Sears Holdings Corp. has sued a subsidiary of Techtronic Industries Co. Ltd. (00669.HK) for demanding what is says are unjustified changes to its supply contract.
Sears said the Techtronic unit, One World Technologies Inc., has no justification to refuse to honor a contract for delivering Craftsman-brand power tools, the Wall Street Journal reports, citing the lawsuit filed on Monday by the retailer in the Illinois state court.
One World is allegedly threatening to repudiate the contract unless Sears scales back the number of products it needs, the newspaper said.
The Journal said One World’s move is the latest signal that suppliers are not satisfied with the struggling retailer’s turnaround strategy.
In a post on the company blog earlier on Monday, Sears chief executive Eddie Lampert criticized One World for making “unreasonable demands”.
One World has been paid more than US$868 million since 2007 but is now manufacturing reasons to escape its contract, the WSJ quoted Lampert as saying in the blog.
Suppliers, who are often among the last to get paid when retailers go bankrupt, have grown nervous about Sears’ financial position after it said in a stock market filing that “substantial doubt exists related to the company’s ability to continue as a going concern”.
The company is closing stores and selling real estate to help fund its operations.
In its lawsuit, Sears accused One World of trying to renegotiate its deal based on “innuendo, rumor and unfounded inferences” regarding the company’s financial health, according to the Journal report.
If the vendor can cut its shipments to Sears, it can sell those products to other retailers at higher prices without spending the money to increase production, the lawsuit added.
– Contact us at [email protected]