Sears faces new obstacle in turnaround

A company that lent money to the chain's suppliers will stop providing financial assistance.

By Jonathan Berr Jan 12, 2012 1:48PM
Image: Woman using calculator on desk full of bills and statements © Sheer Photo, Inc/Photodisc/Getty ImagesShares of Sears Holdings (SHLD), billionaire Edward Lampert's struggling retail empire, slumped Thursday after Bloomberg News reported that some of the chain's suppliers may have a harder time getting paid.

One company that makes loans to small businesses, CIT Group (CIT), will no longer provide financial assistance to Sears' suppliers waiting to be paid.

Sears shares fell 3.5% to $31.75 in midday trading, and CIT Group shares were unchanged at $37.14.

The news couldn't have come at a worse time. The company recently reported dismal holiday sales and plans to shutter as many as 120 underperforming locations. Sears is downplaying the significance of CIT's decision not to provide suppliers with payment guarantees, arguing that "goods factored by CIT represent less than 5% of the company's inventory," according to Bloomberg. However, CIT is a giant in the industry, and other companies may follow its lead.

The following video discusses whether CIT Group's move may undermine the confidence of some of Sears' suppliers.

Post continues below.
Among Sears' biggest suppliers are appliance makers Whirlpool (WHR) and Electrolux (ELUXB), the news service says. CIT's decision may also affect apparel providers such as the Kardashians, whose Kardashian Kollection is available exclusively at Sears. Other big Sears brands include Craftsman, DieHard and Land's End.

Sears, whose shares have plunged more than 58% in the past year, has huge problems. Sales have fallen ever since Lampert merged Sears Roebuck and Kmart in 2005. The company's brand identity is muddled among customers and investors.

Though Thursday's news is hardly a death knell for Sears, it highlights the challenges that Lampert and CEO Lou D'Ambrosio face in turning around this once-venerable brand.

Jonathan Berr owns no shares of the listed companies.

Jan 12, 2012 4:11PM

Sears went from a store where you could buy anything to a clothing and appliance store with tools. If they would go back to their original concept then they could be a major factor in the business world.

They have forgotten what made them strong in the first place. Having what the customer wanted and customer service. They do not carry hunting items, bikes, carpeting, kitchen cabinets, all of the things that made them America's Store. Go back to their roots and they will survive.

Bring back the quality of yesterday and make your products as they were before, Made In America. Your tools are junk anymore, they used to be the best. Your warrantee is pure rubbish.

Jan 12, 2012 3:55PM
Who cares.  Sears lost its focus and its customers by not standing behind their name brands.  I had a craftsman lawn tractor with 50 hours on it and the transmission fell out.  Did Sears fix it?  replace it?  not on your life.  No wonder they are going belly up. 
Jan 12, 2012 3:54PM
sears is dead.  it'll flop around like a fish for a while, but it will dry out and die
Jan 12, 2012 5:14PM
Sears is run by that Hedge fund guy. Been a **** pit ever since. Total waste of real estate and franchise potential.

Turn it around? Get rid of the hedge fund guy. Crapert or whatever his name is. The guy who excels at failure.

Jan 12, 2012 5:12PM
Just another failed retail store.   Remember Montgomery Ward, Circuit City?   Is anybody crying over those stores today.   Nope.      GameStop in 3 years will be the next one closing doors.
Jan 12, 2012 5:12PM
Sears deserves its fate.  It abanndoned long ago the customer service and warranty support for which it was known once upon a time.  Its quality of products has gone down across the board as well.  I'll always fondly remember trips with my dad to Sears on Saturday mornings, but memories will soon be all that's left.
Jan 12, 2012 5:08PM
Never in my adult life (some 40 years) have I ever bought a brand new appliance. Every time I need a refrigerator, washer, or dryer, I buy a used Kenmore for maybe a hundred bucks. I have never had a used Kenmore appliance fail inside of 5 years. I have returned worn, broken, and even mangled Craftsman tools I've found in the street for a free replacement, no questions asked (even though I knew I shouldn't have taken a hammer to that screw driver). Perhaps this illustrates what happens when the quality of a product is "too good".
Jan 12, 2012 7:14PM

Wake up and get back to basics before it s too late !


This was one of Jim Cramer's biggest picks of all time.  


I went to a K-mart in my community two Christmas' ago.  We waited by the Jewelry counter for over 1/2 hour with the Light on.   Finally had the check out girl call the manager.   No one showed up for another 15 minutes and those "associates' that walked by said it wasn't their department.    I told the Check out gal, she was very nice to us and that she should be looking for another job as I didn't think this store would stay open much longer.    This year it is one of those being closed.    I hope the check out girl found a different job last year.


Next time Jim says buy, buy, buy, I will know to sell, sell, sell.

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