Sears Halts Supplier Payments As Bankruptcy Looms

With talk of bankruptcy growing louder for Sears, the struggling retailer has reportedly stopped paying suppliers.

Reports in Reuters on Thursday (Oct. 11) said three suppliers have reported missed payments from Sears in the last several weeks. The reports have heightened concerns about the company’s future.

“We went into business with them with our eyes open and knew this day would come one day,” said Arnold Kamler, chief executive officer of New Jersey-based bike maker Kent International, one of Sears’ suppliers. In response to the missed payment, Kamler said that Kent International has halted its shipments to Sears.

The retailer did not respond to Reuters’ request for comment. Unnamed sources also told the publication on Wednesday (Oct. 10) that its efforts to secure financing for its anticipated bankruptcy have so far been unsuccessful.

While Sears’ financial woes have been well-reported, and while bankruptcy may not come as a surprise to the market, reports noted that its suppliers will still take a significant punch, as vendors typically receive only “pennies on the dollar” in bankruptcy court. Suppliers are likely hoping that Sears will secure financing so they can be paid as much as possible, reports said.

Yet, two sources told Reuters that discussions with Bank of America and Wells Fargo have not led to any financing agreements so far.

Sears will need to keep up supplier confidence to ensure that enough inventory remains on store shelves, which is key to avoiding liquidation, reports said. But suppliers have pulled back from fulfilling Sears orders for years, either by not working with the retailer, tightening invoice payment terms or cutting down on shipments.

If consumers walk into a store and there are empty shelves, it lowers consumer confidence, and that is what has ultimately happened,” said Brett Rose, CEO of wholesale distributor National Consumer Suppliers.

One source said Sears would attempt to retail vendors by placing orders but not picking them up until it had the money to pay the invoice, and last summer, the company warned suppliers it would no longer prepay for its orders.