Hoffman Estates,IL—Sears Holdings moved to do some damage control surrounding a report that CIT Group, one of the biggest factoring services, is refusing to extend credit advances to the retailer’s suppliers.
While CIT declined to comment on a report by Bloomberg News that it will no longer approve credit for orders effective immediately, Sears released a statement on Thursday saying the decision would have little impact on business.
“We disagree with their action,” a Sears Holdings spokesperson said, noting that other lenders are still financing loans.
In addition, Sears said CIT’s payable account for less than 5% of its inventories and that other lenders are still financing loans. The retailer said it has “more than adequate liquidity and ample resources at our disposal which give us significant financial flexibility.” At the end of 2011, the company had about $4.2 billion of liquidity, comprised of about $900 million in cash and $3.3billion available through its credit facilities.
The Latest in a Series of Setbacks
Although CIT’s decision isn’t likely to affect shipments to the company’s Sears and Kmart stores, it is another setback in a series of setbacks for Sears Holdings. Its stock, which made the list of Wall Street’s “10 most hated stocks,” dropped 56% last year.
Just after Christmas, the company reported that its comparable store sales were down 5.2% during the holiday season and it would begin closing some 100 to 200 stores. Not long after, Sears was hit by a downgrade in credit rating, after Moody’s marked it down from B1 to B3.
In another report, Edward S. Lampert, Sears Holdings’ chairman, added another $130 million share of the company’s stock to his holdings. Through his hedge fund, ESL Investment, and his own stock portfolio, Lampert controls about 60% of the stock. But the latest acquisition was made through ESL, according to a regulatory filing.
The New York Times reported “Lampert may be under pressure to meet redemptions from his hedge funds. Other regulatory filings suggest that investors have been pulling out in recent weeks.”
Top Executive Departs too
Adding to the unease about the retailer’s health, Sears confirmed that John Goodman, executive vice president of apparel and home, had resigned effective immediately. Prior to joining Sears to help revive its softgoods division, Goodman was chief executive at Charlotte Russe and before that, chief of Kmart’s apparel and home division.