As the coronavirus pandemic zaps brick-and-mortar revenues, J.C. Penney Company Inc. and Macy’s, Inc. have both reportedly turned to financial advisers to manage debt and maintain cash flow.
Beleaguered department store chain JCPenney has hired the consultancy AlixPartners LLP to manage its hefty debt load of about $4 billion, according to a report from Bloomberg. The retailer has been in talks with its banks over the past few weeks regarding liquidity needs, according to the report, and is engaged in negotiations with lenders about a potential debt deal. According to Bloomberg, the retailer is also working with advisers from law firm Kirkland & Ellis LLP and investment banking firm Lazard Ltd. In an email to FN, a representative from JCPenney declined to comment on the matter.
While JCPenney’s digital business remains open, the coronavirus has killed brick-and-mortar sales, and its fleet of about 850 stores have been shut since March 18. The company, which employees about 90,000 people, furloughed the majority of its hourly store associates on April 2. On April 5, it furloughed a “significant” portion of its corporate workforce at offices in Plano, Texas; Salt Lake City; and New York, in addition to salaried store associates. Additionally, JCPenney has drawn down $1.25 billion from its $2.35 billion revolving credit line to create cash flow while stores remain shut. The chain said it was also “evaluating other financial options.”
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The coronavirus outbreak is the most recent in a series of hurdles for JCPenney, which has been struggling amid an evolving retail picture. Problems such as sliding sales, numerous leadership changes and increased digital competition have scared off investors. These challenges have sent the company’s stock below $1 — and put it at risk of being delisted from the New York Stock Exchange. Ahead of market open on Tuesday, JCPenney shares were trading at just 33 cents.
As JCPenney looks to financial advisers to manage its debt and retain liquidity, Macy’s has reportedly made a similar move. Reuters reported Monday that Macy’s has tapped Lazard to help weigh its financial options as it manages liabilities. The retailer is reportedly mulling options including new financing.
A spokesperson for Macy’s confirmed to FN that the company is “exploring” options to improve its capital structure but did not elaborate on its partnerships.
“As we have previously communicated, the coronavirus pandemic continues to take a toll on Macy’s Inc.’s business,” the representative said. “Macy’s Inc. has taken multiple actions to improve our position and improve financial flexibility. … The company is also exploring numerous options to strengthen our capital structure. We have relationships with a range of advisers.”
Like JCPenney, Macy’s has furloughed the “majority” of its more than 120,000 employees. Chairman and CEO Jeff Gennette is forgoing his salary for the time being. Further, the company has suspended its quarterly dividend, deferred capital spend and tapped its $1.5 billion revolving credit facility.
Similar to JCPenney, Macy’s has faced challenges in recent years amid the so-called retail apocalypse. In early February, the department store chain unveiled an ambitious three-year turnaround plan that included trimming 125 stores from its total footprint, cutting 2,000 jobs — or about 9% of its corporate workforce — and ramping up investments in higher-margin private labels and off-price through Macy’s Backstage. But so far in 2020, Macy’s has shed more than 70% of its market capitalization, which is now about $1.5 billion, roughly a quarter of what it was last year.