In response to a misleading article recently published, we want to make sure our vendors and the marketplace know all the facts and understand that Sears Holdings has significant financial flexibility to execute our transformation and meet our obligations.
Here are the facts:
- SHC has significant financial flexibility and the means to fund our transformation and meet all of our obligations. 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. We have no significant term debt maturities until late in 2018, and we also have a vast real estate portfolio which is substantially unencumbered and whose “accounting value” is reflected on our financial statements at about $5 billion, not to mention about $6.5 billion in inventory, much of which is already paid.
- SHC continues to meet all of its obligations, including paying our vendors and suppliers. To date we’ve had no material interruptions in the flow of goods to our company. We value our relationships with vendors and suppliers, and communicate with them regularly as we move through our transformation.
- SHC has almost $6.5 billion in inventory in our stores right now. Our stores are well stocked and serving our millions of members every day. We also enjoy long-term supply contracts with several of our major vendors which ensure us a regular flow of goods in some of our most important categories. Furthermore, less than three percent of our gross inventory is factored – a very small percentage of SHC’s overall business. Additionally, one has to remember that factoring is generally employed on the apparel side of the business and that the vendors are generally smaller in nature – albeit still important to us as all our vendor partners are.
- SHC has the financial resources to deal directly with our vendors. We are always pleased to work with our vendors directly while also being supportive and encouraging of providers of credit support. These steps also proactively demonstrate to vendors and other constituents our steadfast commitment to meet our obligations.
- Providers of insurance have never had to pay a claim to a vendor tied to SHC’s business. Despite the rumors and speculation on this topic, for SHC there has been no significant impact to date on our business. Unfortunately, put prices and other forms of insurance reflect perception and not factual reality. We are meeting our obligations and have ample inventory and liquidity to operate our business.
- We continue to work to enhance our financial flexibility. As previously announced, over the next six to 12 months, Sears Holdings intends to work with its lenders and others to evaluate its capital structure with a goal of achieving more long-term flexibility, and may take other actions as appropriate.