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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 operate a national network of stores with 1,672€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, automotive repair and maintenance, and is a significant player in
the rapidly emerging Connected Solutions market. 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, 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 approximately 500
Kmart stores and on shopyourway.com/kmart.com. We are the nation's largest provider of home services, with
nearly 12 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. Since the de-consolidation of Sears Canada in October 2014, we have operated in 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€30, 2016, the Company operated a total of 941 Kmart stores across 49 states, Guam, Puerto Rico
and the U.S. Virgin Islands. This store count consists of 934 discount stores, averaging 95,000 square feet, and seven
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 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 697 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 offers a layaway program, which allows members and customers to cost-effectively finance their purchases
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