We haven’t hired advisers for in-court restructuring: Penney

|     Anne D’innocenzio     |

NEW YORK (AP) – JC Penney, looking to soothe rattled investors, said on Friday it hasn’t hired any advisers to prepare for an in-court restructuring or bankruptcy.

The company’s statement came after a report said Penney was hiring experts to help restructure its debt.

Reuters reported on Thursday that Penney has held discussions with lawyers and investment bankers who work with struggling companies on debt restructurings. It cited anonymous sources familiar with the matter.

Penney’s shares fell nearly 17 per cent on Friday.

The department store chain based in Plano, Texas, continues to maintain strong liquidity but faces a USD4 billion debt bill in the next few years. It said that it routinely hires outside advisers to evaluate opportunities. But it cited its strong liquidity position and noted it doesn’t have any significant debt maturities due in the near term.

The JC Penney logo hangs outside the Manhattan Mall in New York. – AP

“As a public company, we routinely hire external advisers to evaluate opportunities for the company,” Penney said. “By working with some of the best firms in the industry, we are taking positive and proactive measures, as we have done in the past, to improve our capital structure and the long-term health of our balance sheet.”

Penney’s CEO Jill Soltau, who took the helm last October, faces numerous challenges as it seeks to avoid the fate of Sears and other retailers that have filed for bankruptcy protection, or vanished.

Department stores like JC Penney are trying to reinvent themselves in an era when Americans are buying more online, or turning to discounters like TJ Maxx for clothing.

But Penney’s faces an additional challenge: It is trying to claw its way back after a disastrous reinvention plan in 2012 by its former CEO Ron Johnson, who dramatically cut back on promotions and brought in new brands in an attempt to attract young shoppers. Penney’s sales went into a freefall, it suffered massive losses and once-loyal customers moved on.

But while sales have stabilised, its business is still weak.

Penney had a 5.5 per cent decline in sales at stores opened at least a year for its fiscal first quarter. Its revenue was USD2.56 billion, down 5.6 per cent, and losses were a worse-than-expected at USD154 million.

Soltau jettisoned sales of major appliances, which accounted for 2.7 per cent of JC Penney’s sales last year, but dragged on the company’s operating profit. It’s focussing instead on women’s clothing, and goods for the home like towels and bedsheets, which carry higher profit margins. Furniture is still available, but only online. That reverses the course followed by predecessor Marvin Ellison, who three years ago began selling major appliances again in an attempt to capitalise on problems at Sears.