J.C. Penney Company Inc. has been added to Fitch Ratings’ “loans of concern” list — the latest sign of the retailer’s compounding financial struggles.
According to the credit rating agency, the department store chain is at a high risk of defaulting on a $1.57 billion loan balance. (Filings with the U.S. Securities and Exchange Commission put its debt at roughly $4 billion.)
The news comes less than two weeks after JCPenney said it had hired advisors to explore debt restructuring options to buy itself more time for a turnaround.
The Plano, Texas-based company wrote that it “routinely hire[s] external advisors to evaluate opportunities” and “can confirm that we have not hired any advisors to prepare for an in-court restructuring or bankruptcy.”
After taking the helm in October, CEO Jill Soltau has made a concerted push toward JCPenney’s retail makeover. Its turnaround strategy involved nixing a few dozen underperforming stores over the course of several months and hiring new talent at the start of the year, including chief transformation officer Truett Horne.
However, in its latest earnings report in May, JCPenney posted first-quarter sales that fell 5.6% to $2.44 billion. It also widened its adjusted net losses to $147 million, or 46 cents per share.
Jane Hali, CEO of investment research firm Jane Hali & Associates, warned that it was too late for JCPenney to remedy its missteps.
“I believe it is headed for bankruptcy,” she said. “I believe the damage has already been done for the consumer… There are too many great digitally native retailers to suffice their customer, let alone the newness of rental, resale and box subscriptions.”
The retail sector makes up 18% of Fitch’s top “loans of concern” — indicating a “significant risk of default” — with J.Crew Group Inc., Toms Shoes LLC and Iconix Brand Group Inc. also making the list. Neiman Marcus Group Ltd. and Ascena Retail Group Inc. joined the second tier of which retail represents 22%.
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