Where Does J.C. Penney's Turnaround Stand? It's Testing New Ideas in Texas

J.C. Penney has time, options and skilled new management. But the company’s stock and corporate bond prices signal that the odds are stacking up against the 117-year-old, Plano-based chain of 840 department stores. Can CEO Jill Soltau fashion a turnaround? Since she was hired nine months ago, Soltau hasn’t minced words while reporting weaker quarters that she inherited and saying “we need to move faster.” She also said Penney “has the capacity to deliver improved results.”Looking around the retail landscape, some say there’s an inevitable outcome when debt is an issue. Penney, which always prided itself in having a strong balance sheet, took on more debt after a failed attempt to remake the department store. That episode burned through the chain’s cash and then some, and it’s still feeling the heat of those heady-turned-scary days of 2011-13. Penney’s $4 billion in debt is manageable for a couple of more years, but it’s also the reason Soltau and newly hired chief financial officer Bill Wafford met with bond investors in late June. The meet-and-greet sessions with small groups were held in an office on Park Avenue in New York. Penney’s lenders and debtholders are a powerful group in the retailer’s future, and that’s why Soltau and Wafford are building those relationships. The company also hired investment bank Lazard to help it plan out its debt obligations. Up in Plano, Soltau has been quietly working on another track to make sure that managing debt becomes more of a routine corporate function again and not one that kills the retailer’s future options. And she boldly put out a statement last week after reports came out that Penney was hiring restructuring advisers, too, saying, “We have not hired any advisers to prepare for an in-court restructuring or bankruptcy.” “That statement was proactive,” said Noel Hebert, corporate credit research analyst at Bloomberg. “It said, ‘Whoa, whoa, whoa, this is part of our due diligence.’” Penney is in “reasonably OK shape for now with liquidity of $1.7 billion,” he said, and it’s not about to unravel as Toys R Us did after similar chatter emerged ahead of holiday 2017. Taking the reinsSoltau, who declined an interview request, is leading a rebuilding of Penney.Its top ranks were depleted last year when former CEO Marvin Ellison departed for his dream job, running a huge home improvement chain. Others followed him to Lowe’s. But in the end, they weren’t the team Penney needed anyway, since many had followed Ellison to Penney from careers at Home Depot.Soltau quickly took apart Ellison’s plan to turn Penney into, well, Sears, which didn’t die on his schedule. Major kitchen and laundry appliances and TVs are gone from Penney stores, and plumbing fixtures, including bathtubs, are no longer being sold online.   Continue reading...

Copyright The Dallas Morning News
Contact Us