Penney says CIT still funding vendors; others keep same terms
(Reuters) - J.C. Penney Co Inc (JCP.N) said on Thursday that commercial lender CIT Group Inc (CIT.N) continued to support deliveries from suppliers, and claimed reports to the contrary were untrue.
The retailer added it had plenty of cash on hand and all major suppliers were still shipping.
J.C. Penney shares closed unchanged after initially rising more than 6 percent after it issued its early morning statement.
The stock price had fallen 10 percent after The New York Post reported on Wednesday that CIT had cut off credit to smaller suppliers on concerns about J.C. Penney's sales performance this quarter.
CIT spokesman Matt Kelin said the company does not comment on specific customers. But three other lenders said on Thursday that they have not changed the terms on the short-term loans they provide to Penney suppliers.
"We are continuing to support the company and all the vendors we represent," said Jim Dore, the head of Wells Fargo's retail finance and commercial services group. Dore is in charge of its factoring business.
Finance companies such as CIT, known in the industry as factors, provide short-term loans to suppliers while they wait to be paid. It is usually smaller vendors that use the services, since larger suppliers finance their own sales.
An executive at one leading factor, who declined to be named, said the firm would consider providing even more loans to Penney suppliers, but it is monitoring the retailer's finances daily. A third factor said it has not changed its loans because Penney has $1.5 billion in cash.
But some on Wall Street are more cautious. Citi analyst Deborah Weinswig downgraded her rating on Penney shares to "sell," saying in a note to clients, "We do not believe that JCP has made progress in stabilizing the business in (the second quarter.)"
Chief Executive Mike Ullman returned in April to Penney when his predecessor, Ron Johnson, was booted after sales fell 25 percent last fiscal year.
Analysts like that Ullman has brought back Penney's traditional discounting and coupon pricing approach, but the recovery is taking time, and they expect same-store sales to have dropped in the second quarter on average 6.7 percent.
The U.S. retailer is expected to report its earnings later this month.