*June 5, 2017 UPDATE*
“The matter has been resolved to the mutual satisfaction of both parties and we look forward to continuing our relationship with One World.”
Last week, at our annual meeting of stockholders, I said that Sears Holdings needs the support of our members, vendors, lenders and the communities we serve to succeed. I also shared my view that while we are not asking to be spared from informed opinions about our business performance, the recent wave of dire predictions about our company’s future have done harm to our business.
I also discussed the hard work we are doing with our vendors to meet their concerns. These efforts have resulted in a meaningful reduction in their counterparty risk with Sears Holdings – to the point where nearly all our vendors have a level of credit risk that is both affordable and appropriate given the relationships we have and our history of always meeting our obligations.
But, as I explained last week, there have been examples of parties we do business with trying to take advantage of negative rumors about Sears to make themselves a better deal – a deal that is unilaterally in their interest. In such a case, we will not simply roll over and be taken advantage of – we will do what’s right to protect the interests of our company and the millions of stakeholders we serve.
Today, we are taking a stand against one vendor that is trying to take unfair advantage of us: One World, a company with whom we have had over a nine-year business relationship, has threatened to refuse to perform under their Supply Agreement unless we agree to what we believe are unreasonable demands. One World has informed us of their intention to take the very aggressive step of filing a lawsuit against us as they seek to embarrass us in the media to force us to let them out of their contract. But Sears has nothing to be embarrassed about — we have lived up to our word under our contract, and we will take the appropriate legal action to protect our rights and ensure that One World honors their contract.
One World is a subsidiary of Techtronic Industries, a conglomerate based in China with over $5 billion in revenues. One World makes various power tools and related accessories for Sears under the Craftsman brand. For over nine years, One World has enjoyed significant benefits from its relationship with Sears – we have paid One World more than $868 million since 2007 – a relationship that helped One World build a formidable presence in the tool industry. Sears has paid and continues to make all payments to One World as they come due, and we are fully capable of continuing to meet our obligations under the Supply Agreement.
There are important competitive reasons why we will fight hard to hold One World to honor our agreement. One World also manufactures power tools for other companies – by reducing its commitment to Sears, One World can do more business with those other companies by diverting resources now committed to Sears without incurring the cost of expanding its manufacturing or outsourced procurement capacity.
If we allowed One World to break their agreement, it would effectively reduce the flow of products they are required to deliver to Sears, harming our ability to sell tools, supply parts, and provide goods to Sears’ members and customers. We won’t allow that to happen. We are generally not a litigious company, but we will fight back to protect our legal rights, hold One World to its contractual agreements, and ensure that our customers are not affected by this business dispute.
As I have said, I believe Sears Holdings can continue to operate as a very significant member-centric integrated retailer with a large number of stores as long as we receive the support of our vendors and other stakeholders. It is important to note that we purchase more than $13 billion a year in goods and services to offer our members in Sears and Kmart in-store and online. Across our entire vendor base, we have always met our payment obligations and are confident that the steps we are taking to improve our financial strength and reduce our operating losses will ensure that we will continue to be a strong business partner for many years to come.
Eddie Lampert is Chairman and Chief Executive Officer at Sears Holdings Corporation.