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J.C. Penney defends itself amid financing speculation

September 26, 2013|By Tiffany Hsu
  • J.C. Penney defended its turnaround progress amid speculation that it is seeking more financing.
J.C. Penney defended its turnaround progress amid speculation that it… (Patrick T. Fallon / Bloomberg )

J.C. Penney publicly defended its trajectory Thursday after watching its stock plunge amid speculation that it needed another financing boost.

In a statement, the retailer said it is “pleased with its progress thus far in the company’s turnaround and the traction its initiatives are starting to achieve.”

J.C. Penney also said it was “starting to see greater predictability in its performance across many areas” -- a nod to several recent quarters of double-digit revenue declines.

The company said it expected same-store sales to be positive for the rest of the year. Customers had rebelled last year against former Chief Executive Ron Johnson’s experiments with pricing and discounting and have been slow to return since his April departure.

But J.C. Penney did not address reports that it was looking for another cash infusion so soon after securing a $2.25-billion Goldman Sachs loan in May. On Thursday the company’s stock slid nearly 6% before recovering to $10.50 a share, a 4% boost, in the mid-session trading in New York.

The price has closed down each day since Sept. 17.

The turmoil at the Plano, Texas, company has continued since Johnson’s predecessor, Myron Ullman, returned to the CEO's post. Top executives in marketing, real estate, operations and more have exited through a rotating door.

After a public war of words with the retailer, activist investor Bill Ackman vacated his board seat last month. Ackman, head of Pershing Square Capital Management, had called for Ullman to step down along with J.C. Penney Chairman Thomas Engibous.

Pershing Square sold the entirety of its 18% stake in the retailer soon afterward.

Even retailers without J.C. Penney’s woes are nervous about the looming holiday season, which many analysts expect to be slow.

In a note Thursday to clients, Sterne Agee analyst Charles Grom said J.C. Penney’s statement came “presumably in response to the 22% drop in stock price this week.”

But after a breakfast meeting Wednesday with Ullman, Grom noted several trends at the retailer that he said he found encouraging. He said Ullman pointed to improving traffic, more coupon use by shoppers and interest in new products.

J.C. Penney is refocusing on its private brands, bringing them to 50% of total inventory compared with their current 33%, Grom said. The chain is also working to reintroduce the $1-billion St. John’s Bay women’s label.


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