NEW YORK — Fitch Ratings upped its debt rating on J.C. Penney Co. to investment grade on Thursday, citing the retailer’s operating momentum, including four years of positive same-store sales, and debt reduction of $1.9 billion over the last 18 months.

Fitch now rates Penney’s $3.4 billion in senior unsecured notes and debentures and a $1.2 billion unsecured bank facility a “BBB-” from “BB+.” The ratings service expects Penney’s to continue to reduce debt and make progress with its turnaround, given that it has a strategy to update apparel offerings and refine assortments to connect with its middle-income core customers.

“Looking ahead, operating cash flow should be sufficient to cover Penney’s capital expenditures and dividends, with free cash flow available for additional share repurchases,” the ratings firm said in its report. “At the same time, the repayment of debt maturities out of existing cash, together with further improvements in operating performance, should lead to a gradual strengthening of the company’s credit measures.”

Shares of the retailer closed up 2.7 percent to $49.69. Trading volume was 3.5 million, above the stock’s three-month average volume of 2.6 million. The 52-week high is $57.99, and the low is $34.03.

This story first appeared in the October 14, 2005 issue of WWD. Subscribe Today.

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