Sears 2008 Annual Report Download - page 20

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We have divided our “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” (“MD&A”) into the following six sections:
• Overview of Holdings
• Results of Operations:
Fiscal Year
Holdings’ Consolidated Results
Business Segment Results
• Analysis of Consolidated Financial Condition
• Contractual Obligations and Off-Balance Sheet Arrangements
• Application of Critical Accounting Policies and Estimates
• Cautionary Statement Regarding Forward-Looking Information
The discussion that follows should be read in conjunction with the consolidated financial statements and
notes thereto included in Item 8.
OVERVIEW OF HOLDINGS
Holdings is the parent company of Kmart and Sears. We are a broadline retailer and, at the end of fiscal
2008, had 2,297 Kmart and domestic full-line stores and 1,233 specialty retail stores in the United States
operating through Kmart and Sears and 388 full-line and specialty retail stores in Canada operating through Sears
Canada, a 73%-owned subsidiary.
We currently conduct our operations in three business segments: Kmart, Sears Domestic and Sears Canada.
The nature of operations conducted within each of these segments is discussed within the “Business Segments”
section of Item 1 in this report on Form 10-K.Our business segments have been determined in accordance with
SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information.”
The retail industry is highly competitive and as such, Holdings faces significant challenges including the
current macroeconomic environment, as many of our product categories are impacted by the housing market and
availability of credit to our customers. However, we believe that we possess unique resources that differentiate us
from our competitors. These resources include:
• The brands we own (Kenmore, Craftsman, DieHard, and Lands’ End) are one of our most important
resources. We believe that each of these four brands has significant recognition and value with
customers.
•Home services, including installation, delivery, and repair, represent another important resource of our
Company. Our extensive network of in-home and in-store service businesses supports our broad-line
stores and gives us the opportunity to retain long-term relationships with our customers—a chance to
deliver value not only at the point of sale but also on an ongoing basis, and a chance to learn
continuously about our customers and what they like and do not like about our products.
• Our existing store base is another resource, as our more than 3,500 domestic stores provide us with a
physical presence in all major communities in the United States.
• We also have viable online businesses, which enhance our multi-channel customer experience.
Sears.com, Landsend.com and PartsDirect.com are examples of online channels where we engage and
transact with our customers. We continue to invest in these online capabilities, as we believe that a
compelling multi-channel experience will be an important factor for success in the years and decades to
come.
20