QUOTE AND NEWS
New York Times  2 hrs ago  Comment 
Edward Lampert’s efforts to save Sears have left it reeling, so he is employing a method he is familiar with: breaking it up and monetizing it.
Motley Fool  Nov 11  Comment 
The retailer wants to create a real estate investment trust, but investors should be afraid of what that really means for their portfolios' valuation
TheStreet.com  Nov 10  Comment 
NEW YORK (TheStreet) -- Shares of Sears Holding Corp. are down 7.80% to $39.47. On Friday, the retailer said it was considering selling as many as 300 of its stores to a REIT as a means to generate much-needed cash, and the stock price...
Clusterstock  Nov 10  Comment 
Sears has been shuttering stores amid a decades-long decline in its business.  To offset losses in the retail department, the company is planning to ramp up e-commerce and make the most of its extensive real-estate properties.  Sears has...
Benzinga  Nov 10  Comment 
Sears Holdings Corporation (NASDAQ: SHLD or "Sears Holdings") today announced that its rights offering of 40,000,000 common shares of Sears Canada Inc. ("Sears Canada"), which closed on November 7, 2014, has been oversubscribed. Accordingly,...
Benzinga  Nov 10  Comment 
Can a REIT strategy really rescue Sears Holdings Corp (NASDAQ: SHLD), or was this just another spike on real estate-related news destined to collapse under a pile of operating losses? That is a multi-billion dollar question hotly contested...
Benzinga  Nov 10  Comment 
Sears Holdings Corporation (NASDAQ: SHLD) has submitted plans to the City of Aventura for the redevelopment of the Sears property at Aventura Mall into an exciting open-air village that will feature retail, restaurants, offices and a hotel....
Forbes  Nov 9  Comment 
  Financial engineering may help Sears Holdings Corporation raise much needed cash to stay alive for some time, but it won’t fix the company’s core business -- retailing. Sears has been running big sales lately. No, I am not talking about...




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Sears Holdings (NASDAQ: SHLD) is the third largest general merchandise retail company in the United States after Wal-Mart (WMT) and Target (TGT). SHLD operates under the Sears and Kmart names in the US and Canada. Product offerings in SHLD stores include apparel, jewelry, appliances, hardware, sporting goods, car repair services, home improvement services and electronics.

The company was formed in 2005 by the merger of Sears Roebuck (Sears) and Kmart Holdings. The merger was coordinated by Edward Lampert, the current Chairman, whom now holds over 54% of the shares outstanding through his hedge fund ESL Investments.[1] Despite strong brand recognition, Sears Holdings, as with Kmart and Sears before it, has suffered several successive years of falling sales and market share erosion. These negative trends can be largely attributed to increasing competition in the industry. Other retail giants such as Wal-Mart Stores (WMT) and Target (TGT) have been aggressively capturing ever greater amounts of customers' wallet share through expanded selections and steeper discounts.

Company Overview

Sears Holdings is composed of three business segments: Kmart, Sears Domestic, and Sears Canada.The firm has no international presence outside of Canada. SHLD's product assortments in both Sears Department Stores as well as Kmart SuperStores and Discount Stores cover virtually all product categories: clothing, major home appliances (refrigerators, dishwashers, etc.), home improvement/home repair, auto repair services, and groceries.

==Business Segments

  • Kmart (35.7% of total revenue): Kmart is a general merchandise and discount chain that competes directly with Wal-Mart (WMT), Target (TGT), and other mass merchant stores.
  • Sears Domestic (53.9% of total revenue): The Sears Domestic segment is comprised of full line department stores that sell general merchandise ranging from clothes and electronics to tools and appliances, specialty stores (i.e. Sears Hardware), Direct-to-Consumer Land’s End operations, and Home Services stores.
  • Sears Canada (10.5% of total revenue): Sears Canada is a consolidated, 73% owned subsidiary of Sears that conducts similar retail operations as Sears Domestic -- Sears Canada is composed of both full-line and specialty Sears-brand stores similar to Sears Domestic stores but with a greater sales emphasis on apparel and other softline products.

Brands

SHLD owns and trademarks many popular brands which help to increase company visibility and boost sales. Some of the company's most popular brands are:

  • Kenmore
  • Diehard
  • Lands' End
  • Jaclyn Smith
  • Joe Boxer
  • Apostrophe
  • Covington brands

SHLD has securitized the Kenmore, Craftsman, and Diehard brands into KCD IP (Kenmore Craftsman DieHard intellectual property), a wholly owned, bankruptcy-remote subsidiary. In addition, the company also has th rights to sell an exclusive line of Jaclyn Smith and Martha Stewart Everyday products.

Business Growth

FY 2010 (ended January 30, 2011)[2]

  • Net sales decreased 1.6% to $43.3 billion.
  • Net income decreased 43% to 133 million.

Trends and Forces

Using Technology to Meet Customers' Needs

Sears announced the launch of AdYourWay, a shopping tool that caters to the needs of each individual customer. The tool "gets to know" the customer by analyzing product selection and then displays personalized content and customized recommendations. For example, a customer can "follow" an item and receive notifications when it is on sale. As David Friedman, senior vice president and president of marketing, puts it "AdYourWay is a unique shopping tool that puts control back into the hands of our customers, allowing them to manage and organize both the products and the offers that interest them.[3]

AdYourWay marks a growing trend where retailers are using technology to better serve their customers. For example, Nordstrom (JWN) puts RFID chips on all of its items so that online customers can see exactly what is in each store and so that the store has better inventory management. As a result of this technological improvement, Nordstrom was able to better withstand the negative effects of the sluggish economy compared to its competitors. AdYourWay provides customers with an enhanced and more efficient shopping experience, which the company hopes to turn into more revenue.

Growing Sears' Exclusive and Private Brands

Department stores are increasingly seeking to distinguish themselves and earn higher profit margins by offering exclusive brands and private label brands. Exclusive brands are brands marketed under the wholesaler's name that are sold only in a particular chain; one exclusive brand at Sears is the Craftsman line that can only be purchased online or at Sears stores. Private label brands are produced by wholesalers, but sold under the brand name of the retailer. Exclusive brands such as Kenmore and Craftsman, can help draw customers into Sears stores, as the products can only be found at Sears. [4] Craftsman tools can also be purchased at Costco and Ace Hardware.

Competition

Sears Holdings is the third largest general merchandise retailer in the world (in terms of net sales) behind big box retailers Wal-Mart (WMT) and Target (TGT), whose enormous scale allows each to extract value in their inventory purchases and pass these savings on to consumers. SHLD's competitors in the mid-tier department store industry include Macy's Inc. (M), J.C. Penney (JCP), and Kohl's (KSS).

References

  1. MSNBC "Kmart to acquire Sears in $11 billion deal" 17 Nov 2004
  2. SHLD 2010 10-K pg. 21
  3. Yahoo Finance "Sears Holding Launches AdYourWay, New Personalized Online Shopping Solution" 29 October 2010
  4. Seeking Alpha "Unseen Value in Sears' Brands" 13 March 2008
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