Shares of Sears Holdings plunged (SHLD) Wednesday following a report that said one of the department store chain’s mid-size vendors is halting shipments to the company.
A Bloomberg report citing anonymous sources said Wednesday that at least one vendor, an unnamed company, will no longer ship its products to Sears due to the fact that three of the largest providers of credit insurance to Sears suppliers are looking to reduce their coverage. Euler Hermes Group has already begun sending coverage cancellation notices to vendors, Bloomberg noted, while providers Coface and Atradius Credit Insurance apparently have plans to do the same.
The company, which operates both the Sears and Kmart store brands, has seen its stock lose more than 47% of its value since the start of the year and sinking sales numbers recently forced the struggling retailer to turn to its chairman, Eddie Lampert, for a $400 million short-term loan.
Last week, Sears even opted to sell off most of a stake in its Canadian unit at a major markdown in hopes of raising $380 million in much-needed capital.
UPDATE: Sears responded Wednesday afternoon to what it calls Bloomberg’s “misleading article” with a statement in which the company assures its vendors and investors that Sears “has significant financial flexibility to execute our transformation and meet our obligations.” The company adds that its stores are currently stocked with $6.5 billion in inventory and that its long-term supply contracts with several “major venders” will help keep Sears’ stores well-stocked going forward.
Sears also stated that insurance providers have not yet needed to pay out a claim to vendors doing business with the company and that “the rumors and speculation on this topic” have not significantly affected the company’s business. And, as far as the company’s financial flexibility, Sears says it still plans to work with its lenders over the next 6 to 12 months “to evaluate its capital structure with a goal of achieving more long-term flexibility, and may take other actions as appropriate.”