J.C. Penney Co. (JCP) rose after reiterating that it expects positive comparable-store sales trends in the second half of the year after its stock plunged in the past week over concerns that it’s running out of cash.
The shares advanced 3 percent to $10.42 at the close in New York. The stock had dropped 26 percent in the previous six trading days through yesterday when an analyst at Goldman Sachs Group Inc. said the chain’s liquidity will be strained this quarter.
Some key items and sizes are back in stock, helping sales at stores and online, the Plano, Texas-based company said today in a statement. Performance in many areas is becoming more predictable as well, J.C. Penney said. The chain’s suppliers are being supportive as it continues to pay them on time, Kristin Hays, a spokeswoman for the retailer, said in an e-mail.
“What they are saying today is that they are continuing to see traction” in winning back their core, older female customers, Mary Ross Gilbert, an analyst with Imperial Capital LLC in Los Angeles, said in a phone interview. “They should be in a good position for fourth quarter.”
Chief Executive Officer Mike Ullman is working to shore up investors’ confidence and fix a company that hasn’t turned a quarterly profit since mid-2011 and lost $1.6 billion in the past year on a 22 percent drop in revenue. Ullman, who took back the helm this year after his predecessor’s attempt to appeal to younger and wealthier consumers failed, has revived sales events and brought back private-label merchandise that appeals to the chain’s traditional customers.
Those actions helped slow the loss of shoppers, with sales at stores open at least 12 months sliding 12 percent in the fiscal second quarter ended Aug. 3. Comparable-store sales are expected to decline 4.3 percent in the current fiscal third quarter and gain 2.4 percent in the fourth quarter, according to analyst estimates compiled by Retail Metrics.
Charles Grom, an analyst for Sterne Agee & Leach Inc. in New York, said in a note yesterday that Ullman told him in a meeting that sales during the back-to-school shopping period showed “good progress.”
J.C. Penney, which took out a $2.25 billion loan and drew $850 million from its revolver this year, is in talks to raise more cash to fund its turnaround, people with knowledge of the matter said last week. While the company doesn’t have immediate cash needs, it has faced shareholder pressure to take advantage of cheap financing, the people said.
J.C. Penney said on Aug. 20 when it announced its quarterly results that it expected to end the year with more than $1.5 billion in liquidity and that the forecast doesn’t assume it would need any additional outside financing.
The company’s shares fell the most in almost seven months yesterday after Kristen McDuffy, a New York-based analyst for Goldman Sachs, said the chain is facing “weak fundamentals, inventory rebuilding, and an underperforming home department.”
Deborah Weinswig, an analyst for Citigroup Inc., followed with a research note after the market closed yesterday that said the “turnaround is taking longer than we expected” and that while the retailer has “ample liquidity” this year, “adequate cash for 2014 and 2015 is in question.” The New York-based analyst, who has a sell rating on J.C. Penney, also cut her share-price estimate from $11 to $7.
For the year, J.C. Penney’s shares are down 47 percent, compared with a gain of 19 percent for the Standard & Poor’s 500 Index.
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