J. C. Penney (JCP) May Need to Raise $400-$500M for 'Cushion' - Wells Fargo
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Rating Summary:
1 Buy, 21 Hold, 11 Sell
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Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
Rating Summary:
1 Buy, 21 Hold, 11 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
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Wells Fargo maintained an Underperform rating on J. C. Penney (NYSE: JCP) with a price target of $4-$5. Analyst Paul Lejuez said the retailer's holiday and Q4 comps were nothing to celebrate. In addition, while liquidity appears fine now, cash may not last long.
"As much as we'd like to be excited about their first positive comp since FQ2 2011, against a down 32% comp in FQ4 2012 on top of a down 2% comp in FQ4 2011, this +2% today is nothing to celebrate. There is no change to our FY2013E but we are reducing our FY2014E from -$3.93 to -$4.37," said Lejuez.
"Though JCP's $2B+ liquidity position is in line with prior guidance, keep in mind this is the time of year with the lowest working capital requirements (because inventory levels are lowest at the end of FQ4). We expect that over the next three quarters, between operating losses, inventory build, and capex, the company will burn through cash of $1.3-$1.5B. So while the credit facility may give them room, we question whether the vendor community will feel comfortable without a more permanent form of financing in place. In our view, JCP will have to raise in the $400-500MM range to give themselves some cushion. And no matter what form it takes, it can't be good for equity holders," he added.
For an analyst ratings summary and ratings history on J. C. Penney click here. For more ratings news on J. C. Penney click here.
Shares of J. C. Penney closed at $5.08 yesterday.
"As much as we'd like to be excited about their first positive comp since FQ2 2011, against a down 32% comp in FQ4 2012 on top of a down 2% comp in FQ4 2011, this +2% today is nothing to celebrate. There is no change to our FY2013E but we are reducing our FY2014E from -$3.93 to -$4.37," said Lejuez.
"Though JCP's $2B+ liquidity position is in line with prior guidance, keep in mind this is the time of year with the lowest working capital requirements (because inventory levels are lowest at the end of FQ4). We expect that over the next three quarters, between operating losses, inventory build, and capex, the company will burn through cash of $1.3-$1.5B. So while the credit facility may give them room, we question whether the vendor community will feel comfortable without a more permanent form of financing in place. In our view, JCP will have to raise in the $400-500MM range to give themselves some cushion. And no matter what form it takes, it can't be good for equity holders," he added.
For an analyst ratings summary and ratings history on J. C. Penney click here. For more ratings news on J. C. Penney click here.
Shares of J. C. Penney closed at $5.08 yesterday.
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