Sears 2006 Annual Report Download - page 6

transactions may, individually or in the aggregate, result in material proceeds or outlays of cash. In addition, the
Company reviews leases that will expire in the short term in order to determine the appropriate action to take
with respect to them.
Further information concerning the Company’s real estate transactions is contained in Note 15 of Notes to
Consolidated Financial Statements.
Trademarks, Trade Names and Licenses
The “KMART®” and “SEARS®” trade names, service marks and trademarks, used by the Company both in
the United States and internationally, are material to the Company’s retail and other related businesses.
The Company sells proprietary branded merchandise under a number of brand names that are important to
its operations. The Company’s KENMORE®, CRAFTSMAN®, DIEHARD®and LANDS’ END®brands are
among the most recognized proprietary brands in retailing. These marks are the subject of numerous United
States and foreign trademark registrations. Other well recognized Company trademarks and service marks
include THE GREAT INDOORS®,OSH
®, CANYON RIVER BLUES®, COVINGTON®, and ATHLETECH®.
The Company also has the right to sell an exclusive line of Martha Stewart Everyday®products in its Kmart
locations over the next three years, as well as within Sears Canada stores through August 2008. The Company’s
right to use its trade names and marks continues so long as it uses them.
Seasonality
The retail business is seasonal in nature, and the Company generates a high proportion of its revenues and
operating cash flows during the fourth quarter of its fiscal year, which includes the holiday season. As a result,
the Company’s overall profitability is heavily impacted by its fourth quarter operating results. Additionally, in
preparation for the fourth quarter holiday season, the Company significantly increases its merchandise inventory
levels, which have traditionally been financed from operating cash flows and credit terms received from vendors.
Fourth quarter reported revenues accounted for 31% of total reported revenues in fiscal 2006.
Competition
The Company’s business is subject to highly competitive conditions. The Company competes with a wide
variety of retailers including other department stores, discounters, home improvement stores, consumer
electronics dealers and auto service providers, specialty retailers, wholesale clubs and many other competitors
operating on a national, regional or local level along with Internet and catalog businesses, which handle similar
lines of merchandise. Wal-Mart, Target, Kohl’s, JC Penney, Home Depot, Lowe’s and Best Buy are some of the
national competitors with which the Company competes. Home Depot, Lowe’s and Best Buy are major
competitors in relation to the Company’s home appliance business, which accounted for approximately 15% of
the Company’s fiscal 2006 reported revenues. Sears Canada competes in Canada with Hudson’s Bay Company
and U.S.-based competitors, including those mentioned above, that are expanding into Canada. Success in this
competitive marketplace is based on factors such as price, product assortment and quality, service and
convenience, including availability of retail-related services such as access to credit, product delivery, repair and
installation.
Employees
As of February 3, 2007, the Company had approximately 315,000 employees in the United States and U.S.
territories, and approximately 37,000 employees in Canada through Sears Canada including, in each case, part-
time employees.
Our Website; Availability of SEC Reports and Other Information
The Company’s corporate website is located at searsholdings.com. The Company’s Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these
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