Boston, MA 10/09/2014 (wallstreetpr) – Sears Holdings Corp (NASDAQ:SHLD)’s stocks plunged more than 17% after the media release said that the vendor had stopped shipments to Sears. The problem seen is of financial position of Sears causing worries among the suppliers. It comes more in focus as the holiday shopping season is near to lure the customers.
The cost-cutting measures
Sears Holdings Corp (NASDAQ:SHLD) has been continuously using several initiatives to save on cost. It slashed costs and reduced business operations as it is faced with two major problems. The first problem is declining sales, and the other problem is weaker margins. Sears owner said that it intends to generate funds of almost $380 million by selling its 51% stake in Sears Canada SCC.T to its shareholders.
Edward Lampert, the CEO of Sears Holdings Corp (NASDAQ:SHLD), initiated several measures to turn it into a digital player company. However, the efforts failed to boost the bottom line. The financial performance of Sears took a hit as it lost more than $1 billion in last six months. Also, almost $747 million capital was used in the operations. The sales dropped more than 8%.
The problem
The problem started when a Bloomberg report said that three of the biggest insurance companies for Sear’s suppliers intend to reduce coverage. One of the reports last week mentioned that Euler Hermes Group SAELE.FR insurance firm will not cover the nonpayment claims of Sears’s suppliers. It said that it is monitoring the situation closely. The insurance firm insures almost $1trillion of business transactions globally. As of now, it is not clear how much inventory of Sears is covered by Euler Hermes.
It came as a warning to the suppliers forcing one of the medium-sized vendors to stop shipments. Fitch Ratings has also said that Sears’s operations are failing to generate enough cash to meet its obligations. However, Sears Holdings Corp (NASDAQ:SHLD) updated on its corporate blog that it has enough financial flexibility to meet the obligations and execute the needed transformation.
