Embattled US department store retailer Sears is being challenged by a number of its suppliers over protection for consigners since going into bankruptcy, including a fraud lawsuit filed by one of its clothing suppliers.
CEO Edward Lampert stepped down from the helm this month after Sears filed for bankruptcy, announcing the closure of 142 stores. The company is rolling out a series of actions to position it “to establish a sustainable capital structure, continue streamlining its operating model and grow profitably for the long term”.
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The move followed weeks of speculation Sears was heading toward bankruptcy.
The retail giant is now facing a lawsuit filed on 16 October – a day after Sears went into bankruptcy – from clothing manufacturer In Gear Fashions. The supplier is reportedly seeking around US$840,000 in damages over seemingly cancelled payments on product that should have been paid for between 28 September and 25 October.
Other suppliers, including a jeweller, a watchmaker, and technology firm, have also legally challenged Sears, saying the retailer’s plans for going out of business sales do not offer protections for consignors, who own the products but supply them to retailers, according to court filings.
Sears is hoping the Chapter 11 process will give the company the flexibility to strengthen its balance sheet, enabling it to “accelerate its strategic transformation, continue right-sizing its operating model, and return to profitability”.
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By GlobalData“Our goal is to achieve a comprehensive restructuring as efficiently as possible, working closely with our creditors and other debtholders, and be better positioned to execute on our strategy and key priorities,” the retailer has said.
Neil Saunders, managing director of analyst GlobalData Retail, believes there are a multitude of factors that have contributed to Sears’ demise, foremost among them management’s failure to understand retail and evolve Sears in a way that would have given the chain a fair chance of survival.
Sears did not return a request for comment at the time of going to press.
