Sears 2013 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 1,980 full-line and
specialty retail stores in the United States operating through Kmart and Sears and 449 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 110 million
products and provide the capability for our members and customers to engage in cross-channel transactions such as
free store pickup; buy in store/ship to home; and buy online, return in store. We are also the home of Shop Your
WaySM, a free member-based social shopping platform that offers rewards, personalized services and a unique
experience. Shop Your Way connects all of the ways members shop - in store, at home, online and by phone. 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 and home offering including such well-known labels as Lands' End®, the Kardashian
Kollection, Jaclyn Smith, Joe Boxer, Route 66, Cannon, Sandra Lee and Levi's. Additionally, we launched the Adam
Levine and Nicki Minaj collections in 500 Kmart stores and on shopyourway.com/kmart.com. We are the nation's
largest provider of home services, with more than 13 million service and installation 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 member-centric 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 program
and the technology needed to support these initiatives.
Business Segments
During 2013, 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 1, 2014, the Company operated a total of 1,152 Kmart stores across 49 states, Guam, Puerto Rico
and the U.S. Virgin Islands. This store count consists of 1,135 discount stores, averaging 94,000 square feet, and 17
Super Centers, averaging 165,000 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, Joe Boxer and Alphaline, 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 840 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 16 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 members and
customers to cost-effectively finance their purchases both in-store and online. In addition, we have expanded the