JC Penney Stock Plummets After Credit Squeeze Report

This is source I found from another site, main source you can find in last paragraph

After J.C. Penney's (JCP) earnings release last week the company has come under a lot of pressure, the day after the release it was down almost 13% to $17.97. There seems to be growing concern that the company might face a cash crisis and could have a going concern issue in 2013. In my view this seems to be a complete stretch, the company's liquidity is more than enough to handle 2013 and 2014 as well and if you look at the numbers rather than the rumors you can see that the numbers tell a different story.

This is an 8-K that the company filed with financial data for the last quarter; this is the balance sheet with the latest numbers:


You can see that the current assets are almost double as the current liabilities. The current asset section does include more illiquid stuff as their own inventory ($3.3B) but the company has a $1.5B credit line that they can use with the inventory as collateral, furthermore inventories can be monetized with promotions and discounts. That is not the strategy of the company but its certainly an option that any CFO will recommend should their cash come under pressure.

What seem to have gotten people worried is that their cash is now down to $500M, but what this misses is that this was the result of a debt payback, not from operating results (which the company is struggling with and the media attention is all over).


You can see that the operating results had a modest cash drain of $48M and most of the decrease in cash came from the retirement of long-term debt. The company could have easily offset that by drawing on the credit line or raising more debt capital but they decided to run down their cash a bit because year end sales are coming. This is what the bears on the stock are missing with regards to JCP liquidity, Q4 is likely to produce significant amounts of cash and put the company in solid footing for 2013

This is source I found from another site, main source you can find in last paragraph

Source : https://seekingalpha.com/article/1023911-j-c-penney-liquidity-concerns-are-overblown-q4-likely-to-squeeze-shorts



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