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Edward Lampert’s Sears Holdings 2016 Investor Letter

Edward Lampert Letter to Sears Holdings Investors, March 9, 2017

  • 2016 proved to be another challenging year for most “bricks and mortar” retailers
    • Sears was not immune to these headwinds
    • Delivered adjusted EBITDA improvements in the fourth quarter, increased financial flexibility, and moving forward with positive momentum
  • Sears Holdings is built on a strong foundation that will continue to provide competitive advantages
    • Valuable brands including some of the most iconic American brands
    • Large store footprint, dedicated associates and tens of millions of Shop Your Way members actively shopping with us
  • Saw the disruption of retail coming more than a decade ago and built a differentiated online shopping and membership platform – Shop Your Way – to ensure our participation in the next wave of retail
  • In a financial position to continue to fund operating needs and meet financial obligations
  • Untapped opportunities to maximize the value of our existing assets, create additional financial flexibility and expand Shop Your Way ecosystem to drive future growth
  • Continuously working to better position in a competitive retail environment

2016 In Review:

  • Shop Your Way Members
    • Tens of millions of active members accounting for more than 70% of our sales today
    • Enhanced our Associate Discount Program this year to deliver Shop Your Way points back on purchases in addition to new increased benefit for purchases of hardlines goods and any other Shop Your Way program points and perks
  • Shop Your Way Partners
    • Expanded network to include more partners and deepen relationships to make Shop Your Way the go-to rewards destination:
    • Launched new Sears Mastercard with an industry-leading 5-3-2-1 Shop Your Way rewards offer that allows members to earn Shop Your Way points everywhere they shop
    • Announced a strategic partnership with Activehours to integrate Shop Your Way rewards program into the Activehours mobile application to allow them to access their paychecks on demand
    • Broadened Uber Technologies partnership rider rewards program to 25 new markets, building on successful launch in NYC and Chicago
    • Expanded dining program to over 30,000 restaurants, including Burger King, Popeye’s, Shoney’s and Restaurant.com with unique rewards
  • Our Transformation
    • Adjusted EBITDA improvement delivered in the fourth quarter – this reflects our focus on returning to profitability as we manage through the challenging retail environment
    • Over the course of the year, undertook a series of financial transactions that enhanced liquidity and financial flexibility
      • Agreement reached with Stanley, Black & Decker to sell Craftsman brand: delivered significant value for Sears Holdings while facilitating the future growth of the Craftsman brand in and outside our shopping platforms
      • Increased borrowing capacity and started a process to market certain real estate properties with a goal of raising at least $1B in the upcoming months

Looking Towards 2017:

  • Last month, outlined a comprehensive plan that will define the next phase of our transformation:
    • Restructuring of our operations to help us become a more agile, cost-efficient and competitive retailer
  • Will continue to take actions to help ensure competitiveness as we pursue our vision of an integrated retailer anchored around member value, convenience, and services
    • This strategy is clearly embodied in our ongoing investment in and focus on Shop Your Way platform
  • As we pursue growth of Shop Your Way in 2017, will focus on:
    • Increasing awareness of Shop Your Way offerings to attract more members and increase member engagement
    • Getting members to use more aspects of our integrated retail offerings
    • Growing partnership and affiliate network
    • Singing up more members and prospective members for Shop Your Way Mastercard
    • Expanding Relay and other exclusive Shop Your Way services to more stores and markets
    • Attracting more shoppers and spending – whether earned points or actual dollars – to stores and online platforms

Conclusion:

  • Firmly believe we will succeed in becoming a new kind of retailer as we provide real value to members with value offerings, personalized services and easy access to the brands, convenience and value they want, whenever and wherever they want

Edward Lampert is the founder, chairman, and CEO of ESL Investments. He is also the chairman and CEO of Sears Holdings.

Image Source: CNN Money
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1 Comment on Edward Lampert’s Sears Holdings 2016 Investor Letter

  1. discountbrains // March 21, 2017 at 8:14 pm // Reply

    OMG!! Really Eddie? U didn’t formerly manage Phar-Mor did u? You know the store that told their suppliers they are such an important customer suppliers should keep extending them credit.

    Like

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