Sears Holdings Corporation
Company Profile
Publication Date: 23 Jun 2010
www.datamonitor.com
Europe, Middle East & Africa
119 Farringdon Road
London
EC1R 3DA
United Kingdom
Americas
245 5th Avenue
4th Floor
New York, NY 10016
USA
Asia Pacific
Level 46
2 Park Street
Sydney, NSW 2000
Australia
t: +44 20 7551 9000
f: +44 20 7551 9090
e: euroinfo@datamonitor.com
t: +1 212 686 7400
f: +1 212 686 2626
e: usinfo@datamonitor.com
t: +61 2 8705 6900
f: +61 2 8088 7405
e: apinfo@datamonitor.com
Sears Holdings Corporation
ABOUT DATAMONITOR
Datamonitor is a leading business information company specializing in industry analysis.
Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiased
expert analysis and in depth forecasts for six industry sectors: Healthcare, Technology, Automotive,
Energy, Consumer Markets, and Financial Services.
The company also advises clients on the impact that new technology and eCommerce will have on
their businesses. Datamonitor maintains its headquarters in London, and regional offices in New
York, Frankfurt, and Hong Kong. The company serves the world's largest 5000 companies.
Datamonitor's premium reports are based on primary research with industry panels and consumers.
We gather information on market segmentation, market growth and pricing, competitors and products.
Our experts then interpret this data to produce detailed forecasts and actionable recommendations,
helping you create new business opportunities and ideas.
Our series of company, industry and country profiles complements our premium products, providing
top-level information on 10,000 companies, 2,500 industries and 50 countries. While they do not
contain the highly detailed breakdowns found in premium reports, profiles give you the most important
qualitative and quantitative summary information you need - including predictions and forecasts.
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic,
mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc.
The facts of this profile are believed to be correct at the time of publication but cannot be guaranteed. Please note that the
findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith
from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitor
can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.
Sears Holdings Corporation
© Datamonitor
Page 2
Sears Holdings Corporation
TABLE OF CONTENTS
TABLE OF CONTENTS
Company Overview..............................................................................................4
Key Facts...............................................................................................................4
SWOT Analysis.....................................................................................................5
Sears Holdings Corporation
© Datamonitor
Page 3
Sears Holdings Corporation
Company Overview
COMPANY OVERVIEW
Sears Holdings Corporation (Sears Holdings or "the company") is a diversified retailer with 2,235
full-line and 1,284 specialty retail stores in the US and 402 full-line and specialty retail stores in
Canada. The company operates through Sears and Kmart retail stores in the US and through Sears
Canada in Canada. The company is headquartered in Hoffman Estates, Illinois, and employs
approximately 322,000 people.
The company recorded revenues of $44,043 million during the financial year ended January 2010
(FY2010), a decrease of 5.8% compared to 2009. The decrease in net sales is attributed to lower
comparable store sales and fewer Kmart and Sears full-line stores in operation during 2009, and
includes a decline due to foreign currency exchange rates. The operating profit of Sears Holdings
was $713 million in FY2010, compared to a profit of $302 million in 2009. The increase in operating
profits is the result of reductions in selling and administrative expenses. The net profit was $235
million in FY2010, compared to a net profit of $99 million in 2009.
KEY FACTS
Head Office
Sears Holdings Corporation
3333 Beverly Road
Hoffman Estates
Illinois
USA
Phone
1 847 286 2500
Fax
1 847 286 8351
Web Address
http://www.searsholdings.com
Revenue / turnover 44,043.0
(USD Mn)
Financial Year End
January
Employees
322,000
New York Ticker
SHLD
NASDAQ National
Market Ticker
SHLD
Sears Holdings Corporation
© Datamonitor
Page 4
Sears Holdings Corporation
SWOT Analysis
SWOT ANALYSIS
Sears Holdings Corporation (Sears Holdings or "the company") is a diversified retailer with 2,235
full-line and 1,284 specialty retail stores in the US and 402 full-line and specialty retail stores in
Canada. The company has presence in the value segment, which is in line with the increase in price
conscious customer base. However, Sears Holdings is highly vulnerable to the discretionary spending
of the customers, which is negatively impacted as consumer confidence declines and unemployment
rises.
Strengths
Weaknesses
Presence in value retail enables Sears
Holdings to effectively cater to price
conscious customer base
Alliances to increase product lines as well
as to enhance marketability of existing
products
Layaway program increases the customer
base and encourages spending amid
constrained budgets
Strained supplier relationships in Canada
Increase in pension contributions will lead
to diversion of significant resources
Opportunities
Threats
Focus on internet and mobile commerce
will facilitate higher revenues from the
channels
Federal stimulus will lead to increase in
demand for energy efficient appliances
Resilience in children’s spending will
positively impact the sales
High exposure to discretionary spending
which is negatively impacted due to low
consumer confidence
Intense competition and strategies to gain
customers will impact market share
Decelerating US apparel retail market will
impact revenues adversely
Strengths
Presence in value retail enables Sears Holdings to effectively cater to price conscious customer
base
Sears Holdings has significant presence in the value segment. Kmart stores are primarily operated
as discount stores and super centers. These stores offer a wide range of food and non-food items.
Kmart has been focusing on reducing prices for the customers on an ongoing basis. Sears Holdings
also operates 93 outlet stores, offering overstock and/or distressed appliances, consumer electronics,
lawn and garden equipment and other merchandise at a discount. In 2010, the company also opened
Sears Holdings Corporation
© Datamonitor
Page 5
Sears Holdings Corporation
SWOT Analysis
its first apparel outlet and offered products at prices which are about 60-80% lower compared to
retail prices. Sears Holdings also has a strong portfolio of proprietary brands which are also viewed
as value purchases by the customers. Proprietary brands are generally offered at a lower price
compared to national brands.
In the recent past, there has been an increase in the price sensitive customer base and industry
trends suggest an increase in the demand for value products at low price points. In an economy
characterized by cautious consumer spending, value retailers and warehouse retailers are expected
to fare well. According to the US Census' monthly retail trade report, for the first 11 months of 2009
the overall retail sales were down by 8% but the sales at warehouse and superstores were up by
2%. This positive trend at warehouse and superstores is due to the shift in consumer preference to
value products. Kmart’s presence in the segment will enable it to attract a large customer base.
Similar trends have been observed across other retail categories like apparel and home appliances.
Across various product ranges, customers are trading down and are looking for value products.
Through Kmart, Sears outlet stores and its proprietary brand portfolio, the company will be able to
effectively address this shift in customer preference for value products.
Alliances to increase product lines as well as to enhance marketability of existing products
Sears Holdings and its businesses forged several alliances and entered into agreements to introduce
new product lines and also to increase the appeal of its products in 2010. The company entered into
an agreement with Edwin Watts Golf Shops to establish the first US based “store-within-a-store”
retail model for the golf industry. Edwin Watts Golf Shops is one of the world’s largest specialty golf
retailers, which will open 12 new service-oriented golf shops inside existing Sears stores in key
locations nationwide. While Sears offers advantages of mall-based retailers with a national footprint,
as well as affiliations with leading brands such as Craftsman Tools and Nordic Track, which strongly
align with the golfer demographic for Edwin Watts; the agreement enabled Sears Holdings to offer
additional services to its customers. Additionally, alliances with large companies will also increase
the footfall. On similar lines, Sears Holdings also entered into an agreement with Jenn-Air to make
Sears the only national retailer for Jenn-Air's new collection of super-premium appliances. Exclusive
agreements pass on popularity of manufacturer or product to Sears Holdings; and Sears Holdings
being the only national retailer selling these products, patronage for a product line will increase the
potential customer base for Sears Holdings.
Also extending the reach of its DieHard product range, Sears Brands Management Corporation
entered a trademark license agreement with Schumacher Electric Corporation which will enable
DieHard-branded power accessories to be sold to retailers in the US, Puerto Rico and Mexico.
Through this agreement DieHard brand increased its addressable market.
Sears Holdings also entered agreements to increase the popularity of its products. The Craftsman
brand tied up with Major League Baseball Properties to provide officially licensed products. The
four-year deal allows Craftsman to feature the logos of Major League Baseball and its 30 Clubs on
products including hand tools, power tools, tool storage and lawn and garden tools and equipment.
This deal increases the visibility and appeal for the products.
Sears Holdings Corporation
© Datamonitor
Page 6
Sears Holdings Corporation
SWOT Analysis
Also, Sears and Gomez, a celebrity in Disney shows, have come together for the company’s back
to school integrated marketing campaign. Children’s market has been resilient to the economic
downturn and the segment offers several opportunities for revenue growth. Increased appeal of
these products through celebrity association will further boost the demand.
Through such alliances and tie-ups Sears Holdings launched new product lines and also increased
the appeal for its products. While product lines facilitate increased average spend of the customers,
the tie ups to increase visibility will trigger demand for the products. Both of these factors will have
an impact on the top line growth.
Layaway program increases the customer base and encourages spending amid constrained budgets
The financial services segment of Sears Holdings offers layaway program for the benefit of its
customers. This program offers customers the option to pay the bill amount over a period of time.
A $15 or 10% down payment is required after which the bi-weekly payments are made for the length
of the purchase contract between the company and the customer. This layaway program has been
effective in the current environment of sluggish consumer spending where budgets are constrained.
According to a recent national survey conducted by Kmart, nearly 70% of Americans have changed
the way they shop as a result of the recession. Given the current economic climate where banks
have sharply reduced consumer credit card limits, layaway has re-emerged in popularity with more
than 73% of consumers stating that they believe using layaway more often is a smart financial
solution that can help them better manage their spending. Also, a majority of consumers surveyed
confirmed their interest in learning more about layaway as a year-round financial planning tool
(55.5%).This indicates that the layaway program’s success is not recession-oriented. The popularity
of the layaway is further reinforced as 82.2% of consumers say that they are looking for smarter
tools in money-management and that they would rather forgo the instant gratification of financing
their purchases in favor of using layaway.
Since the economic downturn in 2008, the Kmart layaway program has experienced double-digit
growth. Additionally, the layaway program at Kmart and Sears has resulted in more than three million
new customer relationships in 2008 and 2009. Consumers have been witnessing tighter credit
markets, which is converted into constrained spending capacity. Layaway enables Sears Holdings
to bridge this gap and increase the average customer spend. Additionally, the program also has
effectively increased new customers for the company.
Weaknesses
Strained supplier relationships in Canada
Sears Holdings’ suppliers in Canada have been resisting the company’s move to retroactively claw
back payments to suppliers and retroactively claim its share of vendors' savings from the rising
dollar. According to the allegations by the suppliers, as the Canadian dollar appreciated, the company
through a letter intimated the slice of 10.27% off suppliers' cheques for purchases made after April
Sears Holdings Corporation
© Datamonitor
Page 7
Sears Holdings Corporation
SWOT Analysis
3, 2010. Also Sears Canada said it would also make a retroactive recovery on purchases from
vendors made between May 2009 and April 3 2010. According to some of the suppliers, this is not
the first time that the company claimed such discounts. The payments being cut range from $1,000
to several hundreds of thousands of dollars, depending on the vendor. Although, suppliers are scared
to lose a customer in times of recession and are generally reluctant to protest, some companies that
supply products ranging from cookware to cribs and electronics have stopped supplying goods to
Sears Holdings. Several suppliers, Canadian Federation of Independent Business, The National
Apparel Bureau and the Canadian Apparel Federation believe retroactively claiming money is
offensive and unethical. Sears Holdings’ claim to its share in the benefits enjoyed by its vendors to
remain competitive has severely strained supplier relationships in Canada. Strained relationships
will affect the procurement operation of the company adversely.
Increase in pension contributions will lead to diversion of significant resources
Sears has suffered increased pension obligations owing to the fall in equity markets in 2008. The
annual pension expense related to legacy domestic pension plans was relatively minimal in years
prior to fiscal 2009. However, due to the severe decline in the capital markets that occurred in the
latter part of 2008, the domestic pension expense increased by $170 million in 2009. Additionally,
the contributions are expected to increase in the future and based on guidance issued by the Treasury
Department, the contribution is estimated to be approximately $275 million in 2010 and $535 million
in 2011.The contributions could be positively affected by varying market conditions or new regulations
and rebound in the returns on equity investments is likely to help pension funds; very low yields on
fixed-income investments is likely to be a drag on returns. The pension liabilities further increased
from $1 billion in FY2008 to $2 billion to FY2009. Further increase in pension contributions will require
diversion of valuable resources which will increase the costs for Sears Holdings. This will further
negatively impact the profitability of the company.
Opportunities
Focus on internet and mobile commerce will facilitate higher revenues from the channels
The e-commerce and m-commerce in the US are set to grow at a fast pace. Although in 2009 growth
stalled in the country, and recorded a low growth rate of 2%, the online retail sales still contributed
for 7% of the total retail sales in 2009 and are expected to further increase. The US market, by 2014,
is expected to reach a value of $13.55 billion, which represents an increase of almost 75% compared
with levels in 2009, according to industry reports. Furthermore, in the US, mobile shopping has been
penetrated at a fast pace. The initial estimates of 57% growth in 2009 were revised to a whopping
117% increase in mobile shopping in 2009 and the market is expected to cross the $1 billion mark
in 2010.
Sears Holdings’ businesses have presence in the online segment through websites like
www.sears.com, www.kmart.com and www.sears.ca. Additionally, the company also launched an
online market place for homeowners called ServiceLive.com as well as engagement platforms,
MySears.com and MyKmart.com, allowing customers to interact with each other and get advice from
Sears Holdings Corporation
© Datamonitor
Page 8
Sears Holdings Corporation
SWOT Analysis
other customers before they buy. The company also created the ShopYourWay rewards program,
to leverage technology to improve the customer purchase cycle. Sears Holdings launched a new
mobile application, including Sears2Go and Personal Shopper. The Sears Personal Shopper
application for the iPhone mobile digital device allows customers to take a picture of the desired
product from anywhere which then gets sent immediately to the company’s team of expert shoppers.
The expert shoppers then work to find the item and contact the customer via phone or email. Sears
Holdings’ has been focusing on internet and mobile retailing to cater to the customer base increasingly
preferring digital channels. These booming markets will facilitate top line growth through increased
sales from the channels.
Federal stimulus will lead to increase in demand for energy efficient appliances
The demand for energy efficient consumer appliances has been growing as consumers opt to reduce
energy costs. Demand for such products and services has increased significantly over the past few
years due to a rise in fuel and energy prices, improved awareness and participation in green home
certification programs, and through government support. Compared to the commercial real estate
market, the residential market for energy efficient products and services is in its infancy and has a
huge potential to grow. Energy Star is a government-backed labeling program, and appliances
carrying this label are estimated to be 15% more energy efficient. Also, the US government has
been encouraging the market for these products by giving several concessions. In a latest program,
consumers are encouraged to trade in their old washing machines, refrigerators or air conditioners
for energy-efficient models. Consumers are given certain rebates in such cases. The federal
government provided $300 million nationwide for the rebate program as part of the stimulus package
that Congress passed in February 2010. To qualify for the rebates, consumers must purchase
appliances that are rated in tier two or tier three of the Energy Star program. Trading in an old
refrigerator will net a $200 rebate, $100 for an old clothes washer and up to $50 for an air conditioner.
Furthermore, the government from time to time offers tax refunds, Earth Day promotions, and
appliance-rebate programs to encourage sales of such energy efficient products.
Energy star rated appliances are offered in several of Sears Holdings’ stores and the company has
enabled several customers to attain energy savings. Revenues from this product line will boost
overall revenues from home appliances amid sluggish consumer spending which is negatively
impacting the consumer appliance market.
Resilience in children’s spending will positively impact the sales
The trend of consumer spending on children’s products indicates resilience to the downturn. When
the economic upheaval shook the US in 2008, American families pulled the purse strings tight,
spending an average 4.3% less over the prior year on apparel, shoes and accessories, according
to the US Labor Department's Consumer Expenditure Survey released in the fall of 2009. But that
reduction did not significantly impact the children–under–16 category, for whom spending remained
constant. And while spending on adult vices like cigarettes and alcohol decreased, spending on
entertainment increased $144 per family, to $2,835, with the majority of that going to toys, hobbies
and playground equipment, according to the Labor Department. According to the winter 2010 industry
Sears Holdings Corporation
© Datamonitor
Page 9
Sears Holdings Corporation
SWOT Analysis
report, while 71% of parents have been personally affected by the recession, 90% of them say they
are spending less on themselves so they can spend more on their children.
Kmart has increased its exposure to the children segment and is using also innovative marketing
methods to further trigger demand for children’s products. Kmart saw same-store sales increases
in both the third and fourth quarters of 2009, for the first time in three-and-a-half years with especially
strong numbers in the toys and children's clothing categories. Kmart’s comparable store sales
declined in FY2010 and this decline was partially offset by toys sales. The company’s revenues will
be positively impacted from the children oriented product lines.
Threats
High exposure to discretionary spending which is negatively impacted due to low consumer confidence
Consumer confidence in the US has registered a decline during recent times. Confidence is down
with the US economy being hit by both a property slump and rising prices of food and fuel. The US
consumer confidence index fell to 46 in February 2010 as compared with 56.5 in January 2010.
Since purchases of the company's products are dependent upon discretionary spending by its
customers, the company’s financial performance is sensitive to changes in the overall economic
conditions that affect consumer spending. Although consumer spending is seeing some positive
growth Americans seem cautious and are not willing to increase spending—one of the reasons why
the pace of recovery is estimated to be more subdued. A high unemployment rate—which is estimated
to reach 10%, sluggish wage gains and credit crunch are all expected to keep consumers relatively
cautious. The unemployment rate further increased as the number of people applying for
unemployment benefits jumped 24,000 to a seasonally adjusted 484,000 in the week ended April
10, 2010. Unemployment reduces consumer spending. According to industry estimates, although
the US shoppers will increase spending in 2010 as purchasing power increases and wealth rebounds.
However, a big spending spree is unlikely in the next few years. The level of consumer confidence,
which determines the spending behavior of consumer, has been low in recent times. Shoppers will
put off spending on big ticket items and remain value-oriented in the near future.
Sears Holdings’ is highly exposed to product lines, the demand for which is directly related to
discretionary spending. For instance, the customers will be able to easily cut back on home
improvements and appliances when their confidence is low. Sears Domestic, which offers such
products contributes to about 53.7% of the total sales. The comparable store sales and total sales
of the segment declined annually at 8.7% and 6.5%, respectively, during FY2009. Comparable store
sales declines were driven by decreases in the home appliance, lawn & garden, and home electronics
categories. A further deterioration of consumer confidence and increase in unemployment will
pressurize spending which will have an adverse impact on the revenues of Sears Holdings.
Intense competition and strategies to gain customers will impact market share
Sears Holdings Corporation
© Datamonitor
Page 10
Sears Holdings Corporation
SWOT Analysis
Sears Holdings’ faces stiff competition on every front. The competition is further worsened as in the
present times consumers have become increasingly unsentimental about where they shop and are
oriented towards price and other promotions. The company faces competition from several players
including Stanley Tools, Black & Decker, John Deere, General Electric and LL Bean. Lowe's has
been increasingly focusing to unseat Sears as the number-one seller of appliances, and Home Depot
and Best Buy are also working to gain market share in appliances. These companies are investing
in their stores and technology; and Sears will have to spend more on its stores to sustain its own
market share. Wal-Mart is also a tough competitor as it aims for price leadership in many home
entertainment categories. As competitors invest in enhancing the customer’s in-store experience
and invest in price promotions aggressively to attract customers, Sears Holdings’ market share may
be negatively impacted.
Decelerating US apparel retail market will impact revenues adversely
The US apparel retail market is estimated to decelerate. The market generated total revenues of
$304.1 billion in 2008, representing a compound annual growth rate (CAGR) of 2.8% for the period
spanning 2004–08. The performance of the market is forecast to decelerate, with an anticipated
CAGR of 1.2% for the five-year period 2008-2013, which is expected to drive the market to a value
of $323.2 billion by the end of 2013. The growth rate on the US market is low and comparatively,
the European and Asia-Pacific markets are estimated to grow with CAGRs of 1.7% and 4.3%. Lands’
End and Kmart offer apparel in its stores. Another challenge is that the weak economy has turned
many retailers into a discounter, including high-end retailers who being more focused on apparel
exclusively might have a more attractive clothing line-up than Sears and Kmart. The apparel retail
market has several players and in a decelerating market, a low growth rate provides little opportunity
for growth and players intensify competition. Customer retention efforts have to be increased which
may convert into lower margins. A decelerating apparel market in the US will impact revenues and
bottom line adversely.
Sears Holdings Corporation
© Datamonitor
Page 11
Copyright of Sears, Roebuck & Co. SWOT Analysis is the property of Datamonitor Plc and its content may not
be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written
permission. However, users may print, download, or email articles for individual use.