SEARS ROEBUCK & COMPANY

Sears Roebuck & Company



Sears Roebuck & Company

Introduction

This paper presents recommendations for a client, who is interested in making an investment in Sears Roebuck & Company. In this paper, a brief history of the company is presented, followed by the financial analysis of the company. Strengths and weaknesses, a discussion about competitors, industry trends are also discussed. In the end, recommendations for investing in the firm are included (Clymer, 2005).

Brief History

Sears Roebuck & Company is one of leading firms engaged in retail business in America. It was founded in 1886, and since then, it has remained one of the major retail firms, enjoying a handsome market share in the retail sector. The headquarters of the firm is located in Hoffman Estates, Illinois. It is a multi-line retailer, offering a variety of merchandise and related services (Clymer, 2005).

Sears Roebuck & Co started its business as a catalog retailer and during the 1920s, the enjoyed a formidable position in the American retail sector.

In the year 2005, the firm experienced turbulent times, leading the company to form an alliance with K-Mart, the undisputed leader in the American retail industry. After the merger, the company, now, called Sears Holdings Corporation. The company is also operational in Latin American countries, including Brazil, Chile, Mexico, Canada and the United Kingdom (Cohn, 2008).

Sears operates both specialty and full-line stores. Its customer operations include major sales from online and catalog marketing. Sears' 871 full-line stores offer a wide range of products for the home. These include appliances, clothing, jewelry, automotive supplies, power tools, and garden equipment. Sears.com is Sears' implementation of internet marketing and offers a limited assortment of home and accessories merchandise. In addition to its full-line stores, Sears operates 1,100 specialty stores, 792 primarily independently owned stores, 245 Sears Hardware Stores, 8 furniture stores, 18 The Great Indoors stores, 45 Sears Outlet Stores, and a commercial sales division (Cohn, 2008).

Financial Analysis

When it comes to financial reporting, the firm enjoys a good record as the financial statements and reports are released on quarterly basis. The annual reports published are in total compliance with the standards and regulations prescribed by the Securities Exchange Commission.

Since 2007, the current ratios have shown a declining trend, which is a negative sign for Sears. The quick ratio has dropped during the four year period (2006-2010). Thus it can be said that market securities and accounts receivable stand at 85 percent of the current liabilities. The inventory turnover has shown a mixed trend. It decreased from 5.12 in 2006 to 5.01 in 2010. This decline indicates that the company had more investment directed towards inventory as compared to the sales during the period mentioned above. This decline in inventory turnover had a negative impact on Sears Roebuck & Co due to the fact that the days to inventory had increased, meaning that the company was taking more days to sell its entire inventory; 71.79 days in 2010 as compared to ...