Responding to a report in the New York Post on Wednesday that commercial lender CIT Group (CIT) had stopped supporting deliveries from smaller manufacturers to JCPenney due to concerns about the retailer’s financial situation.
“Contrary to the news report, CIT continues to factor and support deliveries from JCPenney suppliers,” the company said in a statement. “In fact, JCPenney continues to have the support of all of its key vendors, who have maintained their shipments to the company.”
When the Post reported its initial story late Wednesday afternoon, JCPenney’s stock dropped some 10%. Subsequent reports from The Associated Press, Bloomberg News and Reuters confirmed the CIT story with sources. While CIT has declined comment, JCPenney said talk that small suppliers are not longer supported are “untrue and that it has been told so directly by CIT, the subject of that report.”
That rebuttal helped JCPenney allay the fears of investors and its stock rebounded about 7% higher in trading today.
Citigroup Downgrades Retailer
JCPenney, which noted that CIT-factored merchandise accounts for less than 4% of its overall inventory, added that it “continues to have ample liquidity” and expects to end the quarter with about $1.5 billion in cash on its balance sheet.
The CIT wasn’t the only bad news JCPenney got this week. Citigroup downgraded the company to “sell” from “neutral.”
“We do not believe that JCP has made progress in stabilizing the business in 2Q13, and we see no evidence of a turnaround in the works,” Deborah Weinswig, Citi retail analyst, wrote in a research note. “We have been surprised that quick fixes (like bringing back coupons) have not led to stronger sales, and we don’t see anything that will change this in the near-term.”
The downgrade, which occurred before JCPenney denied the Post story, didn’t appear to be tied to the CIT concerns. Citi noted that CIT represents a “relatively small” percentage of JCPenney’s total receivables.
JCPenney is trying to turnaround business since April when Ron Johnson was ousted 17-month tumultuous tenure as chief executive when JCPenney reported a net loss of $985 million.
Back to school, typically a retailer’s second largest season after holiday, could be a crucial season for JCPenney’s turnaround. According to Experian Marketing Services, JCPenney has already made in roads in online shopping: the store’s website is second only to Walmart’s for back-to-school shoppers. In 2012, JCPenney wasn’t even ranked in Experian’s top 10.