Sears 2007 Annual Report Download - page 2

PART I
Item 1. Business
General
Sears Holdings Corporation (“Holdings,” “we,” “us,” or the “Company”) is the parent company of Kmart
Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings was formed as a Delaware
corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”). The Merger, completed on
March 24, 2005, combined two of America’s oldest existing retail entities, both with origins dating to the late
1800s. We are a broadline retailer with 2,317 full-line and 1,150 specialty retail stores in the United States
operating through Kmart and Sears and 380 full-line and specialty retail stores in Canada operating through Sears
Canada Inc. (“Sears Canada”), a 70%-owned subsidiary.
Business Segments
During fiscal 2007, we operated three reportable segments: Kmart, Sears Domestic and Sears Canada.
Financial information, including revenues, operating income and total assets for each of these business segments
is contained in Note 19 of Notes to Consolidated Financial Statements. Information regarding the components of
revenue for Holdings is included in Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
Kmart
As of February 2, 2008, Holdings operated a total of 1,382 Kmart stores across 49 states, Guam, Puerto
Rico, and the U.S. Virgin Islands. This store count included 1,327 discount stores, averaging 92,000 square feet,
and 55 Super Centers, averaging 165,000 square feet. Most Kmart stores are one-floor, free-standing units that
carry a wide assortment of general merchandise, including products sold under such well-known labels as Jaclyn
Smith, Joe Boxer and Martha Stewart Everyday. During fiscal 2005, we began selling certain proprietary Sears
brand products, such as Kenmore, Craftsman, and DieHard brand products, and services within certain Kmart
stores. At the end of fiscal 2005, approximately 100 Kmart stores were selling an assortment of Sears brand
products, mainly within home appliances and tools. During the fall of fiscal 2006, we added Craftsman tool
assortments into Kmart locations nationwide. As of February 2, 2008, approximately 280 Kmart stores were also
selling an assortment of major home appliances, including Kenmore-branded products. There are 1,063 Kmart
stores which also operate in-store pharmacies. The Super Centers generally operate 24-hours a day and combine
a full-service grocery along with the general merchandise selection of a discount store. There are also 20 Sears
Auto Centers operating in Kmart stores, including 11 which opened in 2007. Sears Auto Centers offer a variety
of professional automotive repair and maintenance services as well as a full assortment of automotive
accessories. Kmart also sells its products through its kmart.com website.
Sears Domestic
As of February 2, 2008, Sears Domestic operations consisted of the following:
• Full-line Stores—935 broadline stores of which 860 are full-line stores located across all 50 states and
Puerto Rico, primarily mall-based locations averaging 134,000 square feet. Full-line stores offer a wide
array of products across many merchandise categories, including home appliances, consumer
electronics, tools, fitness and lawn and garden equipment, certain automotive services and products,
such as tires and batteries, home fashion products, as well as apparel, footwear and accessories for the
whole family. Our product offerings include our proprietary Kenmore, Craftsman, DieHard, Lands’
End, Covington, Apostrophe, Canyon River Blues and Athletech brand merchandise. Also, as of
February 2, 2008, we operated 75 Sears Essentials/Grand stores located in 26 states, primarily free-
standing units averaging 113,000 square feet and offering health and beauty products, pantry goods,
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