Sears 2015 Annual Report Download - page 4

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Separation of Lands' End, Inc.
On April 4, 2014, we completed the separation of our Lands' End business through a spin-off transaction. The
operating results for Lands' End through the date of the spin-off are presented within the consolidated continuing
operations of Holdings and the Sears Domestic segment in the accompanying Consolidated Financial Statements.
See Note 1 of Notes to Consolidated Financial Statements for further information.
Real Estate Transactions
In the normal course of business, we consider opportunities to purchase leased operating properties, as well as
offers to sell owned, or assign leased, operating and non-operating properties. These transactions may, individually
or in the aggregate, result in material proceeds or outlays of cash. In addition, we review leases that will expire in
the short term in order to determine the appropriate action to take with respect to them.
On April 1, 2015, April 13, 2015 and April 30, 2015, Holdings and General Growth Properties, Inc. ("GGP"),
Simon Property Group, Inc. ("Simon") and The Macerich Company ("Macerich"), respectively, announced that they
entered into three distinct real estate joint ventures (collectively, the "JVs"). Holdings contributed 31 properties to
the JVs where Holdings currently operates stores (the "JV properties") in exchange for a 50% interest in the JVs and
$429 million in cash (the "JV transactions").
On July 7, 2015, Holdings completed its rights offering and sale-leaseback transaction (the "Seritage
transaction") with Seritage Growth Properties ("Seritage"), a recently formed, independent publicly traded real estate
investment trust ("REIT"). As part of the Seritage transaction, Holdings sold 235 properties to Seritage (the "REIT
properties") along with Holdings' 50% interest in the JVs. Holdings received aggregate gross proceeds from the
Seritage transaction of $2.7 billion.
Further information concerning our real estate transactions is contained in Note€11 of Notes to Consolidated
Financial Statements.
€Trademarks and Trade Names
The KMART® and SEARS® trade names, service marks and trademarks, used by us both in the United States
and internationally, are material to our retail and other related businesses.
We sell proprietary branded merchandise under a number of brand names that are important to our operations.
Our KENMORE®, CRAFTSMAN® and DIEHARD® brands are among the most recognized proprietary brands in
retailing. These marks are the subject of numerous United States and foreign trademark registrations. Other well
recognized Company trademarks and service marks include CANYON RIVER BLUES®, COVINGTON®, SHOP
YOUR WAY®, SMART SENSE®, STRUCTURE®, THOM MCAN® and TOUGHSKINS®, which also are registered
or are the subject of pending registration applications in the United States. Generally, our rights in our trade names
and marks continue so long as we use them.
Seasonality
The retail business is seasonal in nature, and we generate a high proportion of our revenues, operating income
and operating cash flows during the fourth quarter of our year, which includes the holiday season. As a result, our
overall profitability is heavily impacted by our fourth quarter operating results. Additionally, in preparation for the
fourth quarter holiday season, we significantly increase our merchandise inventory levels, which are financed from
operating cash flows, credit terms received from vendors and borrowings under our domestic credit agreement
(described in the "Uses and Sources of Liquidity" section below). Fourth quarter reported revenues accounted for
approximately 29% of total reported revenues in 2015, 28% of total reported revenues in 2014, excluding the impact
of transactions related to Sears Canada and Lands' End, and 30% of total reported revenues in 2013. See Note 19 of
Notes to Consolidated Financial Statements for further information on revenues earned by quarter in 2015 and 2014.
Competition
Our business is subject to highly competitive conditions. We compete with a wide variety of retailers,
including other department stores, discounters, home improvement stores, consumer electronics dealers, auto service
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