Speaking to investors in New York, CEO Myron “Mike” Ullman reportedly told them JCPenney didn’t plan to raise cash as some reports indicated earlier this week.
Moreover, JCPenney issued a press release this morning seeking to reassure that its turnaround efforts were progressing.
“In response to inquiries, JCPenney said today that it is pleased with its progress so far in the company’s turnaround efforts and the traction its initiatives are starting to achieve,” the statement said. “Overall, sales on jcp.com continue to trend double digits ahead of last year.”
‘Positive Comp Store Sales Trends’
In addition, the department store said it expects “positive comparable store sales trends” for the third and fourth quarters of this fiscal year. The statement made no mention of any efforts to raise cash.
JCPenney had taken out a $2.25 billion loan and drew $850 million from its revolver this year. And now is seeking additional funding, according to reports.
On Wednesday, JCPenney’s stock, which has fallen about 50% this year, dropped even lower after Goldman Sachs reported that the retailer’s sale would grow more slowly than expected. Citing unnamed sources, Reuters said on Wednesday that JCPenney wants to raise up to $1 billion in new equity.
JCPenney stock fell due to the “the shock and awe of seeing them raise more money, and that might be the last money they can raise,” said Brian Sozzi, chief equities strategist/ceo for Belus Capital Advisors.
“They’re going to have to really improve in 2014,” Sozzi said. “If they don’t, and continue to burn cash, then you really have to wonder about their survival in 2014.”
Most analysts believe JCPenney has enough money for fiscal 2013.
“We still believe JCP has ample liquidity for 2013, but if cash burn is running worse than our estimates, the company may need to raise capital to cushion against a potentially challenging holiday season,” Citigroup analyst Deborah Weinswig said in a note. Weinswig, who rates JCP a “sell,” said the store’s turnaround has been made more difficult by a softer “ macroeconomic environment” that many retailers complained about in their recent earnings reports.
“While we agree that liquidity will not be an issue through FY13, looking ahead to FY14 we believe that the issue of liquidity remains a big question,” wrote Sterne Agee analysts Charles Grom and Renato Basanata.