J.C. Penney Falls as Analyst Cuts Estimates

J.C. Penney Co. (JCP) fell to the lowest in more than 12 years after an analyst at Morgan Stanley said the department-store chain is consuming cash faster than expected and may post a wider loss than she previously estimated.

The shares slid 3.9 percent to $13.28 at the close in New York, the lowest closing price since Jan. 26, 2001. The Plano, Texas-based retailer’s shares have fallen 33 percent this year, compared with a 19 percent gain in the Standard & Poor’s 500 Index.

J.C. Penney’s estimate, released last week, that it would have about $1.5 billion in cash at the end of the quarter that ran through July was less than the $1.9 billion projected by Kimberly Greenberger, a New York-based analyst at Morgan Stanley.

Greenberger wrote in a note to clients today that the figure, which implies cash use of about $1 billion from the previous quarter, may be caused by lower operating cash flow, increased capital spending and higher-than-expected inventories.

J.C. Penney may have posted an adjusted loss as deep as $1.34 per share in the quarter, wider than a previous estimate of as much as $1, she said. The average projection of 22 analysts surveyed by Bloomberg was for an adjusted loss of $1.05 a share.

Photographer: Victor J. Blue/Bloomberg

J.C. Penney Co.'s shares fell 30 percent this year through yesterday, compared with a 20 percent gain in the Standard & Poor’s 500 Index. Close

J.C. Penney Co.'s shares fell 30 percent this year through yesterday, compared with a... Read More

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Photographer: Victor J. Blue/Bloomberg

J.C. Penney Co.'s shares fell 30 percent this year through yesterday, compared with a 20 percent gain in the Standard & Poor’s 500 Index.

Same-store sales may have slid 10 percent, more than the previously expected 8 percent drop, Greenberger said.

Johnson Renovations

Amid the costly store renovations and plunging sales under former Chief Executive Officer Ron Johnson, the retailer’s operations consumed $10 million in cash in the year ended Feb. 2, the first year they’ve done so since at least 1987, according to data compiled by Bloomberg. The chain’s operations generated $820 million in cash the previous year.

In an effort to turn the retailer around, Chief Executive Officer Myron Ullman drew $850 million from J.C. Penney’s revolving credit facility a week after succeeding Johnson in April. The drawdown on the $1.85 billion credit line was to be used for capital spending and to replenish inventory as the company opens renovated home departments, the retailer said in a statement.

J.C. Penney also received a loan commitment from Goldman Sachs Group Inc. in April. The five-year term loan, initially targeted for $1.75 billion and later raised to $2.25 billion, was secured by real estate and an interest in other assets of the retailer.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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