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Sears Holding
Company
Analysis
















Felicia Chandra
Don Coleman
12
th
J une 2014


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Table of Content

Company History. Page 3

Horizontal Analysis....Page 4

Vertical Analysis....Page 7

Liquidity and Efficiency Ratio.....Page 9

Profitability and Market Prospect Ratio...Page 10

Long Term Solvency Ratio..Page 10
Conclusion....Page 10







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Company History:
Sears Holding Company is founded in March 24, 2005. They are a merger of Sears
Roebuck and Kmart Holdings. Sears Holding Co. headquarters are in Hoofman Estates,
Illinois, United States, but served to be in Puerto Rico, Canada and Mexico. They operate
1,980 full line and specialty retail stores in the United States, through Kmars and Sears.
449 full-line and specialty retail stores in Canada operating through Sears Canada, a 51%
owned subsidiary.
Sears Holding is the third largest general merchandises Retail Company after Wal-
Mart and Target. Sears Holding stores major products include apparel, jewelry,
appliances, and hardware, sporting goods, car repair services, home improvement services
and electronics. Sears Holding most popular brands are as follow:
Kenmore
Diehard
Lands End
Jaclyn Smith
Joe Boxer
Apostrophe
Covington brands
Sears Holdings Corporation is all about opportunity, opportunity for your talent to
be recognized and grow. Sears Holding has committed to improve the lives of their
member by providing quality services, products and solution to earn trust and build a long-
lasting relationship. Sears Holding Corporation valued teamwork, integrity and positive
energy. There are 226,000 people employed in the United States as of February 1, 2014.
Furthermore, there are approximately 23,000 people employed in Canada, through Sears
Canada. Searss state of incorporation is in Delaware, United States.

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Comparative Balance Sheet and Income Statement
Comparative Balance Sheet
Sears Holding Company
February 1, 2013 and 2012

(In Millions) 2013 2012
Dollar
Change Percent Change
Asset
Current Asset
Cash and cash equivalents $609 $747 -$138 -18.47%
Restricted Cash 9 7 2 28.57%
Account receivable 635 695 -60 -8.63%
Merchandise Inventories 7,558 8,407 -849 -10.10%
Prepaid expenses and other current assets 454 388 66 17.01%
Total current assets 9,265 10,244 -979 -9.56%
Property and equipment
Land 1,875 1,924 -49 -2.55%
Buildings and improvements 6,072 6,186 -114 -1.84%
Furniture, fixtures and equipment 2,950 2,786 164 5.89%
Capital leases 347 314 33 10.51%
Gross property and equipment 11,244 11,210 34 0.30%
Less accumulated depreciation and
amortization -5,191 -4,633 -558 12.04%
Total property and equipment, net 6,053 6,577 -524 -7.97%
Goodwill 379 841 -462 -54.93%
Trade names and other intangible assets 2,881 2,937 -56 -1.91%
Other assets 762 782 -20 -2.56%
TOTAL ASSETS $19,340 $21,381 -2041 -9.54%
LIABILITIES
Current liabilities
Short-term borrowings $1,094 $1,175 -81 -6.89%
Current portion of long-term debt and
capitalized lease obligation 83 230 -147 -63.91%
Merchandise payables 2,761 2,912 -151 -5.18%
Other current liabilities 2,683 2,892 -209 -7.23%
Unearned revenues 931 964 -33 -3.42%
Other taxes 480 523 -43 -8.22%
Short-term deferred tax liabilities 382 516 -134 -25.97%
Total current liabilities 8,414 9,212 -798 -8.66%
Long-term debt and capitalized lease 1,943 2,088 -145 -6.94%

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Based on the horizontal analysis above, Sears holding have a significant decrease in their
assets, a 9.54% decrease in the year 2013 as compared to the year 2012. The major
decrease was noted in merchandise inventory as it has decreased by $849 million or by
10.10% in the year 2013 as compared to the year 2012. Also, Goodwill has decrease by
54.93% due to the impairment and capital leases have increased by $33 million or by
10.51%. Total liabilities and total equity for the company has also decreased as total
liabilities have decreased by $872 million or by 5.12% in the year 2013 as compared to the
year 2012. The total equity has also decreased by $1,169 million or by 26.93% in the
period under review. Also, the major decrease was noted in Current portion of long-term
debt and capitalized lease obligation as it has decreased by $147 million or by 63.91% in
the year 2013 as compared to the year 2012. Retained earnings have also decreased by
52.55% due to the increase in losses for the year.
Comparative Income Statement
obligations
Pension and postretirement benefits 2,730 2,738 -8 -0.29%
Other long-term liabilities 2,126 2,186 -60 -2.74%
Long-term deferred tax liabilities 955 816 139 17.03%
Total liabilities 16,168 17,040 -872 -5.12%
Commitments and contingencies
EQUITY
Sears Holding Corporation equity
Preferred stock, 20 shares authorized; no share
outstanding - - - -
Common stock $0.01 par value;500 shares
authorized; 106 and 106 shares oustanding,
respectively 1 1 0 0
Treasury stock - at cost -5,970 -5,981 11 -0.18%
Capital in excess of par value 9,298 10,005 -707 -7.07%
Retained earnings (deficit) 885 1,865 -980 -52.55%
Accumulated other comprehensive loss -1,459 -1,609 150 -9.32%
Total Sears Holdings Corporation equity 2,755 4,281 -1,526 -35.64%
Non-controlling interest 417 60 357 595.00%
Total Equity 3,172 4,341 -1169 -26.93%
TOTAL LIABILITIES AND EQUITY $19,340 $21,381 -$2,041 -9.54%

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Sears Holding Company

(In Millions) 2013 2012
Dollar
Change
Percent
Change
REVENUES
Merchandise sales and services $36,188 $39,854 (3,666) -9.20%
COSTS AND EXPENSES
Cost of sales, buying and occupancy $27,433 $29,340 (1,907) -6.50%
Gross margin dollars $8,755 $10,514 (1,759) -16.73%
Selling and administrative $9,384 $10,660 (1,276) -11.97%
Selling and administrative expense as a percentage
of revenues $26 $27 (1) -3.00%
Depreciation and amortization $732 $830 (98) -11.81%
Impairment charges $233 $330 (97) -29.39%
Gain on sales of assets -$667 -$468 (199) 42.52%
Total costs and expenses $37,115 $40,692 (3,577) -8.79%
Operating loss -$927 -$838 (89) 10.62%
Interest expense -$254 -$267 13 -4.87%
Interest and investment income $207 $94 113 120.21%
Other income (loss) $2 $1 1 100.00%
Loss from continuing operations before income
taxes -$972 -$1,010 38 -3.76%
Income tax expense -$144 -$44 (100) 227.27%
Loss from continuing operations -$1,116 -$1,054 (62) 5.88%
Loss from discontinued operations, net of tax $0 $0 0 0.00%
Net loss -$1,116 -$1,054 (62) 5.88%
(Income) loss attributable to non-controlling
interests -$249 $124 (373) -300.81%
NET LOSS ATTRIBUTABLE TO HOLDINGS
SHAREHOLDERS -$1,365 -$930 (435) 46.77%
Amounts attributable to Holdings shareholders:
Loss from continuing operations, net of tax -$1,365 $0 (1,365) -100.00%
Loss from discontinued operations, net of tax $0 $0 0 0.00%
Net loss -$1,365 -$930 (435) 46.77%
NET LOSS PER COMMON SHARE
ATTRIBUTABLE TO HOLDINGS
SHAREHOLDERS
Diluted loss per share from continuing operations -$12.87 -$8.78 (4) 46.58%
Diluted loss per share from discontinued
operations $0.00 $0.00 0 0.00%
-$12.87 -$8.78 (4) 46.58%
Diluted weighted average common shares
outstanding $106.10 $105.90 0 0.19%


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2013 was another year with loss for the company and the loss was on increasing trend as
net loss has increased by $435 million or by 46.77% in the year 2013 as compared to the
year 2012. The major contributing factors for this loss is the decrease in sales as it has
decreased by $3,666 million or by 9.20% in the year 2013 as compared to the year 2012.
The decrease in sale has also resulted in decrease in the cost of sales by 6.50% but the
overall decrease in the gross margin was 16.73%. Total cost and expenses has decreased
by $3,577 million or by 8.79% but there was a major increase of 120.21% in Interest and
investment income.
Common-Size Comparative Balance sheet and Income statement
Common-Size Comparative Balance Sheet
Sears Holding Company
February 1, 2013 and 2014

Common Size
Percentage
(In Millions) 2013 2012 2013 2012
Asset
Current Asset
Cash and cash equivalents $609 $747 3.15% 3.49%
Restricted Cash 9 7 0.05% 0.03%
Account receivable 635 695 3.28% 3.25%
Merchendise Inventories 7,558 8,407 39.08% 39.32%
Prepaid expenses and other current assets 454 388 2.35% 1.81%
Total current assets 9,265 10,244 47.91% 47.91%
Property and equipment 0.00% 0.00%
Land 1,875 1,924 9.69% 9.00%
Buildings and improvements 6,072 6,186 31.40% 28.93%
Furniture, fixtures and equipment 2,950 2,786 15.25% 13.03%
Capital leases 347 314 1.79% 1.47%
Gross property and equipment 11,244 11,210 58.14% 52.43%
Less accumulated depreciation and amortization -5,191 -4,633 -26.84% -21.67%
Total property and equipment, net 6,053 6,577 31.30% 30.76%
Goodwill 379 841 1.96% 3.93%
Trade names and other intangible assets 2,881 2,937 14.90% 13.74%
Other assets 762 782 3.94% 3.66%
TOTAL ASSETS $19,340 $21,381 100.00% 100.00%
LIABILITIES

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Current liabilities
Short-term borrowings $1,094 $1,175 5.66% 5.50%
Current portion of long-term debt and capitalized
lease obligation 83 230 0.43% 1.08%
Merchandise payables 2,761 2,912 14.28% 13.62%
Other current liabilities 2,683 2,892 13.87% 13.53%
Unearned revenues 931 964 4.81% 4.51%
Other taxes 480 523 2.48% 2.45%
Short-term deferred tax liabilities 382 516 1.98% 2.41%
Total current liabilities 8,414 9,212 43.51% 43.08%
Long-term debt and capitalized lease obligations 1,943 2,088 10.05% 9.77%
Pension and postretirement benefits 2,730 2,738 14.12% 12.81%
Other long-term liabilities 2,126 2,186 10.99% 10.22%
Long-term deferred tax liabilities 955 816 4.94% 3.82%
Total liabilities 16,168 17,040 83.60% 79.70%
Commitments and contingencies
EQUITY
Sears Holding Corporation equity
Preferred stock, 20 shares authorized; no share
outstanding - - - -
Common stock $0.01 par value;500 shares
authorized; 106 and 106 shares outstanding, respectively 1 1 0.01% 0.00%
Treasury stock - at cost -5,970 -5,981 -30.87% -27.97%
Capital in excess of par value 9,298 10,005 48.08% 46.79%
Retained earnings (deficit) 885 1,865 4.58% 8.72%
Accumulated other comprehensive loss -1,459 -1,609 -7.54% -7.53%
Total Sears Holdings Corporation equity 2,755 4,281 14.25% 20.02%
Non-controlling interest 417 60 2.16% 0.28%
Total Equity 3,172 4,341 16.40% 20.30%
TOTAL LIABILITIES AND EQUITY $19,340 $21,381 100.00% 100.00%
The review of the common size balance sheet has revealed that there is no major change in
the asset side of the company with respect to total assets of the company. In the liabilities
side of the balance sheet, total liabilities have increased from 79.70% in 2012 to 83.60% in
the year 2013. Also, total equity has decreased from 20.30% in the year 2012 to 16.40% in
the year 2013.
Common-Size Comparative Income Statement
Sears Holding Company
Common-Size

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Percentage
(In Millions) 2013 2012 2013 2012
REVENUES
Merchandise sales and services $36,188 $39,854 100.00% 100.00%
COSTS AND EXPENSES
Cost of sales, buying and occupancy $27,433 $29,340 75.81% 73.62%
Gross margin dollars $8,755 $10,514 24.19% 26.38%
Selling and administrative $9,384 $10,660 25.93% 26.75%
Selling and administrative expense as a percentage of
revenues $26 $27 0.07% 0.07%
Depreciation and amortization $732 $830 2.02% 2.08%
Impairment charges $233 $330 0.64% 0.83%
Gain on sales of assets ($667) ($468) -1.84% -1.17%
Total costs and expenses $37,115 $40,692 102.56% 102.10%
Operating loss ($927) ($838) -2.56% -2.10%
Interest expense ($254) ($267) -0.70% -0.67%
Interest and investment income $207 $94 0.57% 0.24%
Other income (loss) $2 $1 0.01% 0.00%
Loss from continuing operations before income taxes ($972) ($1,010) -2.69% -2.53%
Income tax expense ($144) ($44) -0.40% -0.11%
Loss from continuing operations ($1,116) ($1,054) -3.08% -2.64%
Loss from discontinued operations, net of tax $0 $0 0.00% 0.00%
Net loss ($1,116) ($1,054) -3.08% -2.64%
(Income) loss attributable to non-controlling interests ($249) $124 -0.69% 0.31%
NET LOSS ATTRIBUTABLE TO HOLDINGS
SHAREHOLDERS ($1,365) ($930) -3.77% -2.33%
Amounts attributable to Holdings shareholders:
Loss from continuing operations, net of tax ($1,365) $0 -3.77% 0.00%
Loss from discontinued operations, net of tax $0 $0 0.00% 0.00%
Net loss ($1,365) ($930) -3.77% -2.33%
The review of the horizontal analysis has not shown any major deviation in the gross margin
or expenses as compared to its total revenues.
Liquidity and Efficiency Ratios:


S. No. Ratio Formula 2013 2012
A Current Ratio Current assets / Current liabilities 1.10 1.11
B Acid Test Ratio Quick assets / Current liabilities 0.15 0.16
C Accounts receivable turnover Revenue / Accounts receivables 56.99 57.34
D Days Sales Uncollected 365 / accounts receivable turnover 6 6
E Inventory Turnover Cost of sales / Inventory 3.63 3.49
F Days Sales In Inventory 365 / Inventory turnover 101 105

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G Total Asset Turnover Revenue / Total assets 1.87 1.86
There is no material difference between the two years with respect to liquidity and efficiency
ratios
Profitability and Market Prospect Ratios


S. No. Ratio Formula 2013 2012
A Profit Margin Ratio Net Income / Revenue -3.77% -2.33%
B Gross Profit Rate Gross Margin / Revenue 24.19% 26.38%
C Return On Total Assets Net Income / Total Assets -7.06% -4.35%
D
Return On Stockholder's
Equity Net Income / Equity -43.03% -21.42%
E
Book Value Per Common
Share Equity / Common shares outstanding $ 29.92 $ 40.95
F Basic Earnings Per Share
Net Income / Common shares
outstanding $ (12.87) $ (8.78)
G Price-Earnings Ratio Market price per share / EPS (3.75) (6.57)
H Dividend Yield Dividend per share / EPS -39% -11%
There is no major change in the profitability ratios as profit margin and gross profit ratio has
remained the same over the last two years but due to the increase in the loss over the period,
the return on total assets, return on stockholders equity, book value per share, basic
earnings per share, price earnings ratio and dividend yield has varied significantly.
Long Term Solvency Ratios


S. No. Ratio Formula 2013 2012
A Debt Ratio Total Liabilities / Total Assets 84% 80%
B Equity Ratio Total Equity / Total Assets 16% 20%
C Debt to equity Ratio Total Liabilities / Total Equity 510% 393%
D Times interest earned ratio Operating Income / Interest Expenses -3.65 -3.14
Debt to equity ratio has increased from 393% in the year 2012 to 510% in the year 2013 due
to decrease in the retained earnings due to loss. Also, it is important to note that the time
interest ratio is negative due to the operating losses.
Recommendation:
I will not advise to invest in the company due to the increase in the losses due to decreased
in sales revenue and comparative increase in some expenses of the company. Also, the
liquidity of the company is on decreasing trend and if we calculate the absolute liquidity of

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the company, it is less than 1 indicating that the absolute assets of the company are not
sufficient enough to cover the current liabilities of the company. The only best performance
indicator for the company is Days Sales Uncollected as it is 6 days that is the indicative of
either doing the business on cash or giving the cash recovery period within a week. Also, the
long term solvency of the company is also poor that is a clear indication that no investment
should be made in the shares of the company.