Sears 2012 Annual Report Download - page 2

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PART I
Item 1. Business
General
Sears Holdings Corporation (“Holdings”) is the parent company of Kmart Holding Corporation (“Kmart”) and
Sears, Roebuck and Co. (“Sears”). Holdings (together with its subsidiaries, “we,” “us,” “our,” or the “Company”)
was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”) on
March 24, 2005. We are an integrated retailer with significant physical and intangible assets, as well as virtual
capabilities enabled through technology. We currently operate a national network of stores with 2,019 full-line and
54 specialty retail stores in the United States operating through Kmart and Sears and 475 full-line and specialty
retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 51%-owned subsidiary. Further, we
operate a number of websites under the sears.com and kmart.com banners which offer more than 60 million products
and provide the capability for our customers to engage in cross-channel transactions such as buy online/pick-up in
store; buy in store/ship to home; and buy online, return in store. We are also the home of SHOP YOUR WAY™, a
social shopping experience where Members have the ability to earn points, receive additional benefits and interact/
shop with each other through shopyourway.com. The Company is the leading home appliance retailer as well as a
leader in tools, lawn and garden, fitness equipment and automotive repair and maintenance. Key proprietary brands
include Kenmore®, Craftsman® and DieHard®. We also maintain a broad apparel offering including such well-
known labels as Lands' End®, the Kardashian Kollection, Jaclyn Smith, Joe Boxer, Sandra Lee and Levi's, as well as
Sofia by Sofia Vergara and the Country Living Home Collection. We are the nation's largest provider of home
services, with more than 14 million service calls made annually.
The retail industry is changing rapidly. The progression of the Internet, mobile technology, social networking
and social media is fundamentally reshaping the way we interact with our core customers and members. As a result,
we are transitioning to a Membership company. Our focus continues to be on our core customers, our Members, and
finding ways to provide them value and convenience through Integrated Retail and our SHOP YOUR WAY
Membership platform. We have invested significantly in our online ecommerce platforms, our Membership rewards
program and the technology needed to support these initiatives.
Business Segments
During 2012, we operated three reportable segments: Kmart, Sears Domestic and Sears Canada. Financial
information, including revenues, operating income (loss), total assets and capital expenditures for each of these
business segments is contained in Note 17 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” as well as Note 17.
Kmart
At February 2, 2013, the Company operated a total of 1,221 Kmart stores across 49 states, Guam, Puerto Rico,
and the U.S. Virgin Islands. This store count consists of 1,196 discount stores, averaging 94,000 square feet, and 25
Super Centers, averaging 168,000 square feet. Most Kmart stores are one-floor, free-standing units that carry a wide
array of products across many merchandise categories, including consumer electronics, seasonal merchandise,
outdoor living, toys, lawn and garden equipment, food and consumables and apparel, including products sold under
such well-known labels as Jaclyn Smith and Joe Boxer, and certain proprietary Sears brand products (such as
Kenmore, Craftsman, and DieHard) and services. We also offer an assortment of major appliances, including
Kenmore-branded products, in virtually all of our locations. There are 896 Kmart stores that also operate in-store
pharmacies. The Super Centers generally operate 24 hours a day and combine a full-service grocery along with the
merchandise selection of a discount store. There are also 21 Sears Auto Centers operating in Kmart stores. Sears
Auto Centers offer a variety of professional automotive repair and maintenance services, as well as a full assortment
of automotive accessories. Kmart continues to offer its layaway program, which allows customers to cost-effectively
finance their purchases both in-store and online. In addition, we have expanded the ways our customers can receive
their purchases, allowing our customers to buy online and pick up in store. This service, powered by MyGofer, is
now available in over 956 Kmart stores via either mygofer.com or kmart.com. Kmart also sells its products through