Sears, the US retailer currently embarked on a turnaround strategy, has sued a supplier for demanding what the retailer says are unjustified changes to their supply contract.

Sears Holdings is suing a subsidiary of China-based Techtronic Industries because the supplier has cast doubt on the retailer's ability to meet its letter of credit (L/C) obligations.

Groundless concerns

The lawsuit said the Techtronic subsidiary, One World Technologies had "no basis for its purported concerns" when Sears has given no indication it will not honour its L/C obligations.

The Chinese supplier has no justification to refuse to honour a contract to supply Craftsman-brand power tools to Sears the lawsuit added.

One World is allegedly threatening to repudiate the contract unless Sears scales back the amount of products it orders.

Suppliers nervous

Before the lawsuit was filed, Sears chief executive Eddie Lampert, had already criticised the Chinese manufacturer for making unreasonable demands.

"One World has been paid more than US$868 million since 2007 but is now manufacturing reasons to escape its contract," Lampert said in a company blog.

Suppliers, who are often pushed to the back of the payment line when retailers go bankrupt, have grown nervous about Sears' financial position as it continues burning cash, closing stores and selling real estate to fund its operations.

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