Why Sears Holdings Stock Is Dropping Today

Published November 01, 2017
Motley Fool

What happened

Shares of Sears Holdings (NASDAQ: SHLD) were falling again today as worries continued to mount about the ailing retailer's future. On Monday, Sears revealed in a filing that it had gone through $200 million in loans during October as it stocks up for the holiday season, and other reports are emerging about nervous suppliers that are squeezing the retailer.

As of 3:45 p.m. EDT, the stock was down 5.6%.

So what 

According to The Wall Street Journal, suppliers like MGA Entertainment, the maker of a hot holiday toy, have already cut Sears' credit line and tightened their payment terms. MGA has even threatened to cut Sears off entirely if it pays one day late. 

Whirlpool (NYSE: WHR), the nation's leading appliance maker, said it would stop selling to Sears after a pricing dispute ended their century-long relationship. Other suppliers are demanding the company pay them up front to eliminate the risk of selling to it.

Now what 

Time may be running out for Sears as the holiday season, usually a boon for retailers, will test its ability to keep items in stock and bring in customers. The company has already announced plans to close more than 350 stores this year, but as suppliers tighten the screws, it will get even more difficult for the company to stay afloat. Sears has thus far survived in part because it has benefited from CEO Eddie Lampert's largesse in the form of loans from his hedge fund ESL Investments. Lampert seems committed to keeping Sears alive, but I'd expect more store closures as customers continue to flee. As the company bleeds cash, the stock should fall even further.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.