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welcome

FINANCIAL UPDATE

$3.88B
sales
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sales metrics
Q1 12 Q2 12 $3.02B (21.7%) (12%) (8%) Q3 12 $2.93B (26.1%) (12%) (10%) Q4 12 $3.88B (31.7%) (17%) (10%) FY 12 $12.99B (25.2%) (13%) (9%)

sales comps* traffic conversion

$3.15B (18.9%) (10%) (5%)

*comps for Q4 12 calculated on a 13-week basis and FY 12 calculated on a 52-week basis

23.8%
gaap gross margin
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gross margin cause of change

Q4 11 gross margin
everyday selling margin impact clearance mix impact clearance selling margin impact cost concessions other

30.2%
0.8% (4.3%) (1.2%) (0.6%) (1.1%)

Q4 12 gross margin

23.8%

selling margin
Q4 11 everyday % 43.7% Q4 12

100
bps

44.7%

% revenue

86%

76%

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selling margin
Q4 11 clearance % 7.7% Q4 12

(830)
bps

(0.6%)

% revenue

14%

24%

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selling margin
Q4 11 selling margin % 38.2% Q4 12

(490)
bps

33.3%

mix impact

86/14%

(430)
bps

76/24%

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quarterly selling margin

mix of business

Q1 12 85% 15%

Q2 12 83% 17%

Q3 12 77% 23%

Q4 12 76% 24%

FY 12 80% 20%

everyday clearance
selling margin

everyday clearance
total

51.6% (26.8%)

51.2% 5.9%

51.7% (5.9%)

44.7% (0.6%)

49.5% (6.8%)

39.8%

42.5%

37.0%

33.3%

37.4%

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$1.21B
sg&a
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$175M
gross sg&a savings
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sg&a savings
Q4 12

gross savings marketing technology investment shop labor net savings

$175M ($22M) ($13M) ($6M) $134M

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sg&a savings
Q4 12 FY 12

gross savings marketing technology investment shop labor net savings

$175M ($22M) ($13M) ($6M) $134M

$671M ($25M) ($25M) ($18M) $603M

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primary pension
Q4 12

lump sum settlements primary pension expense total

$148M $28M $176M

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restructuring charges
Q4 12

home store office/store fixtures management transition home office/store severance other total

$18M $5M $4M $2M $29M

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eps
Q4 12 FY 12

gaap eps restructuring pension transition markdowns gain on sale of non-core assets adjusted (non-gaap) eps

($2.51) $0.08 $0.49 $0.00 $0.00 ($1.95)

($4.49) $0.83 $0.88 $0.43 ($1.14) ($3.49)

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BALANCE SHEET

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balance sheet $ in millions

assets
cash and equivalents merchandise inventory income tax receivable deferred income tax prepaid expenses properties other assets total assets

Q4 11
1,507 2,916 168 245 245 5,176 1,167 $11,424

Q3 12
525 3,362 69 409 265 5,493 767 $10,890

Q4 12
930 2,341 57 106 249 5,353 745 $9,781

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balance sheet $ in millions

assets

Q3 12 cash and equivalents 525

Q4 12

$405

930

operating cash flow in Q4 of $645M capex spend in Q4 of $230M

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balance sheet $ in millions

assets

Q4 11 merchandise inventory 2,916

Q4 12

(20%)

2,341

reduced inventory by $575M reduced weeks of supply and improved aging

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balance sheet $ in millions

assets

Q4 11 deferred income tax 245

Q4 12

($139)

106

reclassification of our net operating loss tax benefits to long-term deferred tax liability

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balance sheet $ in millions

assets

Q4 11

Q4 12

other assets

1,167

($422)

745

reduction due to monetization of non-core assets

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balance sheet $ in millions

assets
merch accounts payables accrued expenses capital leases/notes payable current current maturities long-term debt
capital leases/notes payable non-current

Q4 11
1,022 1,503 1 230 2,868 3 888 899 4,010

Q3 12
1,408 1,344 22 0 2,868 75 786 885 3,502

Q4 12
1,162 1,395 26 0 2,868 88 388 683 3,171

long-term deferred tax other liabilities equity

total liabilities & equity

$11,424

$10,890

$9,781

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balance sheet $ in millions

liabilities & equity

Q4 11
merch accounts payables

Q4 12

1,022

14%

1,162

reduction in inventory weeks of supply realignment of vendor payment schedules of $129M one-time deferral of select vendor payments of $85M

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balance sheet $ in millions

liabilities & equity

Q4 11
long-term deferred tax

Q4 12

888

($500)

388

increased future benefits from net operating losses

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CASH FLOW

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cash flow from operating activities $ in millions

Q4 12

gaap net income restructuring/management transition depreciation inventory supplier payables other working capital income/deferred tax asset impairments & other charges primary pension plan/benefit plans

(552) 19 157 1,021 (246) 211 (234) 107 162

cash flow from operating activities

645

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cash flow $ in millions

operating Q4 12

cash flow from operating activities

investing

645

capital expenditures sale of non-core assets cash flow from investing activities
financing

(230) 1 (229)

capital leases/other cash flow from financing activities

(11) (11)

net increase in cash

405

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cash flow from operating activities $ in millions

FY 12 gaap net income restructuring/management transition depreciation inventory merch accounts payable other working capital income/deferred tax asset impairments & other charges primary pension plan/benefit plans gain on sale of non-core assets (985) 121 543 575 140 (46) (350) 117 272 (397)

cash flow from operating activities

(10)

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cash flow $ in millions

operating cash flow from operating activities investing capital expenditures sale of non-core assets acquisition cash flow from investing activities financing payment of debt other cash flow from financing activities (250) (24) (274) (810) 526 (9) (293) FY 12 (10)

net decrease in cash

(577)
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line of credit february amendment

increased size by $350M to $1.85B increased accordion feature from $250M to $400M increased flexibility for third-party financing no change in covenant structure updated representations and warranties section acknowledges the business results of the first year of transformation secured by receivables and inventory continued support from our banking partners

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liquidity

$0.85B $1.85B $0.40B $3.10B

*does not include $0.3B of outstanding letters of credit

year-end adjusted cash

line of credit

accordion

liquidity*

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reduced expenses by $671M reduced inventory by $575M monetized $526M of non-core assets invested $810M of capital reduced debt by $250M

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q&a
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thank you

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appendix

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Reconciliation of Non-GAAP Financial Measures

(Unaudited) (Amounts in millions except per share data)
We define (1) adjusted operating income/(loss) as operating income/(loss) excluding the impact of markdowns related to the alignment of inventory with our new strategy, restructuring and management transition charges, the non-cash impact of the primary pension plan expense and the net gain on sale or redemption of non-operating assets and (2) adjusted net income/(loss) and adjusted earnings/(loss) per share - diluted as net income/(loss) and earnings/ (loss) per share - diluted, respectively, excluding the after-tax impacts of markdowns related to the alignment of inventory with our new strategy, restructuring and management transition charges, the non-cash impact of the primary pension plan expense and the net gain on sale or redemption of nonoperating assets. We believe that the presentation of these non-GAAP financial measures is useful in order to better understand our financial performance as well as facilitate the comparison of our results to the results of our peer companies. It is important to view each of these non-GAAP financial measures in addition to, rather that as a substitute for, the GAAP measures of operating income/(loss), net income/(loss) and earnings/(loss) per share - diluted, respectively.

ADJUSTED OPERATING INCOME/(LOSS), NON-GAAP FINANCIAL MEASURE

The following table reconciles operating income/(loss), the most directly comparable GAAP measure, to adjusted operating income/(loss), a non-GAAP financial measure:

Operating income/(loss)
As a percent of sales

Three months ended Feb. 2, Jan. 28, 2013 2012 $ (745) $ (73)
(19.2)% (1.3)%

Twelve months ended Feb. 2, Jan. 28, 2013 2012 $ (1,310) $ (2)
(10.1)% (0.0)%

Add:

Markdowns - inventory strategy alignment

29 176 $ (540)
(13.9)%

154 22 $ 103
1.9%

155 298 315 (397) $ (939)

(7.2)%

451 87 $ 536
3.1%

Restructuring and management transition charges Primary pension plan expense Less: Net gain on sale or redemption of non-operating assets Adjusted operating income/(loss) (non-GAAP)
As a percent of sales

ADJUSTED NET INCOME/(LOSS) AND ADJUSTED EARNINGS/(LOSS) PER SHARE - DILUTED, NON-GAAP FINANCIAL MEASURES
The following table reconciles net income/(loss) and earnings/(loss) per share-diluted, the most directly comparable GAAP measures, to adjusted net income/(loss) and adjusted earnings/(loss) per share share-diluted, - diluted, non-GAAP non-GAAP financial financial measures: measures:

Net income/(loss) Earnings/(loss) per share - diluted Add: Markdowns - inventory strategy alignment, net of tax of $-, $-, $60 and $Restructuring and management transition charges, net of tax of $12, $35, $116 and $145 Primary pension plan expense, net of tax of $68, $9, $122, $34 Less: Net gain on sale or redemption of non-operating assets, net of tax of $-, $-, $146 and $Adjusted net income/loss (non-GAAP) Adjusted earnings/(loss) per share - diluted (non-GAAP)

Three months ended Feb. 2, Jan. 28, 2013 2012 $ (552) $ (87) $ (2.51) $ (0.41) 17 # 108 $ $ (427) (1.95) $ $ 45 0.21 13 119

Twelve months ended Feb. 2, Jan. 28, 2013 2012 $ (985) $ (152) $ (4.49) $ (0.70) 95 182 193 (251) $ $ (766) (3.49) $ $ 207 0.94 306 53

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Reconciliation of Non-GAAP Financial Measures

(Unaudited) (Amounts in millions except per share data)
Free cash flow is a key financial measure of our ability to generate additional cash from operating our business and in evaluating our financial performance. We define free cash flow as cash flow from operating activities, less capital expenditures and dividends paid, plus the proceeds from the sale of operating assets. Free cash flow is a relevant indicator of our ability to repay maturing debt, revise our dividend policy or fund other uses of capital that we believe will enhance stockholder value. Free cash flow is considered a non-GAAP financial measure under the rules of the SEC. Free cash flow is limited and does not represent remaining cash flow available for discretionary expenditures due to the fact that the measure does not deduct payments required for debt maturities, pay-down of off-balance sheet pension debt, and other obligations or payments made for business acquisitions. Therefore, it is important to view free cash flow in addition to, rather than as a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.

FREE CASH FLOW, NON-GAAP FINANCIAL MEASURE

The following table reconciles cash flow from operating activities, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure:

Three months ended Feb. 2, 2013 Net cash provided by/(used in) operating activities Add: Proceeds from sale of operating assets Less: Capital expenditures Dividends paid Free cash flow (non-GAAP) $ 645 (230) 415 # $ # # # $ Jan. 28, 2012 953 14 (165) (43) 759 $

Twelve months ended Feb. 2, 2013 (10) $ (810) (86) (906) # $ Jan. 28, 2012 820 15 (634) (178) 23

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