Martha Stewart and A-Rod (above) are two of a kind. Both have deals with partners who wouldn’t lose sleep if they walked away—but neither will, because they need the cash. (Paul J. Bereswill)
JCPenney is facing a fresh credit squeeze.
CIT — the largest commercial lender in the US apparel industry — has abruptly stopped financing deliveries from smaller manufacturers to Penney stores, The Post has learned.
The reason for the clampdown couldn’t immediately be confirmed.
CIT and Penney didn’t respond to requests for comment yesterday.
Shares of the Plano, Tex., retailer plunged more than 10 percent, to $14.60, in the final 40 minutes of trading after CIT’s move was first reported on nypost.com.
Some insiders speculated that CIT grew skittish after getting a peek at Penney’s financials, which have been deteriorating as the department store scrambles to recover from a botched turnaround bid under former CEO Ron Johnson.
CIT met with JCP officials on Tuesday, according to one source close to the situation. “I assume they got a thorough briefing and didn’t like what they saw,” the source said.
According to a second source, CIT tightened Penney’s credit “deliberately to get attention” after the struggling chain denied CIT’s requests to see its financials.
“This isn’t necessarily an indication of a big concern about Penney’s risk,” the source said, predicting that the situation will soon be resolved.
CIT alerted clients of the clampdown early Tuesday before its meeting with Penney, and left it in effect, according to sources.
CIT’s move — which affects future orders and not deliveries that are already scheduled — comes despite an aggressive financing deal this spring that was arranged by Goldman Sachs, which raised $2.25 billion backed by Penney real estate.
Penney CEO Mike Ullman, who took the reins from Johnson in April, has reintroduced traditional sales events and coupons that Johnson had scrapped in favor of a disastrous flat pricing strategy.
Even so, sales this summer have been “lackluster,” according to one executive at a major Penney supplier.
Penney, which stopped reporting monthly sales last year under Johnson, is slated to report second-quarter results Aug. 9.
“It just shows the growing concern over performance at JCPenney since they are not giving out monthly sales data anymore,” said David Tawil, at Maglan Capital.
The pinch comes as Penney and Martha Stewart are set to square off in court today against Macy’s, with each side giving closing arguments in a dramatic trial that’s resuming after a three-month hiatus.
A lawsuit from Macy’s forced Penney to take Martha Stewart’s name off a line of home goods it launched in May, which Macy’s argued violated its own preexisting licensing pact with Stewart.
Penney lawyers this spring had defended the new line, but legal experts say they now may be happier to see it nixed by a New York judge.
That’s because a 10-year contract puts Penney on the hook for royalties to Stewart, whether her name is on the products or not.
Penney “could end up with a secret — and very expensive — private-label designer,” said Steve Gursky, a partner at law firm Olshan.