Myron “Mike” Ullman 3rd isn’t wasting any time trying to get J.C. Penney Co. Inc. back on track.
A week after Ullman replaced Ron Johnson as the struggling retailer’s chief executive officer, Penney’s unveiled plans to “enhance” its financial flexibility and position by drawing funds from its credit line. The move follows Penney’s decision to hire Blackstone Group to determine ways to shore up its finances. It also recently hired Centerview Partners to advise on ways to raise cash.
Penney’s said it has borrowed $850 million of its $1.85 billion committed revolving credit facility, at an annual 5.25 percent interest rate. The borrowing has a maturity date of April 4, 2014.
For industry experts, the news was largely expected and counted more as a preemptive strike against upcoming volatility for the retailer’s languishing business.
Citi analyst Deborah Weinswig said the amount Penney’s drew was “more than expected” but she was “pleased to learn that JCP drew more than its current funding needs.”
“We still believe that a longer-term financing solution is necessary,” she said, noting that Penney’s is likely to burn through $722 million in cash in the first quarter alone. “In our view, JCP may ultimately need to raise $1 billion in total cash this year to buy time to stabilize the business.”
The retailer said Monday that it would use the $850 million to fund working capital requirements and capital expenditures, which includes the replenishment of inventory levels in anticipation of the completion of its newly renovated home departments, set to open next month.
“Earlier this year, we increased our revolving credit facility in anticipation of operating, working capital and capital expenditure needs, especially during the first half of the year,” said Penney’s chief financial officer Ken Hannah. “As we near completion of the home department transformation in over 500 stores, we have been undertaking and will continue to experience a significant inventory build and increase in capital expenditures.”
Market sources told WWD that they expect to hear from Ullman sooner rather than later regarding his plans for turning around the company.
“We’re waiting for first-quarter results,” said a credit analyst, who spoke on condition of anonymity. “We expect a significant loss for the quarter.”
The analyst expects a negative reaction from vendors and factors regarding first-quarter results, which “could have” some impact on access to credit.
Maggie Taylor, vice president, senior credit officer at Moody’s, said that based on her firm’s estimates, she could see Penney’s needing to borrow more money in the third quarter, but she declined to provide a figure.
“It depends on if Penney’s can raise money in the capital markets,” said Taylor, who has a ‘B3’ negative outlook on the retailer. “Because of how the credit metrics are currently, they have a lot of hurdles in front of them.”
The biggest hurdle — the “$100 million question” — is whether Penney’s can “win back the consumer,” Taylor noted.
That may be a tall order, the analyst said, considering the difficult macroeconomic environment.
“The growth rate is slower,” she said, pointing to flagging retail sales. “It’s a slow-growing retail environment.”
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye
Did you know: @carlychaikin of "Mr. Robot" has been painting for about a decade? The actress, who plays Darlene on the show, is a self-taught artist who lists Salvador Dalí and Chuck Close as some of her idols. Chaikin told WWD that painting is a form of meditation for her — A much-needed one given the intensity of "Mr. Robot." See a piece Chaikin is working on at WWD.com (📷: @jilliansollazzo) #wwdeye