J.C. Penney Company, Inc. (NYSE:JCP) has just reported preliminary unaudited earnings for the quarter in connection with a recent financing transaction. Full earnings will be provided by the company on May the 16th. As of May 4th 2013, J.C. Penney estimates that it has $821 million cash on hand and debt of $3.818 billion. The company expects revenue of $2.635 billion for Q1. The company expects same store sales to decrease 16.6 percent for first quarter compared to the same period last year. The earnings have been highly anticipated by investors amid news of George Soros taking a large stake in the struggling retailer, the appointment of a new CEO, and concerns about the company’s cash flow. Shares are currently up 2.3 percent after hours on the results.
Financing Details — J.C. Penney Company, Inc. (NYSE:JCP) disclosed it has entered into a commitment letter with Goldman Sachs Group, Inc. (NYSE:GS) for a $1.75 billion 5-year secured term loan. The UOP will be to tender for the 7.125% debentures due 2023 and general corporate purposes. Many also expect some proceeds will be used to repay $850 million of outstanding revolver borrowings.
Security of New Facility — Collateral includes
- J.C. Penney Company, Inc. (NYSE:JCP)’s Headquarters and related land
- Nine owned distribution centers
- An additional ~$850 million of owned / ground leased property selected by JCP
- 90% of the aggregate value of owned properties worth more than $2 million
- 80% of the aggregate value of ground leased properties worth more than $2 million
- Intellectual Property and
- A secondary Interest in ABL collateral.
J.C. Penney Company, Inc. (NYSE:JCP) Offered Online-Only Coupons
For the second consecutive week, J.C. Penney Company, Inc. (NYSE:JCP) offered two online-only coupons: (1) 15% or 20% off purchases below/above $100, respectively (valid 4/29-5/2); and (2) the ‘Buy More, Save More’ event, featuring discounts of $10, $15 or $25 on orders above $25, $50 and $100, respectively. Of note, the event was originally set to run on 5/3-5/4, but was extended a day. In addition, J.C. Penney’s ‘Mother’s Day’ sale (4/28-4/30) was reinforced via a $10 coupon for in-store purchases of $25 and up (5/3-5/4), along with discounts on new select merchandise.
Deutsche Bank channel checks suggest that traffic has picked up meaningfully since coupons have returned, albeit at the likely expense of gross margins. To this end, looking back to early May 2011, DB notes that J.C. Penney Company, Inc. (NYSE:JCP)’s 2-day coupon was for $10, $15, and $20 off of purchases of $50, $75, and $100, resp., which equates to a 20% discount vs. the 25%-40% discounts aforementioned in recent events.
On the May 16th conference call management will likely provide more details on both the new coupon strategy as well as the financing.