What happened
Shares of Sears Holdings (SHLDQ) were headed south today after the department store chain broke off its 100-year-old relationship with Whirlpool Corporation (WHR 1.52%) over a pricing dispute. In a memo to employees, Sears said, "Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price."
As of 3:08 p.m. EDT, Sears stock was down 7.9% on the news.
Image source: Sears.
So what
The news was the latest evidence that suppliers are making life difficult for Sears by asking for stricter terms as the company's cash flow problems mount. It's also a sign that Sears continues to lose its leadership position in appliances, its strongest segment and in which it was the market-share leader for a long time. News that rival Lowe's will begin selling Craftsman tools, a brand that Sears owned for 90 years, also shows how far the retailer has fallen in appliances and hardware.
Now what
It's unclear how much the split will hurt Sears' sales, though Whirlpool owns a number of other well-known brands in the space, including Maytag and Kitchenaid. Whirlpool said Sears was responsible for about 3% of its revenue or about $600 million in sales. That means the retailer could lose at least that much from its top line of $22.1 billion last year, but some of its customers may simply choose other brands.
With Sears' business continuing to fall apart, I'd expect more such breakups with important suppliers.
