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 about 1,870 retail stores in the US and Canada, Sears Holdings operates through subsidiaries, including Sears, Roebuck and Co. and Kmart. Sears Holdings has reduced its once majority stake in Sears Canada to just 12% through a partial spin off and rights offering as it seeks to raise cash. 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. Lampert owns a majority stake in the company.
Sears Holdings subsidiary Sears, Roebuck and Co. has Sears-branded and affiliated stores in all 50 states and Puerto Rico. Sears Canada, which accounts for about 10% of Sears Holdings total sales, operates about 475 full-line and specialty stores throughout Canada. Subsidiary Kmart boasts Kmart-branded stores in 49 states, Guam, Puerto Rico, and the US Virgin Islands.
Sears Holdings operates through three segments: Kmart, Sears Domestic, and Sears Canada. Sears Domestic is its largest segment, raking in a little more than half of Sears Holdings' total sales. In 2012 the company's stake in Sears Canada dropped from 95% to 51% as a result of a spinoff of part of its ownership interest. Sears Holdings believes the spinoff allows investors to more easily target growth opportunities at Sears Canada directly. In 2014 the company said it's weighing selling its 51% stake in Sears Canada.
Outside of retail, Sears Holdings has a real estate business unit called SHC Realty, 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.
Sales continued their steady decline at Sears and Kmart stores in fiscal 2013 (ends January), as the chains shuttered stores and continued to shed business to competitors, including Wal-Mart and Target. Indeed, Sears Holdings' fiscal 2013 sales declined 4% vs. the prior year and the company was unprofitable for the second year in a row. It was the sixth consecutive year that Sears Holdings posted a negative annual sales comparison. (Sales have tumbled 25% over the past six years.) Same-store sales at its retail stores in the US declined by 2.5%, with declines of 1.4% at Sears and 3.7% at Kmart in fiscal 2012. Cash flow from operations continued its three-year plunge. The spinoff of Orchard Supply Hardware in late 2011, real estate sales, and pending separation of the Sears Hometown and Outlet businesses along with certain hardware stores via a rights offering, have or are intended to raise money and boost liquidity for the parent company.
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 has utterly failed to translate into an increase in sales for either retailer. Indeed, Sears Holdings has struggled since its formation in 2005, while investors, initially wowed by the financial prowess of chairman Edward Lampert, have grown disenchanted and confused regarding his long-term vision for the company.
As things go from bad to worse at Sear Holdings, the company in October 2014 announced the closure of more than 100 additional stores and layoff of nearly 5,500 employees. Since August 2014, the retailer has shuttered at least 46 Kmart locations, 30 Sears department stores, ad 31 Sears Auto Centers.
And Lampert hasn't invested much in improving existing stores, focusing instead on growing the company's online properties. Part of that strategy is paying off as the number of visitors to the Sears.com and Kmart.com websites is actually growing; its online presence is also complemented by the PartsDirect.com (DIY repair parts) and LandsEnd.com (casual apparel) websites. Still, some analysts point out that without more capital improvements to existing store locations, especially those stores in older malls, it will be hard to woo shoppers from such rivals as Wal-Mart, Target, and Home Depot, among others.
As Sears business continues to deteriorate, the company spun off its Lands' End retail business and is considering the same for its Sears Auto Center businesses. Sears has been closing stores, and selling real estate and other assets as it tries to turn its business around.
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.
Lampert's investment vehicle, ESL Investments, owns 55% of Sears Holdings' shares, while Fairholme Capital Management owns about 17%.