The retailer's stock climbed more than 3 percent in premarket trading on Thursday.
The company that also owns the Kmart store chain lost $489 million, or $4.61 per share, for the period ended Feb. 2. That compares with a loss of $2.4 billion, or $22.63 per share, a year earlier.
Excluding certain items, earnings from continuing operations were $1.12 per share.
Revenue fell 2 percent to $12.26 billion from $12.48 billion. Sears said this was mostly due to the separation of its Sears Hometown and Outlet businesses; the impact of having fewer Kmart and Sears stores in operation and lower revenue from stores open at least a year. This was somewhat offset by having an extra week in the period.
Revenue at U.S. stores open at least a year dropped 1.6 percent in the quarter.
This metric is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.
Revenue at domestic Sears stores open at least a year edged up 0.8 percent, helped by strength in the clothing, home appliance and home categories. The figure dropped 3.7 percent for Kmart locations and fell 3.8 percent for Sears Canada.
A good part of the drag on results was softness in consumer electronics. Removing this category, total revenue at U.S. stores open at least a year dipped 0.2 percent while Sears rose 2.4 percent and Kmart declined 2.5 percent.
Like many retailers, Sears Holdings Corp. saw growth in its online business, with sales climbing 25 percent.
Total costs and expenses declined to $12.88 billion from $13.18 billion.
Merchandise inventories at quarter's end were $7.6 billion compared with $8.4 billion a year earlier. Domestic inventory dropped $895 million to $6.8 billion.
Chief Financial Officer Rob Schriesheim said that Sears anticipates lowering its 2013 peak domestic inventory by $500 million from the $8.6 billion level at the end of the third quarter of 2012.
Total debt at quarter's end was $3.1 billion. This is down from $3.5 billion in the prior-year period.
Shares of Sears gained $1.53, or 3.2 percent, to $49 two hours before the market open.
For the full year, Sears lost $930 million, or $8.78 per share. In the prior year it lost $3.14 billion, or $29.40 per share.
The company's adjusted loss from continuing operations was $2.03 per share.
Annual revenue fell 4 percent to $39.85 billion from $41.57 billion.
Sears has more than 2,500 stores in the U.S. and Canada.