Sears 2007 Annual Report Download - page 8

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demand for a particular product or the time it will take to obtain new inventory, our inventory levels will not be
appropriate and our results of operations may be negatively impacted.
If we are unable to compete effectively in the highly competitive retail industry, our business and results of
operations could be materially adversely affected.
The retail industry is highly competitive with few barriers to entry. We compete 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. Some of our competitors are actively engaged in new store expansion. Internet
and catalog businesses, which handle similar lines of merchandise, also compete with us. In this competitive
marketplace, success is based on factors such as price, product assortment and quality, service and convenience.
Our success depends on our ability to differentiate ourselves from our competitors with respect to shopping
convenience, a quality assortment of available merchandise and superior customer service. We must also
successfully respond to our customers’ changing tastes. The performance of our competitors, as well as changes
in their pricing policies, marketing activities, new store openings and other business strategies, could have a
material adverse effect on our business, financial condition and results of operations.
Due to the seasonality of our business, our annual operating results would be adversely affected if our
business performs poorly in the fourth quarter.
Our business is seasonal, with a high proportion of revenues and operating cash flows being generated
during the fourth quarter of our fiscal year, which includes the holiday season. As a result, our fourth quarter
operating results significantly impact our annual operating results. Our fourth quarter operating results may
fluctuate significantly, based on many factors, including holiday spending patterns and weather conditions.
Our sales may fluctuate for a variety of reasons, which could adversely affect our results of operations.
Our business is sensitive to customers’ spending patterns, which in turn are subject to prevailing economic
conditions. Our sales and results of operations have fluctuated in the past, and we expect them to continue to
fluctuate in the future. A variety of other factors affect our sales and financial performance, including:
• actions by our competitors, including opening of new stores in our existing markets or changes to the
way these competitors go to market on-line,
• seasonal fluctuations due to weather conditions,
• changes in our merchandise strategy and mix,
• changes in population and other demographics, and
• timing of our promotional events.
Accordingly, our results for any one fiscal quarter are not necessarily indicative of the results to be expected
for any other quarter, and comparable store sales for any particular future period may increase or decrease. For
more information on our results of operations, see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Item 7 of this Form 10-K.
8