With Sears' future in doubt, vendors begin pulling back

Thu Mar 23, 2017 12:57pm EDT
 
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By Nandita Bose and Richa Naidu

(Reuters) - Suppliers to Sears Holdings Corp told Reuters they are doubling down on defensive measures, such as reducing shipments and asking for better payment terms, to protect against the risk of nonpayment as the company warned about its finances.

The company's disclosure turned the focus to its vendors as tension is expected to mount ahead of the key fourth-quarter selling season amid rising concern about a potential bankruptcy, they said.

The storied American retailer, whose roots date back to 1886, said on Tuesday that "substantial doubt exists related to the company's ability to continue as a going concern."

Shares of the company closed down 12.3 percent at $7.98 on the Nasdaq. Earlier, the stock recorded its biggest one-day percentage decline since November of 2012.

The managing director of a Bangladesh-based textile firm said his company is using only a handful of its production lines to manufacture products for Sears' 2017 holiday sales. Last year, nearly half of the company's lines in its four factories were producing for Sears.

"We have to protect ourselves from the risk of nonpayment," said the managing director, who declined to be identified for fear of disrupting his company's relationship with Sears.

Mark Cohen, the former chief executive of Sears Canada and director of retail studies at Columbia Business School in New York City, said vendors will keep a close eye on Sears' finances. "Whatever vendors continue to support them are now going to put them on even more of a short string. That means they’ll ship them smaller quantities and demand payment either in advance or immediately upon delivery."

He added: "Sears stores are pathetically badly inventoried today and they will become worse."   Continued...

 
An online shopping kiosk is shown inside a Sears department store in La Jolla, California, U.S., March 22, 2017.    REUTERS/Mike Blake