In the world of retail, Sears Holdings is an appliance giant. In addition to home appliances, the company is a leading retailer of tools, as well as lawn and garden, fitness, and automotive repair equipment. With roughly 1,700 retail stores across the US, Sears Holdings operates through subsidiaries Sears, Roebuck and Co. and Kmart, offering proprietary Sears brands including Kenmore, Craftsman, and DieHard. Beyond retail, Sears Holdings is the largest provider of home installation and product repair services in the US. In 2014, Sears Holdings spun off Lands' End and reduced its once majority stake in Sears Canada to just 12% as it sought to raise cash to overcome struggling store sales.
Sears Holdings operates two segments: Sears Domestic, which boasts nearly 720 full-line stores that generated 55% of Sears Holdings' total sales in fiscal 2015 (ended January 1, 2015); and Kmart, which had around 980 Kmart stores that contributed another 39% to Sears Holdings' total sales. The firm de-consolidated its Sears Canada segment (which made up around 7% of annual sales) in late 2014.
By product, the retailer generated 44% of its total sales from hardline merchandise (electronics, appliances, tools, etc.) and another 28% from apparel and soft home items. About 14% of sales came from food and drug sales, while service (installation and repair) made up another 8% of total sales during the year.
Outside of retail, Sears Holdings has a real estate business unit called Sears Holdings Real Estate, one of the largest corporate real estate organizations in the world. It offers for sale or lease closed Kmart and Sears stores. It also leases empty space inside and outside of the stores.
Sears Holdings subsidiary Sears, Roebuck and Co. has Sears-branded and affiliated stores in all 50 states and Puerto Rico. Subsidiary Kmart boasts Kmart-branded stores in 49 states, Guam, Puerto Rico, and the US Virgin Islands.
Sales and Marketing
The retailer has been decreasing its advertising spend over the past few years as sales have declined. It spent $1.1 billion on advertising in FY2015, down from $1.5 billion and $1.6 billion in fiscal years 2014 and 2013.
Declining store sales and mounting losses have plagued Sears Holdings for the past several years as the popularity of e-commerce and fierce competition from other big box retailers has been growing.
The retailer's net sales fell 14% to $31.2 billion during fiscal 2015 (ended January 1, 2015) with sales declines in both Sears and Kmart stores. Sears Domestic store sales declined 11% mostly due to its mid-2014 separation of Lands' End, as well as store closings in the US and 2.1% drop in comparable store sales. Sears Canada store sales plummeted 45% mostly because of the de-consolidation of the Canada-based business but also because of an 8% drop in comparable store sales. Kmart sales also fell by 8% for the year due to store closings and as comparable store sales dipped 1.4%.
Steep revenue declines caused Sears Holdings' losses to deepen to $1.6 billion, despite a decrease in cost of sales, and buying and occupancy costs. The retailer's operations used $1.3 billion, or 25% more cash than in FY2014, as the company suffered deeper operating losses.
Sears Holdings outlined three main objectives in 2015 to ensure its long-term success: restoring profitability; focusing on its best members (most loyal customers), best stores, and best categories (home appliances, home services, and fitness equipment); and enhance its financial flexibility through sales of store assets and investor fundraising.
The retailer has been trying to adapt to the rapid consumer change from brick-and-mortar stores toward e-commerce in recent years. In 2015, the company continued shifting from being product centric to becoming "member centric," catering to members' needs "wherever, whenever, and however they want to shop," as stated in the February 2015 Chairman's letter. The member-centric model is built on two platforms: Shop Your Way, the loyalty membership platform; and Integrated Retail, the technology platform that connects its "ecosystem" of retail channels to member "touchpoints" (i.e. online and through mobile apps).
Facing years of losses, Sears Holdings has been forced to to close dozens of stores, cut thousands of jobs, and sell real estate and other assets to turn its business around. In 2014, as Sears' business continued to deteriorate, the company sold off most of its stake in its struggling Sears Canada business, spun off its Lands' End retail business, and considered doing the same for its Sears Auto Center business.
The pairing of Sears and Kmart was intended to leverage the strengths of both chains by making their products, brands (Kenmore, Craftsman, DieHard), and services (including auto and appliance repair) available through more locations and distribution channels. That strategy failed to increase in sales for either retailer.
Sears Holdings was created in 2005 as a result of the $11.9 billion mega-merger of Sears and struggling Kmart masterminded by chairman and CEO Edward Lampert.
Chairman Lampert added the CEO title in February 2013 when Louis D'Ambrosio stepped down due to health issues in his family. D'Ambrosio became the chief executive of Sears Holdings in February 2011.