JCPenney insisted today that its credit is good with commercial-lending giant CIT after The Post reported yesterday that CIT has clamped down on deliveries by smaller suppliers to Penney stores.
Penney said in a written statement that it has “ample liquidity,” and expects to end the current quarter with $1.5 billion in cash on its balance sheet after raising a $2.25 billion term loan in May.
“CIT continues to factor and support deliveries from JCPenney suppliers,” the retailer said in the statement. “In fact, JCPenney continues to have the support of all of its key vendors, who have maintained their shipments to the company.”
However, Penney’s use of the phrase “key suppliers,” was an indication of “a non-denial denial” of CIT’s clampdown, according to one source, who pointed out that Penney’s statement didn’t dispute The Post’s report that CIT had tightened credit for smaller suppliers.
As reported by The Post yesterday, larger suppliers including PVH, Jones Group and VF Corp have continued to ship to Penney.
A CIT spokesman declined to comment on Penney’s statement.
CIT’s clampdown is a sign of recent skittishness among lenders about Penney’s business prospects as it scrambles to recover from a disastrous turnaround bid under former CEO Ron Johnson that tanked sales and spurred $1 billion in losses last year.
“The balance-sheet information (Penney) provided this morning is exactly the kind of information CIT was looking for,” according to an exec at one Penney suppler.
Penney shares tumbled more than 10 percent yesterday on The Post’s report, closing at $14.60.
Following Penney’s statement this morning, the shares had recovered most of that lost in pre-market trades.
“The fact is, (CIT) put a credit hold on its Penney accounts going forward, which means they aren’t approving orders anymore like it’s business as usual,” a source said today, following Penney’s statement. “That was the status as of the end of yesterday. We’ll have to see if it changes today.”
The source added that some Penney orders might still be approved by CIT on a limited, case-by-case basis in emergency situations – especially if CIT is now taking public heat from Penney.
“This is like what happened with Sears last year,” a Penney supplier noted, referring to a CIT clampdown that was quickly resolved after going public, with the practical result that Sears began dealing with more of its smaller vendors directly.