J.C. Penney Company, Inc. (NYSE:JCP)’s latest 10-Q filing indicates that it is significantly increasing its capital expenditures for the second half of this year. As a result, Bank of America Merrill Lynch analyst Lorraine Hutchinson said she changed her estimates for the company’s free cash flow in the current fiscal year.

J.C. Penney

Changes In J.C. Penney’s Capital Expenditures

In the new 10-Q filing, executives revealed that they are now planning full-year capital expenditures to be $1 billion, which would be $350 million in capital spending for the second half of the year. Hutchinson said they were previously expecting the retail chain to spend just $60 million, so they reduced their free cash flow estimate for the 2013 fiscal year by $300 million to $1.6 billion.

Investing In J.C. Penney’s Major Turnaround

Hutchinson said the significant increase in capital expenditures this year was done in connection with the rollout of some new shops, essentially continuing in part the plan that was created and begun under now former CEO Ron Johnson. The new shops Johnson planned are quite expensive, and management had put several of them on hold in order to conserve capital. However, they decided to go forward with shops for some brands.

The cash for the rollout was provided under the recent debt deal which J.C. Penney Company, Inc. (NYSE:JCP) entered into. Management apparently decided that Johnson’s shops weren’t such a bad idea after all, so the retail chain will proceed as Johnson had planned before his ouster.

The company did say capital expenditures for the 2014 fiscal year will be substantially lower. Hutchinson estimates that they will be between $400 million and $500 million. She said if the retail chain’s sales and margins do not improve dramatically, then it will have to look for places to make spending cuts.

BAML remains neutral on J.C. Penney and has a $20 per share price target on the stock. J.C. Penney Company, Inc. (NYSE:JCP) shares rose as much as 2 percent on Thursday during the regular trading day.