The Toy Association Surveys Members to Gauge Sears/Kmart Risk
November 19, 2018 | The Toy Association continues to closely monitor court activity and news related to Sears Holdings Corp.’s bankruptcy proceedings. This includes developments as the company passes through the holiday selling season and as it seeks both financing and asset sales to avoid liquidation.
Sears Holdings filed for Chapter 11 bankruptcy on October 15, listing $6.9 billion in assets and a significant and concerning $11.3 billion in liabilities, according to court filings. Sears Holding also announced the closing of 142 of its 700 stores by the end of the year (in addition to 46 previously announced store closures), throwing into doubt the future of the 125-year-old retailer. More recently, Sears announced plans to close an additional 40 stores by February 2019. Sears also disclosed in court filings that it plans to sell an undetermined number of stores. The company claimed 400 of its stores are currently profitable, while determining a number of others can be made profitable.
Risk remains for toy manufacturers selling to Sears/Kmart, however a recent survey by The Toy Association indicated that most member companies have strived to either not become too far extended selling to Sears/Kmart or have stopped selling to them altogether.
Given that credit insurance on receivables has not been available for some time, those selling to Sears and/or Kmart appear to have exercised exceptional caution. The Toy Association survey found 66 percent of members were either not selling to Sears or Kmart, had the companies on short terms, or were requiring cash payment upon delivery. Twenty-six percent reported they were on regular payment terms but at not more than 30 days. The remaining small percentage were somewhere between the two groups. While the vast majority of respondents indicated Sears or Kmart sales at 5 percent or less of total sales, five member companies responding did have existing Sears or Kmart sales between 6 and 11 percent.
The Toy Association is committed to securing resources needed to support members, including bankruptcy counsel and financial advisors should they be required.
Members will be kept apprised of developments on this topic through Toy News Tuesday and important email alerts should a member conference call or webinar be scheduled. Association members with specific questions or concerns related to Sears Holdings should contact Paul Vitale, executive vice president of finance & operations at The Toy Association. More information on Sears Holdings’ court filings and other documents is available on Prime Clerk’s website.