NEW YORK (Reuters) - Commercial lender CIT Group Inc (CIT.N) abruptly stopped funding some future shipments to struggling retailer J.C. Penney Co Inc (JCP.N), just months before the all-important holiday season, a source familiar with the situation said on Wednesday.
CIT, who met Penney officials on Tuesday, is currently in talks with the department store chain to resolve the issue, the source said. Penney and CIT representatives were not immediately available for comment.
The news, which sent shares of the department store chain down 10.2 percent in late trading, came months after CIT decided to start charging Penney vendors a 1.0 percent surcharge on all invoices. Penney shares closed down $1.66 at $14.60 Wednesday.
CIT and other finance companies, known in the industry as factors, provide short-term loans to suppliers while they are waiting to be paid by those receiving their goods or services.
One industry source said CIT may want detailed financial data ahead of Penney’s quarterly earnings report on August 20.
Penney earlier this year lined up a five-year $2.25 billion financing package to shore up its liquidity after sales fell 25 percent last fiscal year under former Chief Executive Ron Johnson’s failed attempt to remake Penney into a more fashionable department store.
Mike Ullman, who both preceded and succeeded Johnson, has largely reversed Johnson’s strategy, bringing back heavy discounting and coupons. Ullman is also bringing back some of the merchandise Johnson did away with, much of that has not hit shelves yet.
Wall Street analysts expects Penney to report same-store sales fell 6.7 percent for the second quarter, according to Thomson Reuters.
The New York Post first reported about Penney having credit problems again.
Additional reporting Martinne Geller in New York and Jessica Wohl in Chicago; Editing by Bob Burgdorfer