CFO.com reports that amid plunging sales and negative free cash flow, J.C. Penney taps its line of credit to finance inventory and operating expenses.
Retailing giant J.C. Penney company announced on Apr.15, it had tapped a portion of its $1.85 billion line of credit, a sign that the company is running short on working capital and a major financial restructuring could be near.
The $850 million will be used to fund working capital requirements and capital expenditures, J.C. Penney said in an SEC filing, “including the replenishment of inventory levels in anticipation of the completion of [the company’s] newly renovated home department next month.”
View the entire story on CFO.com here.
The following is from the company’s press release issued April 15.
J. C. Penney Company announced plans to enhance the company’s financial flexibility and position. As part of that process, and consistent with its previously stated plans, the company has drawn $850 million out of its $1.85 billion committed revolving credit facility. Proceeds will be used to fund working capital requirements and capital expenditures, including the replenishment of inventory levels in anticipation of the completion of its newly renovated home departments next month.
Chief Financial Officer Ken Hannah said, "Earlier this year, we increased our revolving credit facility in anticipation of operating, working capital and capital expenditure needs, especially during the first half of the year. As we near completion of the home department transformation in over 500 stores, we have been undertaking and will continue to experience a significant inventory build and increase in capital expenditures.
Over the past few months, the company has worked to improve performance through changes in its pricing and promotional strategies, including the return of coupons, and the development of other new initiatives to drive store traffic and deliver the style, quality and value that its customers want. The action today bolsters those efforts, as well as the Company’s on-going financial position.
See also:
Fitch: JC Penney Draw on Revolver Seen as Stop-Gap Measure