> </DIV>
</TD>
</TR>

<TR>
<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>

<TD></TD>

<TD></TD>

<TD>
<HR WIDTH="100%"></TD>
</TR>
</TABLE></CENTER>
<FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>The Company accesses a variety of capital
markets to preserve flexibility and diversify its funding sources. The
primary funding sources utilized include unsecured commercial paper, medium
term notes, senior debt and securitization.</FONT></FONT>
<BR> 
<BR> 

<P><B><U><FONT FACE="Arial"><FONT SIZE=-1>Liquidity</FONT></FONT></U></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>Based upon the cash flow expected to
be generated from future operations and the Company's ability to cost-effectively
access multiple sources of funding, the Company believes sufficient resources
will be available to maintain its planned level of operations, capital
expenditures and dividends in the future.</FONT></FONT>
<BR> 
<BR> 

<P><B><U><FONT FACE="Arial"><FONT SIZE=-1>Year 2000</FONT></FONT></U></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>This description updates the description
of the Company's Year 2000 project contained in the Company's 1998 Annual
Report to Shareholders and its Quarterly Reports for the quarters ended
April 3, 1999 and July 3, 1999 and should be read in conjunction with such
descriptions.</FONT></FONT>
<BR> 
<BR> 

<P><B><FONT FACE="Arial"><FONT SIZE=-1>         
<U>State of Readiness</U></FONT></FONT></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>         
<U>Information Systems</U></FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>The Company has completed the inventory
and assessment of its mission critical (vital to business operations) information
systems. During the period covered by this Report, the Company completed
the remediation and testing of those mission critical systems requiring
remediation. As of October 20, 1999, the Company has completed certification
(final testing and validation) for approximately 80% of its mission critical
or retired mission critical systems, and the Company expects to complete
such certification by the end of November 1999. To assist in completing
certification, the Company has issued a moratorium on deploying any changes
into its systems production environment from July 1, 1999 through April
1, 2000 (subject to business critical changes) that are not related to
the Year 2000 compliance project. A formal process has been developed for
managing business critical changes implemented during the moratorium, including
a retesting and recertification process where necessary.</FONT></FONT>
<BR> 
<BR> 
<BR> 
<BR>                                          
                          
- 17 -
<BR> 
<BR> 
<BR> 
<CENTER> </CENTER>
</DIR>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR WIDTH="100%">
<BR> 
<DIR><U><FONT FACE="Arial"><FONT SIZE=-1>Business Management</FONT></FONT></U>

<P><FONT FACE="Arial"><FONT SIZE=-1>There have been no changes in the Company's
assessment of its equipment and systems that contain embedded computer
technology, its resale merchandise, or its mission critical, non-information
systems service providers -- the Company believes that these areas do not
pose a substantial Year 2000 compliance risk to the Company.</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><U><FONT FACE="Arial"><FONT SIZE=-1>Merchandise Vendors</FONT></FONT></U>

<P><FONT FACE="Arial"><FONT SIZE=-1>The Company currently rates its vendors
as either green or red. The green category consists of vendors that have
represented to the Company that they are compliant, including the development
of contingency plans, subject to the possible failure of the vendors' third
party providers. The green category also includes vendors in the third
tier that previously reported that they would be compliant by August 1,
1999. All other vendors are rated in the red category.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>As of November 1, 1999, one first tier
vendor (less than 1% of merchandise sales), two second tier vendors (less
than 1% of merchandise sales) and 162 third tier vendors (approximately
2% of merchandise sales) were rated in the red category. The Company continues
to monitor vendors rated in the red category, including reviewing follow-up
progress reports and conducting electronic data interchange testing. For
first and second tier vendors rated in the red category, the Company also
continues to engage in further discussions with the vendors regarding their
compliance and review available information, such as the vendors' filings
with the Securities and Exchange Commission.</FONT></FONT>

<P><B><I><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></I></B>

<P><B><I><FONT FACE="Arial"><FONT SIZE=-1>Contingency Plans</FONT></FONT></I></B></DIR>

<DIR><FONT FACE="Arial"><FONT SIZE=-1>Each of the Company's business units
has substantially completed the development of contingency plans that identify
what actions need to be taken if a critical system, merchandise vendor
or service is not available. These plans are based on existing emergency
response plans, business continuity plans and the results of the Year 2000
compliance project. The business units have considered various contingencies,
such as alternative merchandise vendors and service providers and operational
alternatives (including manual processes) in the event of a loss of utilities,
public services or mission critical systems. In addition, the Company is
developing its century rollover event management procedures. The procedures
focus on assuring that key personnel - including managerial, operational
and technical support functions - will be available to identify and seek
to remedy as promptly as possible any disruption that may occur during
the century rollover. The Company expects to complete the formulation of
these century rollover event management plans in November 1999 and to test,
rehearse and refine these plans throughout the remainder of 1999.</FONT></FONT>

<P><B><I><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></I></B>

<P><B><I><FONT FACE="Arial"><FONT SIZE=-1>Risks</FONT></FONT></I></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>The Company believes that its most
significant Year 2000 risk factors are:</FONT></FONT></DIR>

<UL>
<UL>
<LI>
<FONT FACE="Arial"><FONT SIZE=-1>Failure of either of its two mission critical
information systems service providers to make their systems Year 2000 compliant,
despite such providers' own Year 2000 compliance efforts and their assurances
to the Company that their systems are Year 2000 compliant; and</FONT></FONT></LI>
</UL>
</UL>

<UL>
<UL>
<LI>
<FONT FACE="Arial"><FONT SIZE=-1>Failure of a first tier mission critical
merchandise vendor, or multiple merchandise vendors or service providers,
to supply merchandise or services for an extended period of time.</FONT></FONT></LI>
</UL>
</UL>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></CENTER>

<CENTER>- 18 -</CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<DIR>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>OPERATIONS, FINANCIAL CONDITION
AND LIQUIDITY FOR THE</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999 AND OCTOBER 3, 1998</FONT></FONT></CENTER>
</DIR>
</TD>
</TR>
</TABLE>

<HR WIDTH="100%">

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>Although the occurrence of either
of these scenarios could have a material adverse effect on the Company,
the Company does not believe that any of these scenarios or any other Year
2000 compliance issues that would materially affect the Company's operations
are reasonably likely to occur.</FONT></FONT>

<P><B><I><FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT></I></B> <B><I><FONT FACE="Arial"><FONT SIZE=-2> </FONT></FONT></I></B>

<P><B><I><FONT FACE="Arial,Helvetica"><FONT SIZE=-1>Costs</FONT></FONT></I></B>

<P><FONT FACE="Arial"><FONT SIZE=-1>The Company estimates total costs (including
external costs and the costs of internal personnel) related to its Year
2000 effort to be approximately $67 million, of which the Company (including
Sears Canada) has incurred approximately $55 million through September
30, 1999. In addition, the Company has accelerated the planned development
of new systems with improved business functionality to replace systems
that were not Year 2000 compliant, including the Company's new payroll
processing system. The Company expects these systems will cost approximately
$82 million, of which the Company has incurred approximately $78 million
through September 30, 1999. The Company funds Year 2000 costs with cash
flows from operations.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></DIR>
<B><U><FONT FACE="Arial"><FONT SIZE=-1>Cautionary Statement Regarding Forward-Looking
Information</FONT></FONT></U></B>
<BR><FONT FACE="Arial"><FONT SIZE=-1>Certain statements made in this Report
are forward-looking statements made in reliance on the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. As such, they
involve risks and uncertainties that could cause actual results to differ
materially. The Company's forward-looking statements are based on assumptions
about many important factors, including ongoing competitive pressures in
the retail industry, changes in consumer spending, delinquency and charge-off
trends in the credit card receivables portfolio, general North American
economic conditions (such as interest rates and consumer confidence), anticipated
cash flow, the Company's ability to cost-effectively access multiple sources
of funding, the ability of the Company to implement its new marketing plan
and cost reduction efforts, and normal business uncertainty. In particular,
the discussion of Year 2000 matters above is based on assumptions about
a variety of factors, including the technical skills of employees and independent
contractors, the representations and preparedness of third parties, vendors'
delivery of merchandise and performance of services required by the Company
and the collateral effects of Year 2000 compliance issues on the Company's
business partners and customers. While the Company believes that its assumptions
are reasonable, it cautions that it is impossible to predict the impact
of certain factors which could cause actual results to differ materially
from expected results.</FONT></FONT>
<BR> 
<BR>                                          
                                  
- 19 -
<BR> 
<BR> 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>PART II. OTHER INFORMATION </FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER>
<HR WIDTH="100%"></CENTER>


<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>Item 1. Legal Proceedings</FONT></FONT>
<BR> 
<BLOCKQUOTE><FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>There
have been no material developments in any legal proceedings since the Company's
disclosure in its Annual Report on Form 10-K for the fiscal year ended
January 2, 1999 other than those reported in the Company's Quarterly Reports
on Form 10-Q for the quarters ended April 3, 1999 and July 3, 1999 which
describe certain material events that occurred in the quarterly period
covered by this Report.</FONT></FONT></FONT>
<BR><FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1> </FONT></FONT></FONT>
<BR><FONT FACE="Arial"><FONT COLOR="#000000"><FONT SIZE=-1>                                
                                         
- 20 -</FONT></FONT></FONT></BLOCKQUOTE>

<DIR>
<DIR>
<DIR>
<CENTER> </CENTER>
</DIR>
</DIR>
</DIR>

<CENTER> </CENTER>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<DIR>
<DIR>
<DIR>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>PART II. OTHER INFORMATION</FONT></FONT></CENTER>
</DIR>
</DIR>
</DIR>
</TD>
</TR>
</TABLE>

<HR WIDTH="100%">
<BR> 

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-1>Item
6. Exhibits and Reports on Form 8-K.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>            
(a) Exhibits.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                 
An Exhibit Index has been filed as part of this Report on Page E-1.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>             
(b) Reports on Form 8-K.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                  
A Current Report on Form 8-K was filed by the Registrant on July 22, 1999
to report, under Item 5,</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                  
at the Registrant issued a press release to report its second quarter earnings
and to file, under Item</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                  
7, a copy of such press release.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                  
A Current Report on Form 8-K was filed by the Registrant on September 2,
1999 to report, under Item 5,</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                  
that the Registrant issued a press release announcing a revised earnings
outlook and certain</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                  
management initiatives and to file, under Item 7, a copy of such press
release.</FONT></FONT>
<BLOCKQUOTE>
<DIR> 
<BR> 
<BR> 
<BR> 
<BR> 
<BR> 

<P><FONT FACE="Arial"><FONT SIZE=-1>                                    
                          
- 21 -</FONT></FONT></DIR>
</BLOCKQUOTE>

<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>

<CENTER> </CENTER>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SIGNATURE</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<CENTER>
<HR WIDTH="100%"></CENTER>


<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>
<DIR>
<DIR>
<DIR>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>Pursuant to the requirements of the
Securities</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>Exchange Act of 1934, the Registrant
has duly</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>caused this report to be signed on
its behalf</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>by the undersigned thereunto duly
authorized.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>                                    
               
Sears, Roebuck and Co.</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                                    
               
(Registrant)</FONT></FONT></DIR>
</DIR>
</DIR>
</DIR>
<FONT FACE="Arial"><FONT SIZE=-1>November 5, 1999</FONT></FONT>
<DIR>
<DIR>
<DIR>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>                                    
               
By <U>/s/ Jeffrey N. Boyer </U><FONT COLOR="#FFFFFF">.</FONT></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                                    
                   
Jeffrey N. Boyer</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                                    
                   
Vice President and Chief Financial Officer</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                                    
                   
(Principal Accounting Officer and duly</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>                                    
                    
authorized officer of Registrant)</FONT></FONT>
<BR> 
<BR> 

<P>                                         
- 22 -</DIR>
</DIR>
</DIR>
</DIR>
 
<TABLE BORDER=0 COLS=1 WIDTH="100%" >
<TR>
<TD>
<CENTER><FONT FACE="Arial"><FONT SIZE=-1>E-1</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>EXHIBIT INDEX</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>SEARS, ROEBUCK AND CO.</FONT></FONT></CENTER>

<CENTER><FONT FACE="Arial"><FONT SIZE=-1>13 AND 39 WEEKS ENDED OCTOBER
2, 1999</FONT></FONT></CENTER>
</TD>
</TR>
</TABLE>

<HR WIDTH="100%">
<DIR>
<DIR> 
<BR> 
<BR> 

<P><U><FONT FACE="Arial"><FONT SIZE=-1>Exhibit No.</FONT></FONT></U>

<P><FONT FACE="Arial"><FONT SIZE=-1> 3(a).    
Restated Certificate of Incorporation as in effect on May 13, 1996 (incorporated
by reference</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>            
to Exhibit 3(a) to Registrant's Statement No. 333-8141).</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1> 3(b).    
By-laws, as amended to February 2, 1999 (incorporated by reference to Exhibit
3.(ii) to</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>            
Registrant's Annual</FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-1>Report
on Form 10-K for the fiscal year ended January 2, 1999).</FONT></FONT>
<DIR> </DIR>
<FONT FACE="Arial"><FONT SIZE=-1>    4.    
Registrant hereby agrees to furnish the Commission, upon request, with
the instruments</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>           
defining the rights of</FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-1>holders
of each issue of long-term debt of the Registrant and its</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>           
consolidated subsidiaries.</FONT></FONT></DIR>
</DIR>

<DIR>
<DIR><FONT FACE="Arial"><FONT SIZE=-1>12(a).   Computation of
ratio of income to fixed charges for Sears and consolidated subsidiaries
for</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>           
each of the five years ended January 2, 1999 and for the nine-and twelve-month
periods ended</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>           
October 2, 1999.</FONT></FONT>
<DIR> </DIR>
<FONT FACE="Arial"><FONT SIZE=-1>12(b).   Computation of ratio
of income to combined fixed charges and preferred share dividends for</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>           
Sears and</FONT></FONT> <FONT FACE="Arial"><FONT SIZE=-1>consolidated subsidiaries
(incorporated by reference to Exhibit 12.(b) to</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>           
Registrant's Annual Report on Form 10-K for the fiscal year ended January
2, 1999).</FONT></FONT>
<DIR> </DIR>
<FONT FACE="Arial"><FONT SIZE=-1>15.      
Acknowledgement of awareness from Deloitte & Touche LLP, dated November
4, 1999,</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1>          
concerning unaudited interim financial information.</FONT></FONT>

<P><FONT FACE="Arial"><FONT SIZE=-1>27.      Financial
Data Schedule.</FONT></FONT>
<BR> 
<BR> 
<BR> 
<BR> 
<BR> 

<P><FONT FACE="Arial"><FONT SIZE=-1> </FONT></FONT></DIR>
</DIR>

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