J.C. Penney Denies Rumors Of Credit Line Cut Off By CIT

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J.C. Penney Denies Rumors Of Credit Line Cut Off By CIT
By J.C. Penney (Brand New design website See article here) [Public domain], via Wikimedia Commons

J.C. Penney Company, Inc. (NYSE:JCP) denied rumors that CIT Group Inc. (NYSE:CIT) has pulled off support for small vendors, compounding a sharp drop in its same store sales.

J.C. Penney Denies Rumors Of Credit Line Cut Off By CIT

James Covert of New York Post indicated the largest commercial lender in the U.S. apparel industry, CIT Group Inc. (NYSE:CIT), has abruptly stopped financing deliveries from smaller manufacturers to Penney stores.

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UBS maintains sell rating

Michael Binetti and team at UBS Investment Research, however, feel the net impact of CIT Group Inc. (NYSE:CIT) pulling out could be small on the retailer. The analysts feel the pullout has reinforced their concerns on the retail major facing cash flow constraints.

UBS analysts have thus trimmed their 2QE SSS to – 14 percent from their earlier flat projection. The analysts also feel JCP has been couponing much more aggressively than estimated. Besides, the analysts feel the retailer’s 2Q GM’s will be well below Street estimates.

Michael Binetti and team at UBS Investment Research thus maintained their earlier ‘sell’ rating on the retailer, retaining their earlier 12-month price target at $10, based on their about 0.45 times FY14 sales estimate.

Citi downgrades J.C. Penney to sell

Deborah L Weinswig and Nathan Rich of Citi in their today’s report feel J.C. Penney Company, Inc. (NYSE:JCP) has not made much progress in stabilizing its business in 2Q 13.

Citi analysts have downgraded the retailer from Neutral to Sell as they feel the timeline for recovery has been pushed out until 2014.

Deborah L Weinswig and Nathan Rich don’t envisage improvement in Penney’s SSS trends on a two-year basis for the rest of the year. The analysts have been surprised that some of the quick fixes adopted by the retailer such as bringing back coupons have not resulted in stronger sales. Besides, they don’t envisage anything that will change this trend in the near term for the retailer.

Citi analysts have thus reduced their price target on J.C. Penney Company, Inc. (NYSE:JCP) from $20 to $11.

Citi analysts feel the retail major has to confront several problems such as inability to connect with its customers, delayed recovery on the gross margin front and anticipating unrealistic turnaround without full management team in place.

As reported earlier, J.C. Penney Company, Inc. (NYSE:JCP) has reportedly paid a heavy price of $170 million to lure back former CEO Ron Johnson and install his top three executives.

Some feel the recent fall in same store sales is similar to what the retailer faced during the Ron Johnson’s tenure.

 

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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