Struggling retailer Sears Holdings reported a 10.3 percent drop in comparable-store sales for the holiday quarter, and said it would cut debt and pension obligations by at least $1.5 billion this year.

Shares of the company, which has been struggling with years of losses and falling sales, were up 39 percent at $7.70 in premarket trading on Friday.

The company — controlled by its billionaire chief executive, Edward Lampert — announced a new plan to cut costs by at least $1 billion in 2017 by reducing overhead, improving merchandise at its stores and through better inventory management.

Once the largest U.S. retailer, Sears has lost its standing as customers move to online shopping or rivals such as Wal-Mart Stores Inc.

To cope with the slump, Sears has cut costs, spun off some of its stores into a real estate investment trust, raised debt from Lampert’s hedge fund and put some brands on sale.

The company has, however, failed to turn a profit in more than a year and said in December there was no guarantee when it would return to profitability.

Sears said on Friday it sold five Sears full-line stores and two Sears Auto Centers for $72.5 million in January and engaged Eastdil Secured to raise at least $1 billion from the sale of its real estate.

Sears said it sold five Sears Full-line stores and two Sears Auto Centers for $72.5 million in January and engaged Eastdil Secured to raise at least $1 billion from the sale of its real estate.

The retailer said last month it sold its lawn and garden equipment brand, Craftsman, to Stanley Black & Decker.

Sears said the proceeds from these sales would be used to reduce its debt and pension obligations by $1.5 billion for fiscal 2017.

The company had pension and post-retirement benefit liabilities of $2 billion as of Oct. 29.

Sears also said it expected revenue of $6.1 billion and a loss of $535 million to $635 million in the fourth quarter ended January.

In less than two months, Sears shares have plunged 40 percent to their lowest since merging with Kmart in 2004 on fears of bankruptcy

Sears shares 5-day performance

—CNBC contributed to this report