JC Penney hires AlixPartners as debts mount and revenues drop

17 April 2020 Consulting.us

Beleaguered retailer JC Penney has added AlixPartners to its roster of advisers as it struggles with mounting debt and dwindling sales, according to Bloomberg News.

The company has been struggling as consumers continue to shift to online and discount retailers, while its own e-commerce business has failed to catch hold.

The retailer had a debt load of $3.72 billion as of Feb. 1, with cash on hand of $386 million. Its sales fell by 8% to $10.72 billion in 2019.

The US retailer last year engaged restructuring advisers from law firm Kirkland & Ellis and investment bank Lazard to help chart a turnaround.

JC Penney hires AlixPartners as debts mount and revenues drop

JC Penney now faces an additional major challenge as its physical stores, where it makes most of its sales, have been closed due to restrictions stemming from the coronavirus pandemic. A majority of its hourly staff and salaried associates were furloughed last month.

Moody’s has downgraded the company to “junk” status, with VP Christina Boni relating, “Although J.C Penney liquidity is adequate, the widespread store closures as a result of the coronavirus pandemic and the continued suppression of consumer demand is expected to pressure...EBITDA, impede its turnaround strategy, and weaken its leverage to unsustainably high levels.”

The company is likely to default in the next year, according to data from Refinitv Eikon. JC Penney’s combined credit score, which measures the likelihood of default in the next 12 months on scale of 100 to 1, was a “1.”

In dire straits, the department store chain has enlisted yet another adviser: AlixPartners. The New York-based consultancy is one of the leading firms in the turnaround and restructuring arena. The company previously supported JC Penney on cost savings work in 2013.

JC Penney has been in talks with its banks in recent weeks on its liquidity needs, while negotiating with lenders on a debt deal, according to a Bloomberg News report.

The company’s shares declined by as much as 6.4% on Tuesday, following news of the AlixPartners hire. 


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