Sears 2010 Annual Report Download - page 19

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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” 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 2010, had
2,201 Kmart and domestic full-line stores and 1,354 specialty retail stores in the United States operating through
Kmart and Sears and 483 full-line and specialty retail stores in Canada operating through Sears Canada, a
92%-owned subsidiary.
We currently conduct our operations in three reportable 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 accounting standards regarding the determination, and reporting, of business
segments.
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. The retail industry is also rapidly evolving as retail is increasingly
impacted by new technologies and social media. We believe that this evolution provides us with significant
growth opportunities, if we are able to transform our portfolio of businesses by leveraging our existing store
network with emerging technologies to develop lasting relationships with our customers. Over the past 12
months, we have worked hard to improve our stores, while also taking steps to reposition ourselves for retail in
the 21st century.
Our existing store base is a significant asset, as our 4,000 stores provide us with a physical presence in
almost all major communities in the United States and Canada. We have been working to improve our existing
stores in a number of ways. First and foremost, we are using technology to transform our store experiences and
we continue to innovate as an integrated retailer, offering our customers a seamless experience across channels
under the Shop Your Way banner. Shop Your Way represents our commitment to providing our customers the
opportunity to buy whatever they want, wherever they want and whenever they want. Second, we have developed
a framework for experimentation across business units in some of our most important markets and have
identified several initiatives to be rolled out based on test results and customer feedback. Third, our efforts to
improve basic store execution produced nearly double-digit increases in our customer service scores year-over-
year at both Sears and Kmart.
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