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.

This story first appeared in the April 24, 2013 issue of WWD. Subscribe Today.

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.

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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.