Shares of Sears Holdings Corporation dropped by nearly 18 percent Wednesday to $25.05 on news that one vendor was halting shipments to the retailer in advance of the holiday season. Shares recovered throughout the day, and at the time of publication, were down 5.48% to $28.64.
In an article Wednesday, Bloomberg, citing unnamed sources, said that three of the biggest insurance firms for Sears Holdings’ suppliers are looking to reduce coverage, which reportedly prompted one supplier to hold back products for Sears in fear of not being paid for the shipments after a recommendation from its credit department.
Sears responded in kind on its blog Wednesday saying, “In response to a misleading article recently published, we want to make sure our vendors and the marketplace know all the facts and understand that Sears Holdings has significant financial flexibility to execute our transformation and meet our obligations.”
According to Sears, with the $380 in proceeds from the Sears Canada rights offering, the $500 million dividend the company received from the Lands’ End spinoff, the $165 million in proceeds from certain real estate transactions, and the $400 million short-term loan recently awarded from CEO Edward Lampert’s hedge fund, Sears Holdings will have generated up to $1.445 billion in liquidity in fiscal 2014.
Sears also noted that it continues to meet all of its financial obligations, including paying its vendors and suppliers. “To date we’ve had no material interruptions in the flow of goods to our company,” the statement noted.
The retailer also currently has close to $6.5 billion in inventory in stores, it said, adding that less than 3 percent of its gross inventory is factored—a small percentage of its business.
“Despite the rumors and speculation on this topic, for SHC there has been no significant impact to date on our business. Unfortunately, put prices and other forms of insurance reflect perception and not factual reality. We are meeting our obligations and have ample inventory and liquidity to operate our business,” Sears noted.