Sears Holdings Corporation

Sears Holdings Corporation {{nasdaq|SHLD}} is the third largest retailer in the United States, behind Wal-Mart and The Home Depot. It was formed in 2005 by the purchase of Sears, Roebuck and Company of Hoffman Estates, Illinois by Kmart Corporation of Troy, Michigan.

History

Kmart

Sebastian S. Kresge founded the S.S. Kresge Corporation, the predecessor of Kmart, in 1899 in Detroit, Michigan. Kresge's first retail establishment, a five-and-ten-cent store, resembled those operated by Frank Woolworth. The store grew into a chain known as 'S. S. Kresge. By 1912, the chain operated 85 stores.

Related Topics:
Sebastian S. Kresge - Detroit, Michigan - Five-and-ten-cent store - Frank Woolworth - Chain

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By the 1920s, Kresge operated larger stores that offered a wider variety of merchandise and prices?precursors of the modern discount store. The first Kmart department store opened in 1962 in Garden City, Michigan. A total of 18 Kmart stores opened that year.

Related Topics:
Department store - Garden City, Michigan

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Kmart became known for its "blue light specials'. At surprise moments, a store worker would light up a mobile police light and offer a discount in a part of the store. The phrase "attention Kmart shoppers" also entered into the American pop psyche. Kmart was also featured in the Oscar-winning 1988 film Rain Man, in which Tom Cruise and Dustin Hoffman both famously exclaim, "Kmart sucks!"

Related Topics:
1988 - Rain Man - Tom Cruise - Dustin Hoffman

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During the 1970s, Kmart put a number of competing retailers out of business. In 1977, S. S. Kresge Corporation changed its name to Kmart Corporation. In 1987, Kmart Corporation sold its remaining Kresge stores.

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Trouble for Kmart

During the 1970s, the company's fortunes began to change; many of Kmart's stores were badly outdated and in decaying condition. Inventory piled up, checkout lines grew, and customers abandoned the stores.

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In 1990, in an effort to change their image, Kmart introduced a new logo (dropping the old-style italic "K" with a turquoise "mart", created in the early 1970s), and gave many stores a very badly needed renovation. However, most stores were not remodeled until the mid-1990s, some of which are not completely renovated today. This then-new logo was replaced in 2004 with the current logo.

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It also began to offer exclusive merchandise by Martha Stewart, Kathy Ireland, and Jaclyn Smith. Other recognizable brands included Sesame Street and Disney.

Related Topics:
Martha Stewart - Kathy Ireland - Jaclyn Smith - Sesame Street - Disney

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In the 1990s, Kmart made a number of missteps, again. Unlike competitor Wal-Mart, it failed to invest in computer technology to manage its supply chain. Furthermore, Kmart maintained a high dividend, which reduced the amount of money available for improving its stores. Many business analysts also faulted the corporation for failing to create a coherent brand image.

Related Topics:
Wal-Mart - Supply chain - Brand

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The original "blue light special" had disappeared in 1991 due to changing consumer habits and misuse by individual stores (according to the company's official explanation). The company then brought back the "blue light special", which involved the manager announcing a promotion in-store every hour, on the hour?said special lasting for 25 minutes. When the announcement of the special took place over the public address system, music would fill the store and all employees would stop their current actions, clap twice and pump their fists in the air, shouting "Blue Light, Blue Light!". This scheme aimed to generate more interest in Kmart from shoppers and the media, but failed because stores did not follow the procedure. No records exist of anyone actually shouting "Blue Light, Blue Light!" It has since ended the "blue light special" again.

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In 2001, the stock scandal involving Martha Stewart severely hurt the corporation's image. In addition, Kmart attempted to compete against Wal-Mart on price by introducing the "Blue Light Always" campaign, which ditched the original blue light concept for lower prices in general. The company could simply not afford to match Wal-Mart's prices. During this time, Target sued Kmart for false advertising.

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On January 22, 2002, Kmart filed for bankruptcy protection; led into the bankruptcy by its then chairman Chuck Conaway and president Mark Schwartz. Similar to the Enron scandal, Conway and Schwartz were accused of misleading shareholders and other company officials of the company's financial crisis, while they were allegedly making millions and allegedly spending the company's money on planes, houses, boats, and other luxuries.

Related Topics:
January 22 - 2002 - Bankruptcy - Enron

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After firing Conaway and Schwartz, It shut down more than 300 stores in the United States and laid off around 34,000 workers as part of a badly-needed restructuring. On May 6, 2003, Kmart officially emerged from bankruptcy protection as Kmart Holding Corporation and on June 10, 2003 it began trading on the NASDAQ as "KMRT". Kmart introduced a new prototype store with a new logo, layout and color scheme (lime green and gray) in 2002 in White Lake, Michigan. The new layout has wider aisles, better selection and better lighting. However, Kmart could not afford a full-scale rollout. The lime green prototype was abandoned for the new Kmart "Orange" concept that rolled out at 9 test stores nationwide.

Related Topics:
May 6 - 2003 - Kmart Holding Corporation - June 10 - NASDAQ - Prototype - Green - Gray - White Lake, Michigan

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Once a major presence in Canada, after being sold to Zellers in the late 1990s, all Kmart stores there were either closed or converted to the Zellers name.

Related Topics:
Canada - Zellers

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Sears

In 1886, the United States contained only 38 states. Many people lived in rural areas and typically farmed. Richard Sears was a railroad station agent in Minnesota when he received a shipment of watches which were unwanted by a local jeweler. Sears purchased them himself, and sold the watches at a nice profit to other station agents up and down the line, and then ordered more for resale. Soon he started a business selling watches. The next year, he moved to Chicago, Illinois where he met Alvah C. Roebuck who joined him in the business. In 1893, the corporate name became Sears, Roebuck and Co.

Related Topics:
United States - Richard Sears - Minnesota - Chicago, Illinois - Alvah C. Roebuck

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Richard Sears knew that farmers often brought their crops to town where they could be sold and shipped, and then bought supplies, often at very high prices, from local general stores. He and Roebuck offered a solution with a catalog. Thanks to volume buying, to the railroads and post office, and later to Rural Free Delivery and parcel post, they offered an alternative to the high-priced rural stores.

Related Topics:
General store - Catalog - Rural Free Delivery - Parcel post

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The catalog business grew quickly. By 1894, the Sears catalog had grown to 322 pages, featuring sewing machines, bicycles, sporting goods and a host of other new items. Organizing the company so it could handle orders on an economical and efficient basis, Chicago clothing manufacturer Julius Rosenwald became a part-owner in 1895. Alvah Roebuck had to resign soon after due to ill-health, but the company still retained his name. By the following year, dolls, icebox refrigerators, cook-stoves and groceries had been added to the catalog.

Related Topics:
Sewing machine - Bicycle - Sporting goods - Julius Rosenwald

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Sears, Roebuck and Co. soon developed a reputation for both quality products and customer satisfaction.

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People had learned to trust Sears for other products bought mail-order, and thus, sight unseen. This laid important groundwork for supplying a home, possibly the largest single investment a typical family would ever make. In 1908, the company began offering entire houses as kits, marketed as Sears Modern Homes, and by the time the program ended in 1940, over 100,000 had been sold.

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Sears issued many catalogs and didn't open its first retail store until 1925, when the business was already 32 years old. The first free standing department store was opened October 5, 1925 in Evansville, Indiana. In addition to mail-order or rail shipment of large purchases, items could also be picked up at the Sears Store in a nearby town when retail outlets were opened.

Related Topics:
October 5 - 1925 - Evansville, Indiana

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The Sears, Roebuck catalog was sometimes referred to as "the Consumers' Bible." The Christmas Catalog was known as the "Wish Book", perhaps because of the toys in it. The catalog also entered the language, particularly of rural dwellers, as a euphemism for toilet paper. In the days of outhouses and no readily available toilet paper, the pages of the mass-mailed catalog were used as toilet paper. "I'm going to read the Sears catalog" was a polite way of saying "I'm going to the outhouse."

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After World War II, the company built many stores in suburban shopping malls. The company was the largest retailer in the United States until the early 1980s but had dropped significantly in rankings by the time it merged with Kmart.

Related Topics:
World War II - Shopping mall - United States

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Sears diversified and became a conglomerate during the mid-20th century. It established several major brands of products such as Kenmore, Craftsman, Die-Hard, and Tuff-skin. The company started the Allstate Insurance Company back in 1931 and had representatives operating in its stores as early as 1934. It purchased Dean Witter and Coldwell Banker real estate in 1981, and started what became Prodigy as a joint venture in 1984.It also introduced the Discover credit card in 1985. During the late 1980s, and as late as 1993, the Discover card was the only accepted credit card at many Sears retail locations.

Related Topics:
Conglomerate - Kenmore - Craftsman - Die-Hard - Tuff-skin - Allstate Insurance Company - Dean Witter - Prodigy - 1984 - Discover credit card

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Roebuck was dropped from the name of the stores, though not from the official corporate name in the 1970s.

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The current Sears logo was created in 1984. Previously, the Sears logo consisted of the name "Sears" in a rectangle. Now it consists of the blue text, Sears, with a white line separating each letter down along the length of its strokes. In late 2004, the logo was switched from all upper case to upper and lower case.

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In 2004, Sears launched a new store concept called Sears Grand which it hopes will be a viable competitor to hypermarkets like Wal-Mart Supercenters.

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Sears formerly traded on the New York Stock Exchange (NYSE) under the ticker of "S", which is now used by the Sprint Nextel Corporation.

Related Topics:
New York Stock Exchange - Sprint Nextel Corporation

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Trouble for Sears

Adam Walsh, the son of reporter John Walsh (America's Most Wanted), was abducted from a Sears department store in Hollywood, Florida, in 1981 at the age of six; his severed head was later found in Vero Beach, FL. Wal-Mart responded by creating Code Adam procedures to protect children that are in the store, whereas Sears initially ignored the risk, hoping it would go away on its own. This led to public opposition to Sears' policies, and alienated customers.

Related Topics:
Adam Walsh - John Walsh - America's Most Wanted - Hollywood, Florida - Vero Beach, FL - Wal-Mart - Code Adam

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In the 1980s and 1990s, the company divested themselves of many non-retail entities, which were creating a burden on the company's bottom line.

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In 1993, Sears stopped production of its general merchandise catalog because of sinking sales and profits. However, Sears Holdings does to continue to produce speciality catalogs and the Holiday Wish Book.

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In 2003, they sold their retail credit card operation to Citibank because the credit cards were draining profits from the company. The remaining card operations was sold to J.P. Morgan Chase in August 2005.

Related Topics:
Citibank - August - 2005

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In the early 1980s, Sears ceased selling shotguns, which had previously even been sold under their internal J. C. Higgins sporting brand from 1908 until 1961, and this alienated them from their historical core of rural and working-class consumers.

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In the late 1990s, the company's market share in many areas deteriorated rapidly as Wal-Mart drew away working-class consumers, and Federated Department Stores attracted wealthier consumers.

Related Topics:
Wal-Mart - Federated Department Stores

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Sears Tower

Sears, Roebuck and Company built the famed Sears Tower, which was completed in 1974. This building, located in Chicago, is the tallest building in the United States.

Related Topics:
Sears Tower - Chicago - Tallest building in the United States

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Merger of Kmart and Sears

On November 16, 2004, Kmart Corporation announced its intentions to purchase Sears, Roebuck and Company; the purchase was billed as a merger of equals. As a part of the merger, Kmart Corporation would change its name to Sears Holding Corporation. It announced at the time that it would continue operate stores under both the Sears and Kmart brands.

Related Topics:
November 16 - 2004

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The two companies cited several reasons for combining forces:

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• Sears had begun investing in new, larger off-mall stores, called Sears Grand stores. Earlier in the year Sears had purchased dozens of current Kmart locations; the merger permited the combined company to accelerate that process.
• Proprietary brands held by both companies could be made more accessible to their target demographics by leveraging their combined real estate holdings. This was estimated to be an expected $200 million a year in revenue synergies.
• At least $300 million a year in cost savings was expected annually, particularly in the supply chain and in administrative overhead.
• The establishment of a shared customer-focused corporate culture between the two companies was estimated to yield improvements in revenue per unit area.
• Preservation of two brands after the merger allowed Sears Holding to continue focusing on different customer demographics, without alienating either group.

The new company would directed by a board of directors comprised of members from the two companies: seven members from Kmart's board, three from Sears'. Shareholders in Kmart Corporation received one share in the new company. Shares of Sears, Roebuck and Company stock was converted into a combination of 55% stock and 45% cash (at $50 a share). Stockholders had a choice of receiving either stock or cash, subject to the pre-defined ratio.

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The merger was completed on March 24, 2005, after receiving regulatory approval from the government and approval by shareholders of both companies.

Related Topics:
March 24 - 2005

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