JCPenney (NYSE:JCP) still can't catch a break. Just after Citi retail analyst Deborah Weinswig decided to downgrade the struggling retailer's stock, the New York Post reported on Wednesday (July 31) that some of the chain's smaller suppliers were being denied financing by CIT, the largest lender in the apparel industry because Penney's is running out of money. Thursday morning, Penney's denied the Post report, but by then its stock had dropped 10 percent—and only rebounded by half the loss.
The Post report, which ran online on Wednesday afternoon, actually only reported, without citing its sources, that CIT had "abruptly stopped financing deliveries from smaller manufacturers to Penney stores" and then continued with speculation about why it happened—including speculation that the stoppage would quickly be resolved.
Reuters, which also reported it had been told Wednesday that CIT had stopped funding some future shipments to JCPenney and the two parties were in talks to resolve the issue, also noted that CIT temporarily halted loans to Sears (NASDAQ:SHLD) suppliers in January 2012 after the chain posted poor holiday results, but resumed funding a few months later.
So was Penney's supply chain ever really at risk? Probably not—CIT finances less than 4 percent of its inventory, the chain said. But right now, no one is happy about Penney's prospects. Weinswig's downgrade was accompanied by a comment that Citi sees "no evidence of a turnaround in the works."
And while analysts expect JCPenney to report a 6.7 percent drop in same-store sales later this month—a huge improvement from its 25 percent drop under ex-CEO Ron Johnson—the fact that it has stopped plummeting doesn't mean it has stopped falling.
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