J.C. Penney Co., the department-store chain seeking to rebound from its worst sales year in more than two decades, said today a report that CIT Group Inc. has stopped funding some of its suppliers is false.
J.C. Penney fell 0.1 percent to $14.58 at the close in New York, following a 10 percent decline yesterday after the New York Post reported that commercial lender CIT ceased supporting deliveries from small manufacturers to its stores. The newspaper didn’t name its source.
“Contrary to the news report, CIT continues to factor and support deliveries from J.C. Penney suppliers,” the Plano, Texas-based store operator said in a statement. J.C. Penney “continues to have ample liquidity to manage its business with expectations to close the quarter with approximately $1.5 billion in cash on its balance sheet.”
Firms such as CIT provide money on a short-term basis for manufacturers to produce goods for retailers, and in return are paid a fee based on a percentage of the total order. If so-called factors like CIT stop funding suppliers, it can prompt other such lenders to follow suit.
That also would mean J.C. Penney would have to pay for goods in cash when delivered, Liz Dunn, an analyst for Macquarie Group in New York, said in a note to clients. Less than 10 percent of J.C. Penney’s goods are funded by commercial lenders, of which CIT is the biggest, and if it had to pay up front for all those goods it would total about $300 million, Dunn said.
J.C. Penney said today CIT factored merchandise currently represents less than 4 percent of its overall inventory for the year.
Such a move by CIT wouldn’t have been unprecedented. It cut off funding to Sears Holdings Corp.’s suppliers in 2012. Those vendors made up less than 5 percent of sales, Sears said at the time.
J.C. Penney is working to improve sales after revenue last year tumbled 25 percent to $13 billion, leading to a net loss of $985 million after Ron Johnson’s failed attempt to remake the retailer. The chain ousted Johnson, a former Apple Inc. executive, in April just 17 months after he took the job.
Mike Ullman, who retook the CEO spot, is working to shore up the company’s finances and increase promotions to lure back shoppers. J.C. Penney will report its first full quarter under Ullman’s leadership next month. A date hasn’t been set yet.
Matt Klein, a spokesman for CIT, said yesterday the company doesn’t comment on specific customers.