Sears sues second Craftsman supplier as frustrations with key vendors mount

Key Points
  • Sears filed a lawsuit against Western Forge — which has worked with the company's Craftsman division for more than 50 years — on Monday, the Chicago Tribune has reported.
  • Sears spokesman Howard Riefs told CNBC the company will "take the steps necessary to hold vendors to honor our agreements."
  • Western Forge was bought by Ideal Industries in 2010.
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Sears is in another battle with one of its Craftsman vendors, this time filing a lawsuit against Western Forge — which has worked with the company for more than 50 years — on Monday.

The suit was first reported by the Chicago Tribune.

With one disagreement behind it, Sears is now struggling to hold on to another key toolmaker's relationship.

Earlier this week, Sears updated a blog post to reflect that it settled a dispute with One World Technologies, another Craftsman partner, which the department store chain had first sued in mid-May.

"The matter has been resolved to the mutual satisfaction of both parties and we look forward to continuing our relationship with One World," Sears said in a statement.

At the time, Sears' lawsuit said One World was citing concerns about the retailer's ability to pay the vendor back. Under increasing pressure, the department store chain had called One World's concerns unfounded, saying it has made and would continue to make all necessary payments.

Sears sold its Craftsman tool brand to Stanley Black & Decker earlier this year, in a deal valued at $900 million. The deal provides Sears the right to sell Craftsman products made by its existing suppliers, royalty-free, for 15 years.

"Western Forge ... is refusing to perform under its current Supply Agreement," Sears spokesman Howard Riefs told CNBC in an email Thursday.

Riefs said Sears will "take the steps necessary to hold vendors to honor our agreements," and seeks to hold Western Forge "to the terms they agreed and to recover damages caused by ... breach of the contract."

Western Forge was bought by Ideal Industries in 2010. An agreement between the company and Sears was set to expire at the end of April, the Tribune reported, and both Ideal and Sears were believed to have been discussing extending their partnership.

But "after several weeks of assurances by Ideal intended to lull Sears into the belief that Ideal would agree to extend the agreement, Ideal abruptly informed Sears that it will not agree to extend the contract beyond its term," according to the lawsuit, which was obtained by the Tribune.

Ideal did not immediately respond to CNBC's request for comment.

Ideal's refusal "has left Sears without the ability to sell certain of its Craftsman brand tools without supply interruption and constitutes a material breach of the agreement," the lawsuit reads.

Sears CEO Eddie Lampert has been more vocal about his frustrations with partners lately, saying in one interview the company is "fighting like hell."

Earlier this year, because of new rules from the Securities and Exchange Commission, Sears was required to disclose that there is "substantial doubt" about the retailer's "ability to continue as a going concern." That disclosure reignited long-standing rumors that the company could file for bankruptcy as early as this year.

In January, Sears Holdings said it would close 150 underperforming stores, including 108 Kmart locations. Earlier this week, Sears announced it will close 66 of its remaining 1,275 stores in an attempt to boost profitability, a source close to the chain told CNBC on Wednesday.

The latest round of store closings includes 49 Kmart stores and 17 Sears stores, with most shuttering by September, the source said.