Suppliers Left Hanging As Sears Rescue Attempt Progresses

The corporate restructuring of struggling retailer Sears continues, with hedge fund owner Edward Lampert reaching a deal this week to combine Sears Hometown with Sears and Kmart.

But the fallout for B2B vendors of Sears resulting from the company’s financial struggles continues under the radar.

Reports in the New York Post on Sunday (June 2) said thousands of vendors across the globe are struggling to continue doing business with Sears, with small and independent businesses and entrepreneurs often the hardest hit.

The publication highlighted Michelle Chan, the owner of a Hong Kong company that manufactures accessories for brands sold in Sears stores. According to reports, Chan lost her life savings as a result of Sears’ filing for bankruptcy late last year, with Sears leaving $4.2 million in unpaid invoices with Chan’s company, Mien Co. Ltd.

Sears began delaying and halting supplier payments amid its financial struggles and subsequent bankruptcy, according to previous reports. The news outlet said the unpaid invoices with Mien were for goods already shipped to Sears.

“Being owed such a big amount of non-paid invoices is a serious attack,” Chan told the publication.

With Lampert’s deal, which established a new company, Transform Holdco, to manage the several hundred remaining Sears stores, existing vendors with Sears continue to operate in limbo. A lawsuit initiated by Sears’ vendors has introduced new challenges over who should pay the debts, Sears or Lampert.

“Each [is] pointing a finger at the other about who should pay what” to creditors,” according to Sarachek, the lawyer representing the six suppliers that have filed the lawsuit. Chan is among those vendors, reports said.

Saracheck noted that the dispute with Sears represents a bigger problem in a manufacturing sector that required smaller players to work with a high-risk, struggling corporate buyer to stay in business.

“It was the most vulnerable vendors who sold to Sears,” he said. “It reflected an unhealthy manufacturing sector. If everything was great, you wouldn’t sell [to] Sears, because you saw the writing on the wall.”