Fitch Lowers JCPenney’s Rating Further into Junk Status

JCPenney's logo turns red again

JCPenney’s logo turns red again

New York—Fitch Ratings, the ratings agency, this week lowered JCPenney’s credit rating into junk status on fear the struggling department store may be using up its cash faster than previously thought.

Fitch now rates JCPenney’s “issuer default ratings” further into junk status, moving it to “CCC” from “B-.”

Last week, the Plano, Texas-based JCPenney announced it would sell some 96.6 million shares of common stock in a public offering in an effort to shore up its cash reserves. The money is needs to help finance the retailer’s turnaround after a failed attempt by former CEO Ron Johnson to upscale the store.

Fitch reported this week that it now expects JCPenney to “burn through $2.8 billion to $3 billion in cash” in 2013, which is $1 billion more than its May forecast.

The rating agency also said it was concerned by JCPenney will need to generate between $750 million to $875 million in earnings “before interest, taxes, depreciation and amortization” to finance continued spending of $400 million to $500 million and cash interest expenses of $360 million to $375 million. In other words that would mean JCPenney would have to hit sales of $13.4 billion to $13.6 billion, or about 14% to 16% above levels projected for 2013.

 

 

Like this? Share it!

Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com