Sears has a bigger problem than plunging sales: dwindling inventory.
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Sears has a bigger problem than plunging sales — but nobody's talking about it (SHLD)
Suppliers that are cutting back shipments, refusing bigger orders, and demanding earlier payment from Sears.
Sears is having a hard time filling its shelves and wall displays with merchandise.
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Companies that supply Sears with the TVs, toys, and clothing for sale in its stores are growing increasingly concerned about the retailer's ability to pay its bills, and some are cutting back on shipments to stores as a result.
That means Sears and Kmart stores are receiving less merchandise to sell, which is a grave problem for a company that's trying to avoid a possible bankruptcy by reversing years of sales declines.
Reuters spoke to three suppliers that are cutting back shipments, refusing bigger orders, or demanding earlier payment from Sears.
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A Bangladesh-based textile firm told Reuters that it has drastically cut back shipments to Sears for the upcoming holiday quarter, and that it's reevaluating accepting new orders to protect itself against the risk of nonpayment. The company declined to be identified.
Another supplier, Arnold Kamler, CEO of New Jersey-based bicycle manufacturer and importer Kent International Inc, told Reuters that Sears tried to purchase more bikes from them last year "because a lot of their current suppliers were either cutting them off or limited them on credit." He said he declined Sears' request.
It's a problem that's underreported because so few suppliers are willing to discuss the matter openly for fear of triggering a Sears bankruptcy or disrupting their relationship with the company.
But the issue is readily apparent stores, where empty shelves and barren wall displays showcase the impact of the company's declining inventory.
Recent visits to Sears stores in Richmond, Virginia and Woodbridge, New Jersey revealed a clear lack of inventory.
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Unfortunately for Sears, suppliers' fears may only accelerate going forward following the company's admission in a filing this week that there's "substantial doubt" about its ability to stay in business.
Sears' stock plunged by nearly 13% following the news.
"We are firmly focused on improving the operational performance and financial flexibility of Sears Holdings," he said.
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