Sears expects REIT by June 1, defends early vendor payment

Hoffman Estates, Ill. – Sears Holding Corp. expects to form a real estate investment trust (REIT) within a few months and sees nothing wrong with paying vendors early. In a public blog post, Rob Schrieshiem, executive VP and CFO of Sears, said the company expects to form an REIT to purchase between 200 and 300 stores by June 1, 2015.



As a result, Sears will manage those stores as a pure real estate company and expects to obtain cash proceeds of more than $2 billion, which the blog post said would provide it with “substantially more financial flexibility to improve our operations, address any vendor concerns and meet our obligations.”



In addition, Schrieshiem addressed a Wall Street Journal article on the retailer offering to pay vendors in 15 days instead of the usual 60 days, in exchange for financial benefits.



“Just like any other retailer, Sears Holdings can and does expect that it will receive benefits in return for any shorter payment terms it may provide to a vendor,” said the post. “Put another way, most families would like to pay off their credit cards on time or early if they could, and if there was a benefit from doing so (or a penalty for not doing so).”



In the post, Schrieshiem also said that in the past three years, on a comparable basis Sears has reduced fourth quarter inventory levels (ending in 2014) by $1.4 billion and payables by $712 million. He also said no insurer has ever had to pay a claim for any of Sears’ 50,000 supplier and vendors for anything related to Sears’ business.