Fitch Ratings downgraded
J.C. Penney Company, Inc
) on expectations of the company spending more cash in 2013 than
projected earlier. The rating agency lowered the company's issuer
default ratings (IDRs) to junk status of "CCC" from "B-".
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Fitch anticipates J.C. Penney to spend $2.8-$3 billion in cash in
2013, a billion dollars more than its May forecast. Moreover, to
procure cash, the company is seeking to offer about 96.6 million
J.C. Penney has been in troubled waters for quite some time, with
decreasing revenues and higher losses. The company has not shown
any signs of recovery in the recent past. This is evident from
consecutive quarter of sluggish results on Aug 20. The company
has been constantly lagging its peers,
) in terms of performance.
The company remained in the red zone with adjusted loss per share
of $2.16 in the second quarter of fiscal 2013 that widened from
the loss of 37 cents in the year-ago quarter. The Zacks Consensus
Estimate for the quarter was a loss of $1.13 per share. J.C.
Penney's top line fell 11.9% to $2,663 million and missed the
Zacks Consensus Estimate. Looking at the company's earnings
surprise history, we find that J.C. Penney has missed the Zacks
Consensus Estimate by an average of about 523.2% in the trailing
However, this Zacks Rank #3 (Hold) stock has taken several
strategic initiatives to drive traffic and conversion. The
company resorted to promotions, which could be a successful sales
driver this holiday season.
Investors remain cautious about the stock amid the company's
endeavors to give itself a major facelift.
In a significant development, J.C. Penney's board of directors in
Apr 2013 discharged the Chief Executive Officer (CEO) Ron Johnson
of his duties after 17 months, as his ambitious transformational
ideas failed to materialize. Consequently, the company's former
CEO, Myron E. (Mike) Ullman, III was reinstated in his post.
However, we have to wait and see whether the initiatives
undertaken to boost the stock will prove to be successful.