Penney’s issuer rating and $3.1 billion of unsecured debt was lowered to BB+, one step below investment grade, from BBB-, New York-based Fitch said today in a statement. Secured bank debt totaling $1.5 billion was cut to BBB- from BBB.
Penney’s steps may not draw consumers, hurting efforts by the Plano, Texas-based department store chain to boost sales, Fitch said. Chief Executive Officer Ron Johnson told analysts last month his plan to introduce a three-tier price model and scale back discount promotions to 12 per year may triple revenue.
“Things are likely to get worse over the near term,” Monica Aggarwal, a Fitch analyst in New York, wrote in a note to clients. Revenue may slump in 2012 as Penney offers fewer sales in “a marked departure from the industry’s high-low promotional strategy,” she said.
Penney slumped 3.1 percent to $41.35 today. The shares have climbed 18 percent this year.
Standard & Poor’s, which also rates J.C. Penney at BB+, lowered the company to junk in April 2009.
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