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Sears Suppliers Ready to Pull Back in 2012

Stocks in this article: SHLD

NEW YORK ( TheStreet) -- Sears' (SHLD) vendors and suppliers are leery of the department store in 2012.

The factor community -- those who provide loans or lines of credit to suppliers and apparel makers to tide them over until retailers make payments -- have expressed concern over the state of Sears, saying vendors are already starting to pull back and could distance themselves further from the company if things don't change soon.

Decisions are on hold until fourth-quarter numbers are released but if the numbers aren't good, things could get tighter from a supplier and vendor perspective, according to several major factoring firms who wished to remain anonymous because of their relationship with the company.

The company announced poor same-store sales numbers early Tuesday and said it plans to close up to 120 Kmart and Sears full-line stores.

Under the scrupulous watch of the vendor community, Sears will need to take major action to restore confidence in its balance sheet.

"I think 2012 might be the year Sears considers reshuffling the deck chairs," says Jack Hendler, president of Net Worth Solutions, a merger and acquisition advisory firm. "Sears' parts are greater than the whole. They have valuable intellectual property and brands, like Land's End, Craftsman and Kenmore, that they could utilize if things got really bad."

The flailing department store, under the helm of billionaire investor Edward Lampert, may need to resort to selling off some of these iconic brands in the new year, Hendler said.

Hendler calls out electronics giant LG as a potential acquirer of the Kenmore brand. "They would love a U.S. brand. To pick up an iconic U.S. brand like Kenmore would be a big win for them."

"There is concern in the financial markets about the viability of ongoing operations," Hendler says. "The vendor community is watching Lampert carefully right now. He isn't committed to retail and hasn't brought in a retailer like J.C. Penney has with Apple's Ron Johnson ."

Sears has been lagging rivals like Macy's (M) and Kohl's (KSS) for some time, and Lampert has put little focus into rejuvenating tired stores and merchandise.

On Nov. 17, Sears reported a third-quarter loss of $2.57 per share on revenue of $9.56 billion, missing analysts' estimates of a loss of $2.29 a share and revenue of $9.6 billion. Gross margin also fell to 25.6% from 26.4%, pressured by higher costs at Kmart.

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