57 F
Fort Worth
Saturday, December 5, 2020
Business Penney dips into credit to stock stores

Penney dips into credit to stock stores

Other News

Left for dead, twice, RadioShack gets another shot online

SILVER SPRING, Md. (AP) — RadioShack, a fixture at the mall for decades, has been pulled from brink of death, again. It’s the most prized...

JC Penney sees bankruptcy protection exit by Christmas

NEW YORK (AP) — J.C. Penney believes it will emerge from bankruptcy protection before Christmas under a new ownership agreement that would save tens...

Petalo, not Charmin: Virus brings Mexican toilet paper to US

By JOSEPH PISANI AP Retail Writer NEW YORK (AP) — Toilet paper is back on store shelves. But you may not recognize some of the...

Mall owners close to buying JC Penney out of bankruptcy

By ANNE D'INNOCENZIO AP Retail WriterNEW YORK (AP) — Mall owners Simon Property Group and Brookfield Property Partners are close to a deal to...
Robert Francis
Robert is a Fort Worth native and longtime editor of the Fort Worth Business Press. He is a former president of the local Society of Professional Journalists and was a freelancer for a variety of newspapers, weeklies and magazines, including American Way, BrandWeek and InformatonWeek. A graduate of TCU, Robert has held a variety of writing and editing positions at publications such as the Grand Prairie Daily News and InfoWorld. He is also a musician and playwright.

NEW YORK (AP) — As J.C. Penney Co. burns through its cash after a disastrous turnaround plan and taps almost half of its credit line, the flailing department store chain doesn’t only have to calm its investors. It has to restore confidence among its several hundred suppliers whose constant flow of merchandise must continue if the retailer is to survive. Penney announced Monday that it would draw $850 million from its $1.85 billion revolving credit line to pay for replenishing inventory particularly for its overhauled home area. Some analysts say the move shows that the Plano, Texas-based company is burning through cash faster than expected. Penney is also looking for alternative sources of funding. It comes at a critical time. Penney is wrapping up back-to-school orders and is starting to order goods for the critical holiday shopping season. Normally, retailers order goods well in advance but don’t pay for them until about 30 to 60 days until after goods are shipped. If vendors start demanding to be paid in advance, stores face a cash crunch when they order goods for busy shopping periods. “Maintaining a seamless flow of merchandise is critical,” said Marshal Cohen, chief retail industry analyst with market research firm The NPD Group. If shoppers see empty shelves, they’ll go somewhere else, he says. The concerns about the future of Penney are mounting a week after Penney fired its CEO Ron Johnson 17 months on the job and rehired his predecessor Mike Ullman. Johnson spearheaded a costly turnaround plan that included getting rid of most discounts, bringing in hip brands and transforming the stores into collections of mini-boutiques. The changes turned off shoppers, resulting in a nearly billion-dollar loss and a 25 percent drop in revenue for the fiscal year ended February. Cohen and others point to a string of retailers, including Circuit City and Linens ‘n Things, that were forced into bankruptcy in part because nervous suppliers delayed shipments of goods or stopped them altogether. Ullman, who was Penney’s CEO for seven years until November 2011 before he was replaced by Johnson, is expected to be in New York this week meeting with vendors, according to Dan Hess, CEO of Merchant Forecast, an independent research firm that monitors the retail sector. Analysts believe Ullman, who is known to have strong relationship with suppliers, will have a calming influence among them. In the stores, he’s expected to bring back discounts and coupons and will be assessing other parts of Johnson’s legacy. “Ullman has always been an executive of high integrity,” Hess said. He noted that suppliers will to be willing to take more risks than they would if Johnson were still at the helm. Allen Schwartz, president of A.B.S. by Allen Schwartz, a supplier of dresses and sportswear for Penney, says he is more relieved now that Ullman is back. “I feel more comfortable,” he said. But there are plenty of signs of nervousness among the financial lenders, commonly called “factors,” that make cash advances to suppliers based on the goods they sell to the merchant. Michael Cipriani of Rosenthal & Rosenthal, a financial lender to clothing suppliers, said it will now slap a surcharge on its clients who sell to Penney after hearing that Penney would tap its credit line earlier than he expected. The company is following other financial lenders in recent weeks. Bob Carbonell, executive vice president and chief credit officer at Bernard Sands, a credit agency for a variety of industries including clothing, said the company continues to recommend suppliers keep shipping to Penney. Still, Carbonell is watching the situation closely. He noted that another horrendous quarterly financial report could have a “psychological impact” on the credit community. Penney is expected to release first-quarter results next month. “Right now, the ball is in Mike Ullman’s court,” Carbonell said. During a conference call last week, Levi Strauss & Co. a Penney supplier to Penney, was asked by an analyst whether it dealing with Penney any differently. Levi CFO Harmit Singh said he was keeping a “close eye” but he noted the retailer “has been paying the bills on time.” “J.C. Penney is a valued customer,” Harmit added. Penney’s moves to increase its cash reserves comes in the middle of the company’s overhaul of its home area. The new home section, which includes shops devoted to merchandise from names like Jonathan Adler and Michael Graves, is scheduled to roll out to 500 of its 1,100 stores by next month. The strategy was part of Johnson’s vision to transform the stores into a mini-mall of specialty shops. Chief Financial Officer Ken Hannah said in a statement that the drawing of the funds “provides more than its current funding needs to ensure our continued liquidity,” but it is also looking to explore other ways to raise more money. In early February, Penney amended its bank credit facility to increase its borrowing capacity to $1.85 billion, from $1.75 billion, but some analysts had expected that it wouldn’t tap into the credit line until the middle of the year Last November, Penney said it would end the latest fiscal year with $1 billion in cash. Penney wound up ending the year with $930 million in cash, which was better than analysts had feared but below the company’s target. However, the figures looked better than they really were because Penney staggered some payments to vendors into the first quarter. Shares of Penney fell 27 cents to $14.35. The stock has lost more than 65 percent of its value since February 2012, when investors were bullish about Johnson’s plan.



Oh hi there 👋 It’s nice to meet you.

Sign up to receive awesome content in your inbox.

We don’t spam! Read our privacy policy for more info.


Oh hi there 👋
It’s nice to meet you.

Sign up to receive awesome content in your inbox.

We don’t spam! Read our privacy policy for more info.

Latest News

Federal loans helped more than 400,000 Texas companies retain workers during the pandemic, new data shows

HOUSTON — The most complete picture so far of the federal program designed to keep businesses afloat during the coronavirus pandemic was revealed this...

COVID-19 relief: What’s on the table as Congress seeks deal

WASHINGTON (AP) — After numerous fits and starts and months of inaction, optimism is finally building in Washington for a COVID-19 aid bill that...

Iconic Fort Worth retail/office center to be represented by Vision

Vision Commercial Real Estate will now be representing one of Fort Worth’s iconic and historic retail/office locations, the Ridglea Village retail center at 6100 & 6040...

Optimism growing for COVID relief bill as pressure builds

By ANDREW TAYLOR Associated Press WASHINGTON (AP) — Optimism about delivering long-sought COVID-19 relief is building on Capitol Hill after additional rank-and-file lawmakers voiced support...

Legendary 6666 Ranch goes on the market for $192.2M

The legendary 6666 Ranch (pronounced Four Sixes) is up for sale. Lubbock-based land brokerage and appraisal firm Chas S. Middleton and Son has listed the...