Penney leaning toward $1 billion equity raise: sources

Wed Sep 25, 2013 7:53pm EDT
 
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By Olivia Oran and Phil Wahba

(Reuters) - J.C. Penney Company Inc (JCP.N: Quote) is looking to raise as much $750 million to $1 billion in new equity to build up its cash reserves as the holiday season approaches, according to three people with knowledge of the matter.

Penney, whose shares have fallen 49 percent so far this year, has a market value of $2.6 billion. The U.S. department store chain is leaning toward issuing new shares, the sources said, although other methods of raising capital are also on the table.

The company declined to comment.

Penney's sales dropped 25 percent last year after it eliminated coupons and jettisoned merchandise that was popular with long-time customers but didn't fit into former Chief Executive Ron Johnson's plan to offer trendier items.

Even after Penney reinstated its old pricing strategy in the spring, sales again fell.

The company's shares tumbled 15 percent on Wednesday after Goldman Sachs said in a research note it expects the retailer's sales to improve more slowly than expected through the end of the year. In intraday trading on Wednesday, the shares dropped to a 13-year low.

The note also raised questions about Penney's liquidity.

"In order to safeguard against a potentially poor 4Q (fourth-quarter) holiday season, it is likely that management will look to build a bigger liquidity buffer," Goldman analyst Kristen McDuffy wrote in her note on Wednesday.   Continued...

 
A woman checks her phone outside the entrance of a J.C. Penney store in New York in this file photo August 14, 2013. REUTERS/Brendan McDermid/Files