In a move to enhance its liquidity position at a time when it is undergoing a phase of transformation to become America’s favorite store, J. C. Penney Company, Inc. (JCP) announced that it has expanded its borrowing capacity to $1.85 billion by amending its bank credit facility. The credit facility also allows the department store chain to increase the borrowing by another $400 million.
J. C. Penney is trying to remould itself from the way it had operated before Ron Johnson took charge. In order to uplift itself, the company announced an array of measures, which include new pricing strategy, fresh logo, strategic partnership, merchandise initiatives, cost reduction and enhancement of customers’ shopping experience.
The company intends to have a WiFi network and mobile POS in all its stores. Moreover, the company is transforming its floor selling space into a shop format.
However, these strategic initiatives are yet to show results and for now this Zacks Rank #5 (Strong Sell) is on the verge of completing fiscal 2012 on a soft note. J. C. Penney has long been struggling to regain its lost market share, which has directly impacted the company’s financials. The company in the last 3 quarters has delivered a net loss, and missed the Zacks Consensus Estimate in the last 4 quarters by an average of 328.2%.
J. C. Penney is scheduled to report its fourth-quarter fiscal 2012 results in the latter part of this month. The analysts polled by Zacks project a loss of 13 cents a share and revenue of $4,194 million for the quarter, which is worse than the prior-year period, when the company posted earnings of 21 cents and generated revenue of $5,425 million.
At present, J. C. Penney does not look like an attractive opportunity for investment. However, there are other stocks in the non-food retail-wholesale sector that are worth considering. Abercrombie & Fitch Co. (ANF), American Eagle Outfitters, Inc. (AEO) and Gap Inc. (GPS), all hold Zacks Rank #2 (Buy) and are expected to continue with their upbeat performances.
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