Lender Cuts Credit to Sears/Kmart Vendors

Bedraggled Sears Holdings, already planning to close 100 or more stores, has run into another hurdle -- CIT Group says it will no longer finance loans to Sears' suppliers who are awaiting payment from the company.

The loans, known as factoring, enable suppliers to finance their operations as they wait for payment from retailers.  Sears insists that CIT, the nation's largest factoring lender, provides only about five percent of the loans to its suppliers but the announcement is still likely to send chills through the Sears supply chain.

Sears has been struggling to overcome worries about its finances. All three major credit-rating firms have downgraded its debt in recent weeks, noting its declining earnings over the last year. Sears fell 5.8 percent to $31 at mid-morning Thursday as news of the CIT decision hit. The shares dropped 56 percent last year.

Sears Holdings has blamed poor holiday sales for the decision to close up to 120 underperforming stores, but analysts say the entire chain is underperforming, at least partly because it has failed to spend enough on freshening its stores so that they are attractive and inviting places to shop.

Inventory slipping?

If, on top on their already-dowdy appearance, Sears and Kmart stores begin to display empty shelves, sales could be further degraded. Judging from recent complaints to ConsumerAffairs.com, that may already be happening. 

"For the past 2 1/2-3 months I have been trying to order the Disney Botanical Baby Play Yard, only available at sears.com and Kmart.com," said Addie of Fort Riley, Kansas recently. "All four times I have ordered this item it has instantly gone 'out of stock.'" 

"For the last couple of years I have strictly shopped Kmart especially around the holidays but lately kmart has been falling behind on the availability of products," said Erica of Pearsall, Texas. "I have had to travel two hours to pick up my merchandise after completing the layaway plans."

"I ordered a combo toolbox for my husband on Dec. 4th with a delivery date of Dec. 23rd. When it didn't arrive, I called Sears and was told there was a backorder on the product," said Stacia of Jefferson, Ga.