Sears stock down again on reports of halted vendor shipments

Sears Canada stock plunged by eight per cent and U.S. parent Sears Holding Corp. was down by 15per cent after reports that a vendor had stopped shipments to U.S. stores.

The report, citing unnamed sources, noted that three of the biggest insurance firms forSearssuppliers are reducing credit insurance coverage that provides protection for vendors against non-payment of a bill.

It made a deal last week with ESL Investments, a firm closely held by its chairman Eddie Lampert, to sell off most of its stake in Sears Canada for $380 million. That move was meant to raise money so it could buy stock for the holiday season.

But the retailer has seen its sales decline for five straight years amid a very competitive retail environment.

Sears Holdings recovered later in the day, closing at $28.85 after hitting a low of$26.US. Sears Canada, which had a sharp spike downward last week after news of its parent companys sellout, closed at $9.92, down slightly from yesterday.

Sears denies trouble with vendors

In a company blog posted today, Sears Holdings denied that it had trouble paying its vendors or that vendors had stopped shipments.

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It emphasized that it had "financial flexibility"

"SHC has significant financial flexibility and the means to fund our transformation and meet all of our obligations," the blog read.

"Together with proceeds from the Sears Canada rights offering (up to $380 million, of which we expect at least $168 million by Oct. 20, 2014), the $500 million dividend Sears Holdings received in connection with the Lands End spinoff, the $165 million in proceeds of certain real estate transactions and the $400 million short-term loan the company recently completed, SHC will have generated up to $1.445 billion in liquidity in fiscal 2014."

That $400 million short-term loan is directly from Lampert, and backed by his choice of Sears retail locations.

Sears Canada has already sold off some of its highest-profile locations as well as its interest in eight regional malls.

It also remitted $500 million to the parent company last year as it supposedly restructured.

J.C. Penney stock down

It's unclear what the plan is to restore Sears Canada. Critics have said Lamperthas little feel for the retail business and has allowed Sears merchandise to become dated and the shopping experience to become poor.

In more signs of trouble in the retail sector, shares of J.C. Penney Co. fell nearly 10 per centafter the department store operator cut its outlook for sales in the current quarter.

Former CEO Ron Johnson was ousted in April 2013 after only 17 months on the jobamid plunging sales and huge losses and a new transformation plan has not yet taken hold.

New CEO Mike Ullman has been trying to win back shoppers by restoring salesevents and basic merchandise that the company ditched underJohnson's tenure.