Sears 2012 Annual Report Download - page 22

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22
shipping platform and a variety of other applications and components. Collectively, these elements change the way
we do business both inside and outside the Company.
We are also focused on providing integrated retail solutions for our Members and customers. We rolled out
tablets and mobile devices to Sears Domestic stores across the country. The tablets are equipped to help our store
associates provide a better overall shopping experience. Our associates can use tablets to look at product
specifications, compare products side-by-side and search for inventory if it is not readily available at the store. More
information about products, inventory, pricing and reviews is now available at their fingertips, which means
Members can have more confidence in their product selection.
We have designed other experiences that provide seamless and convenient integrated experiences for our
Members. Building on our Buy Online Pick Up In Store and Ready in 5 promise, we developed a Return/Exchange
in 5 capability that allows Members to fill out the product return information online. Members simply drop off or
exchange the item they want to return at our Merchandise Pick Up area within five minutes or less.
Core Retail Excellence
We are also focused on providing great merchandise value to our customers and Members. In 2012, we
launched several innovative brand offerings such as Outdoor Life, Alphaline electronics accessories, and
RoadHandler tires. In January 2013, we announced that we would be developing two new apparel lines in a
collaborative effort between SHOP YOUR WAY and our Kmart format. We have a long heritage of building
celebrity brands, both at Sears and Kmart. We chose to partner with Nicki Minaj and Adam Levine for this
collaboration because of their creativity, their global appeal and their strong interest in developing their clothing
brands in a unique and innovative manner.
We are focused on providing flexibility and convenience for our Members through such things as buy online/
pick-up in store, buy in store/ship to home, digital receipts and returns and exchanges in five minutes or less. We
enhanced our layaway program and added the capability for our Members to make layaway payments online and
have the items from their layaway shipped directly to their homes when their contract has been completed. We also
provide our customers with easy access to a broad and diverse range of products and categories through marketplace
on sears.com.
Financial and Operational Discipline
In 2012, we also demonstrated our financial flexibility by positively impacting our liquidity by $1.8 billion,
while unlocking the value in our asset portfolio, as part of our on-going asset re-configuration where we are re-
deploying our capital in support of our member-centric, integrated retail strategy. Actions taken included:
• the separation of our Sears Hometown and Outlet businesses through a rights offering transaction, which
generated gross proceeds of approximately $447 million;
• the partial spin-off of 45% of Sears Canada;
• the execution of various real estate transactions which generated cash proceeds of approximately $440
million;
• Reducing inventory by nearly $1.0 billion below last year's level and adjusting our promotional cadence to
be more targeted;
• Reducing our fixed cost structure by over $500 million; and
• Capitalizing on an opportunity to reduce risk related to our legacy pension obligation by making a
voluntary offer to former employees to pay a lump sum.
We are an asset-rich enterprise with substantial liquidity, unencumbered real estate and well-established
stand-alone businesses, including Lands' End and Sears Canada. We expect to generate at least $500 million of
additional liquidity through monetization of assets over the next 12 months. In addition to our asset monetizations,
we currently expect to reduce 2013 peak domestic inventory by $500 million from the 2012 level of $8.6 billion at
the end of the third quarter as a result of stores already or expected to be closed, initiatives underway to reduce slow-
moving inventory and modest productivity improvement. This action is expected to generate $300 million of cash
after consideration of related payables. We also expect to further reduce our fixed cost base by another $200 million
in 2013.