Report: J.C. Penney Eyes Debt Restructuring Options

Struggling department store chain J.C. Penney, facing debt payments of approximately $4 billion over the next few years, has reportedly hired advisors to examine debt restructuring options.

Citing sources familiar with the matter, Reuters reported that the retailer has had talks in recent weeks with investment bankers and lawyers who specialize in working with companies that are struggling financially and looking to restructure debt.

The report noted that the discussions are in the early stages.

The Plano, TX-based retailer, which operates 860 stores, has struggled in recent years to boost sales in a highly competitive retail landscape. Since May of 2018, the J.C. Penney executive ranks have seen a major overhaul. Marvin Ellison, who served as the retailer’s CEO for three years, left the company for Lowe’s where he now serves as the home improvement chain’s president and CEO.

In October of 2018, retail veteran Jill Soltau was named J.C. Penney CEO.

The company’s financial struggles were seen most recently in its first quarter results that were reported in May.

Net sales for the quarter ended May 4 were $2.4 billion, a 5.6% decrease from the comparable quarter the prior year. Net loss was $153 million, or $0.48 per diluted share, compared with a net loss of $78 million, or $0.25 per diluted share, in the first quarter of 2018. Comparable store sales in the quarter were down 5.5%.

Company officials said the exit of the major appliance and in-store furniture categories in the quarter had a negative impact on comparable store sales.

Despite the less-than-positive results, Soltau said she was pleased with the strides the company made on several fronts.

“We have made good progress on each of our immediate action steps, including our continued efforts to reduce and enhance our inventory position, which resulted in a 16% reduction in our inventory and meaningful improvement in our free cash flow this quarter,” she said.