J.C. Penney Co. Inc. is expected to burn through more than $1 billion in cash in the first quarter to catch up on vendor payments and roll out Joe Fresh and new home goods shops.
That estimate, by Morgan Stanley analyst Kimberly Greenberger, was confirmed as accurate by a source who is familiar with the retailer’s financial operations.
Penney’s has replenished its capital by drawing down $850 million from its credit facility — a fallback source of funding retailers try to avoid using. But the sheer amount of the cash spent illustrates the challenges facing chief executive officer Myron “Mike” Ullman 3rd as he refocuses the retailer. Penney’s lost nearly $1 billion last year and sales fell 25 percent as Ron Johnson’s effort to transform the chain failed to take hold.
“[Penney’s] path to profitability remains uncertain,” said Greenberger.
The analyst projected Penney’s comparable-store sales would fall 13 percent in the first quarter on top of an 18.9 percent drop a year earlier and set a target price of $9 on the stock. Shares of the retailer slipped 0.6 percent Tuesday to $15.45 on a generally up day for Wall Street.
William Ackman, the activist investor who helped bring Johnson on board, has acknowledged that mistakes were made at Penney’s, but indicated he was sticking by the chain.
On Monday, at The 4th Annual Active-Passive Investor Summit in Manhattan, Ackman said if he could do it again he would encourage Johnson to hire an executive with a strong background in department store operations. The investor’s keynote address was closed to the press, but WWD spoke to two people in attendance.
Ackman said that when Penney’s went from being a transformation to a turnaround scenario, it needed a ceo who could be there seven days a week, something Johnson wasn’t able to do for family reasons. Johnson commuted weekly to Penney’s headquarters in Plano, Tex., from his home in Silicon Valley, Calif.
“This is a company in turnaround and [Ackman] said you need a ceo there, present,” the source said. “The ceo should be the last one turning off the lights at night.”
Ackman credited Johnson for the shop-in-shop strategy, which continues to perform well, and for making improvements to the company’s cost structure. Those cost cuts were executed by former chief operating officer Michael Kramer.
Overall, Ackman put a good spin on the situation for his Pershing Square Capital Management, which owns $607.2 million worth of Penney’s stock, but has much larger investments in companies such as Procter & Gamble Co. and General Growth Properties Inc.
Penney’s, which is working with consultants to raise money and right its operations, remains in flux. Several of Johnson’s top lieutenants have left Penney’s since Ullman retook the reins April 8, including Kramer and chief talent officer Daniel Walker.
On Tuesday, Brynn Evanson was promoted to executive vice president of human resources, overseeing human resources across Penney’s stores, supply chain and home office. Evanson, who had been vice president of compensation, benefits and talent operations, reports to Ullman.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)