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.”
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)