Sears Holdings Corp (NASDAQ:SHLD) conference call, below are comments from Eddie Lampert. Also make sure to see his letter to investors here.
Eddie Lampert – Sears Holdings Corporation – Chairman & CEO
Thanks, Rob. I would also like to thank all of you for joining us today. I am proud of what Sears Holdings Corp (NASDAQ:SHLD) has accomplished in the last quarter and over the past fiscal year. We have made significant progress in important areas of our transformation since we last spoke, and have a clear plan to position the Company for long-term growth and profitability.
I will take this opportunity to provide you with a more detailed discussion of our strategy and what we believe are early signs of success that give us further confidence in our plan. We will then spent some time to update you on our fourth-quarter and full-year results, followed by a discussion of how we are leveraging our rich portfolio of assets and redeploying capital to support our plan.
I want to start off by level-setting where we are. The size and scope of the transformation we are pursuing is substantial. We are in the midst of transforming Sears Holdings into a member-centric business that provides and delivers value by serving its members in the manner most convenient for them, whether in store, in home or on the go.
Transforming a business is always challenging. Add to it a highly promotional and fast-changing retail landscape and a consumer that has drastically changed the way they shop, and you have a significant task in trying to adapt a retailer the size of Sears Holdings. At the same time, we are managing legacy pension obligations while freeing up the resources to invest in technology platforms.
Unlike many other retailers, though, we are taking a proactive approach and we are altering our business model to create a long-term sustainable advantage. This is not something that will happen overnight and not something you measure in small increments of time. As CEO, Chairman and Sears Holdings Corp (NASDAQ:SHLD)’s largest individual shareholder, I am 100% committed to the success of this transformation and have confidence in our associates in the path that we are taking. We hope to accelerate the pace of change to become a leading retailer positioned for continued growth.
On slide 5 we list our five strategic pillars. In my annual letter to shareholders released this morning, I noted that in January The Wall Street Journal ran a prominently-placed story suggesting that beyond all of the retailers reporting poorer profits there is a, quote, deeper malaise at work. A long-term change in shopper habits has reduced store traffic, perhaps permanently, and shifted pricing power away from malls and big-box retailers.
Instead, shoppers seem to be figuring out what they want online, then making targeted trips to pick it up from retailers that offer the best price. While shoppers visited an average 5 stores per mall trip in 2007, today they only visit 3. Meanwhile, online stores have further sharpened purchase decisions in prices, leaving some shoppers to come into the stores only when they can cherry-pick discounted items.
All of these dynamics are ones for which Sears Holdings has been preparing for years. As I have described before, the 5 key pillars of our strategy are, 1, creating lasting relationships with members by empowering them to manage their lives; 2, attaining best-in-class productivity and efficiency; 3, building our brands; 4, reinventing the Company continuously through technology and innovation; and 5, reinforcing the SHC way by living our values every day.
Our two key platforms, Shop Your Way and Integrated Retail, continue to become more prominent, both in how we run the Company and in how we serve our members.
Slide 6 outlines how we are accelerating our pace of change to position ourselves in the changing environment. We are proactively learning more and more each day about how our members want to shop and what resonates with them. We are utilizing this feedback as we continue our transition and invest in two primary areas, our member-based platform, Shop Your Way and Integrated Retail.
These two key elements represent a different way of doing business at Sears Holdings Corp (NASDAQ:SHLD) and are the foundations of our other programs and initiatives. Within these two key areas we are making substantial investments in engaging members with personalized, relevant content, offering more capabilities to our members, continually enhancing member engagement, and building out our platform technology.
To enable this change, we have been strategically realigning our portfolio of businesses to focus on our core strengths, simplify Sears Holdings and become a more focused Company that is more efficient to manage and easier to understand, all while enabling us to better optimize our allocation of capital and attract the best talent.
We are also enhancing our financial flexibility by reconfiguring our asset base to redeploy capital while we meet all of our financial obligations. Finally, we are providing opportunities for our shareholders to participate in what we believe are value-accretive activities.
As indicated on slide 7, we believe that we are proactively transforming our business to benefit from the changing retail landscape. We believe we are ahead of the game by transitioning to a member-centric, integrated retailer leveraging our Shop Your Way platform. Shop Your Way is unique in that it is a program that rewards members, enhances interaction with members, and delivers useful information to them.
As a result, we are able to be more strategic in how we, 1, invest in capabilities to enable our members to access the widest possible assortment of products and services; 2, use data and analytics on member trends to make targeted offers and decisions delivered in real-time. We are becoming a more fact-based company and are making decisions based on analytic data as opposed to gut feelings. And our members will expect us to provide them with offers that are relevant to them as individuals.
Three, expand our reach through Sears Marketplace, our innovative community that allows third-party merchants to advertise or sell their products on the Sears Holdings family of websites where we now offer over 100 million items and multiple delivery options
Four, enhancing our Shop Your Way membership benefits. Membership is free, and we want everyone to know the significant benefits of membership as our members always get more. And finally, developing digital and social relationships with our members as we aspire to do more than simply transact. We are working to build value trusted relationships with our members by providing differentiated products and services that will be difficult for others to replicate.
At a high level, we are seeing increases in key member engagement metrics, giving us confidence in our strategy and demonstrating tangible progress. As indicated in our release, 72% of sales are now made to Shop Your Way members, up from 58% during the fourth quarter last year. And we experienced year-over-year growth of 10% in online and multichannel sales, showing steady growth in both channels since 2006.
And on slide 8 you can see our framework for investing in Integrated Retail capabilities. Integrated Retail is a business model where members