Dive Brief:

• Sears released its annual report on Tuesday, stating that past operating results indicate “substantial doubt...related to the company’s ability to continue as a going concern,” The Wall Street Journal reported. Such language implies great uncertainty over the business’ ability to meet its next 12 months of obligations.
• This is the first time Sears has issued such a warning in its 131 years of operations. Stocks have dropped 39% within the past year, with shares falling a further 12% to $7.98 on Wednesday, the day after the press release.
• However, Sears CFO Jason Hollar says that the disclosure is merely in line with regulatory standards, and that it's “probable” that further cost cuts, sales of assets, and other actions would help mitigate the seller's headaches.

Dive Insight:

With Sears admission of deep financial struggles, suppliers of the once-vaunted retailer have scaled back en masse, demanding payment up front, limiting merchandise levels, and in some cases, cutting them off entirely.

It's the reverse of the usual supply chain conundrum — to ensure timely payments for items produced before continuing further production. In this case however, it's the suppliers who are hedging their bets. Worse still is the refusal of previous supply insurers to continue to underwrite policies that ensure payment. Manufacturing plants previously occupied with production for inventory intended for Sears now report idle equipment as well as lowered expectations for the 2017 holidays.

Many vendors and industry analysts predict a negative outcome for Sears, despite the measures taken to continue operations. The retailer may be able to hang on for a few more quarters, but a successful outcome to its current scenario is considered unlikely