J. C. Penney (JCP) Cash Burn Tied to Former CEO, Thinks BTIG

August 6, 2013 10:40 AM EDT
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Price: $6.76 -2.59%

Rating Summary:
    12 Buy, 15 Hold, 7 Sell

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J. C. Penney (NYSE: JCP) stock opened lower on Tuesday, continuing a 4-day drop. Investors continue to eye the company's bonds, as cash burn remains in focus.

Recently J. C. Penney stated it expects to close the quarter with approximately $1.5 billion in cash on its balance sheet. The news created concerns about sales trends. However, in the view of BTIG, cash burn is likely related to correcting problems created by former CEO Ron Johnson.

"Under Johnson, significant inventories of higher margin private label brands had been drastically depleted. When we add that – harder to quantify – variable to the mix of extended capital expenditures, home restocking, and back to school anticipation we have a quarter with substantial cash needs," said BTIG.

"If the inventory levels are adequate, JC Penney has entered upon its third quarter with as much cash as it had on hand in the quarter just before the beginning of the ill-fated Johnson experiment. It is entering this quarter with a new and fresh home department, with a return to well-liked private brands that were needlessly discarded, and with a return to discounting that the core customer had missed" added analysts.

BTIG has a Buy rating on J. C. Penney with a price target of $22.00

For an analyst ratings summary and ratings history on J. C. Penney (NYSE: JCP) click here. For more ratings news on J. C. Penney click here.

Shares of J. C. Penney closed at $13.82 yesterday.

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