DBJ Confidential
Danielle Abril
Staff Writer-
Dallas Business Journal
Article from http://www.bizjournals.com/dallas/blog/
May 16, 2013, 6:14pm CDT
While there were no major surprises in J.C. Penney Co. Inc.’s first quarter earnings released May 16, analysts said there are indicators that the retailer’s financial situation could improve.
“If management can execute, there is cash to make it to the end of the year,” Morningstar Inc. analyst Paul Swinand said about the leadership team, including CEO Mike Ullman. “Hopefully the third and fourth quarters pick up.”
“They’re in a much better position than just a few weeks ago," said Rick Snyder, senior retail analyst at New York-based Maxim Group LLC.
J.C. Penney (NYSE: JCP) reported a $348 million loss in the first quarter, with sales down about 16.4 percent. Total debt was reported at $3.83 billion.
This comes after the Plano-based retailer spent $1 billion to rebrand the company under ousted CEO Ron Johnson and drew $850 million from a revolving line of credit.
“The earnings are slightly worse (than expected)," Swinand said. “But we knew it was bad.”
J.C. Penney also reported an operating cash flow of $752 million and investing cash flow of $196 million. The company’s cash and cash equivalents were reported at $821 million.
“They borrowed $850 million, and they had $821 million on the balance sheet,” Snyder said. “That’s pretty easy math. They literally ran out of cash.
“They need to turn cash flow positive very quickly,” he said, adding that it’ll be interesting to see how they handle stocking stores for back to school and the holidays.
Snyder believes the second quarter will be much more telling about the retailer’s future. Regardless of the numbers, he sees some hope.
“One thing I see is customers coming back,” said Snyder, who visits the store weekly, “but … how deeply do they have to discount to bring customers back? What is the gross margin, and how do sales taxes offset gross margin?
“This is just a fascinating case study in history.”
J.C. Penney will hold a shareholders meeting May 17.
Staff Writer-
Dallas Business Journal
Article from http://www.bizjournals.com/dallas/blog/
May 16, 2013, 6:14pm CDT