Sears 2010 Annual Report Download - page 5

Trademarks, Trade Names and Licenses
The KMART®and SEARS®trade names, service marks and trademarks, used by us both in the United
States and internationally, are material to our retail and other related businesses.
We sell proprietary branded merchandise under a number of brand names that are important to our
operations. Our 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
APOSTROPHE®, CANYON RIVER BLUES®, COVINGTON®, BASIC EDITIONS®, OSH®,
SHOPYOURWAY®, SMART SENSE™ and THE GREAT INDOORS®, which also are registered or are the
subject of pending registration applications in the United States. We have the right to sell an exclusive line of
Jaclyn Smith®products through July 2011 (with an option to extend for up to two additional three-year terms,
subject to certain conditions). We also have the right to sell an exclusive line of Joe Boxer®products through
December 2015 (with an option to extend for up to two additional five-year terms, subject to certain conditions).
Generally, our right to use our trade names and marks continues so long as we use them.
Seasonality
The retail business is seasonal in nature, and we generate a high proportion of our revenues, operating
income and operating cash flows during the fourth quarter of our year, which includes the holiday season. As a
result, our overall profitability is heavily impacted by our fourth quarter operating results. Additionally, in
preparation for the fourth quarter holiday season, we significantly increase our merchandise inventory levels,
which are financed from operating cash flows, credit terms received from vendors and borrowings under our
amended credit agreement (described in the “Uses and Sources of Liquidity” section below). Fourth quarter
reported revenues accounted for 30%, 30% and 28% of total reported revenues in years 2010, 2009 and 2008,
respectively. See Note 20 to our Consolidated Financial Statements for further information on revenues earned
by quarter in 2010 and 2009.
Competition
Our business is subject to highly competitive conditions. We compete with a wide variety of retailers,
including other department stores, discounters, home improvement stores, consumer electronics dealers, auto
service providers, specialty retailers, wholesale clubs, as well as many other retailers operating on a national,
regional or local level. Online and catalog businesses, which handle similar lines of merchandise, also compete
with us. Walmart, Target, Kohl’s, JC Penney, Macy’s, Home Depot, Lowe’s and Best Buy are some of the
national retailers with which we compete. Home Depot and Lowe’s are major competitors in relation to our home
appliance business, which accounted for approximately 16% of our 2010 and 15% of our 2009 and 2008 reported
revenues. Sears Canada competes in Canada with Hudson’s Bay Company and certain U.S.-based competitors,
including those mentioned above, that may be expanding into Canada. Success in these competitive marketplaces
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. Additionally, we are
influenced by a number of factors including, but not limited to, the cost of goods, consumer debt availability and
buying patterns, economic conditions, customer preferences, inflation, currency exchange fluctuations, weather
patterns, and catastrophic events. Item 1A in this report on Form 10-K contains further information regarding
risks to our business.
Employees
At January 29, 2011, we had approximately 280,000 employees in the United States and U.S. territories, and
approximately 32,000 employees in Canada through Sears Canada. These employee counts include part-time
employees.
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