Sears 2014 Annual Report Download - page 2

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2
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 1,725 full-line and
specialty retail stores in the United States operating through Kmart and Sears. Further, we operate a number of
websites under the sears.com and kmart.com banners which offer millions of 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 Way®, 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 Jaclyn Smith, Joe Boxer, Route 66, Cannon, Sandra Lee, Ty
Pennington Style and Levi's and also offer Lands' End® merchandise in some of our Full-line stores. Additionally,
we offer 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
Through the third quarter of 2014, we operated three reportable segments: Kmart, Sears Domestic and Sears
Canada. After the de-consolidation of Sears Canada in October 2014, we operated with two segments, Kmart and
Sears Domestic. 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 January 31, 2015, the Company operated a total of 979 Kmart stores across 49 states, Guam, Puerto Rico
and the U.S. Virgin Islands. This store count consists of 968 discount stores, averaging 95,000 square feet, and 11
Super Centers, averaging 170,000 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 723 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 seven Sears Auto Centers operating in Kmart stores
offering 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