Sears 2006 Annual Report Download - page 23

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multi-channel service area where customers can choose from the entire Lands’ End assortment—either
online or by phone- shopping for products that would otherwise not be available in the store; and
• remodeled approximately 70 Kmart stores to include Sears-brand products. The Company intends to
continue its roll-out of home appliances, including Sears Kenmore brand products, into both Sears
Grand and Kmart locations over the next several years as a means of expanding its points of
distribution in response to competitor store growth. As of February 3, 2007, approximately 180 Kmart
stores, including certain of the remodeled locations, offered broad assortments of home appliances.
Certain of these initiatives and actions benefited the Company’s fiscal 2006 operating results, and the
impact of such items is reflected in the Company’s 2006 operating results as presented in the below “Results of
Operations” section. Other initiatives represent investments management has made with the belief that they
further Holdings’ pursuit of its ultimate mission: profitably building long-term relationships and gaining
prominence in the retail industry.
RESULTS OF OPERATIONS
In the results of operations section that follows, results for fiscal 2005 and fiscal 2004 are set forth on both a
reported and pro forma basis. This presentation reflects the fact that the reported results for Holdings prior to the
March 24, 2005 Merger reflect only Kmart’s results. Accordingly, to facilitate an understanding of the
Company’s trends and on-going performance, the Company has presented pro forma results below for fiscal
2005 and fiscal 2004 in addition to the reported results for these years. The pro forma results adjust the reported
amounts for these two fiscal years to give effect to the Merger as if it had occurred at the beginning of fiscal
2004. Thus, the pro forma results include both Kmart and Sears results for the entire fiscal 2005 and fiscal 2004
periods. A reconciliation of pro forma amounts to reported amounts has been included under the heading “Pro
Forma Reconciliation.”
References to comparable store sales amounts within the following discussion include sales for all stores
operating for a period of at least 12 full months, including remodeled and expanded stores, but excluding store
relocations and stores that have undergone format changes. Comparable store sales results for fiscal 2006 were
calculated based on the 52-week period ended January 27, 2007 as compared to the comparable 52-week period
in the prior year.
The discussion that follows should be read in conjunction with the consolidated financial statements and
notes thereto included in Item 8.
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