J.C. Penney changes: J.C. Penney Company, Inc. (NYSE:JCP)’s shares traded as low as $8.59 this Monday –the lowest it has since 1984 and the result of its 7th consecutive quarter of sluggish results. Concerns persist as the company is still unable to perform a real turnaround and its management credibility is questioned along. The company has been having a really hard time trying to win back customers and investors. Now, it’s also having a tough time keeping them.
Apparently, JC Penney’s slowing sales and rising debt are mounting with investors. Today, the Maxim Group downgraded the firm’s shares from buy to hold. “Our thesis that customers would return to J.C. Penney stores when the chain returned to discounting has been incorrect,” said Rick Snyder, Maxim Group analyst, responsible for cutting the stock to hold from buy and suspending its price target. He also said that the lost sales have “deleveraged on the fixed cost of business while the increased debt has increased interest expense,” thus making JC Penney’s shares “susceptible to very small changes in sales estimates”.
Late Thursday, investors were spooked after JC Penney announced it was selling 84 million shares to raise the company’s capital, with its underwriter also having the hability to sell another 12.6 million shares. The firm projected it would have $1.3 billion cash left by the end of the year as well, down from the $1.5 billion projection it made last August. According to Maxim Group, the 84 million shares sale represents a 38% dilution to existing shareholders equity.
JC Penney has been in trouble for a while now. It has made an effort in the recent past to change its “destiny”. However, the company has not been able to show any signs of recovery and has been lagging behind its competitors in the retail industry. The department store’s public offering of 84 million shares failed to calm investors’ anxiety before the holiday season. As Maxim Group’s analyst stated, “we see nothing that would indicate that the [company’s] overall environment should improve going forward.”
Disclosure: Pamela Gaviño holds no position in any stocks mentioned