Sears 2014 Annual Report Download - page 22

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
We have divided our "Management's Discussion and Analysis of Financial Condition and Results of
Operations" into the following six sections:
• Overview of Holdings
• Results of Operations:
Fiscal Year
Holdings' Consolidated Results
Business Segment Results
• Analysis of Consolidated Financial Condition
• Contractual Obligations and Off-Balance Sheet Arrangements
• Application of Critical Accounting Policies and Estimates
• Cautionary Statement Regarding Forward-Looking Information
The discussion that follows should be read in conjunction with the consolidated financial statements and notes
thereto included in Item 8.
OVERVIEW OF HOLDINGS
Holdings, the parent company of Kmart and Sears, was formed in connection with the March 24, 2005 Merger
of these two companies. 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.
Through the third quarter of 2014, we conducted our operations in three business segments: Kmart, Sears
Domestic and Sears Canada. As a result of the de-consolidation of Sears Canada as described in Note 2 of Notes to
the Consolidated Financial Statements, Sears Canada is no longer an operating or reportable segment. We now
conduct our operations in two business segments: Kmart and Sears Domestic. The nature of operations conducted
within each of these segments is discussed within the "Business Segments" section of Item 1 in this report on
Form 10-K. Our business segments have been determined in accordance with accounting standards regarding the
determination, and reporting, of business segments.
Our focus in 2014 continued to revolve around progressing in our transformation to a member-centric retailer
that meets our members’ needs wherever, whenever and however they want to shop, which we believe will position
us for enhanced growth and profitability to create long-term shareholder value. We are anticipating and adapting to
the way members and customers shop by working to better understand the people we serve through data that allows
us to understand not only what, but also why people buy, and then creating experiences around that. While
challenging, we are making progress in our transformation, as evidenced by our improvement in profitability in the
second half of the year and in our member-engagement. We are committed to our transformation of Sears Holdings
from a traditional "store-only" based retailer to a more asset-light, member-centric integrated retailer.
At the core of this transformation is a change in perspective. We are shifting from being product centric to
member centric; from transacting with customers to building relationships with our members; from focusing on
driving our customers to our store network to building integrated retail capabilities that leverage the store network to
create solutions that allow us to better serve our members. Our Member-Centric Integrated Retail model is built on
the foundation provided by two separate and distinct platforms: Shop Your Way®, our membership platform, and
Integrated Retail, the technology platform that connects our members to our integrated ecosystem of retail channels