Former J.C. Penney CEO: Coronavirus will have short-term impact on demand
Former J.C. Penney CEO Ron Johnson discusses how the coronavirus will impact retail.
J.C. Penney disclosed Wednesday that it will miss the due date on a loan repayment as company officials reportedly mull bankruptcy following mass store closures related to the coronavirus pandemic.
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The struggling retailer had an April 15 due date to make a $12 million interest payment on 6.375 percent senior notes due in 2036. In an 8-K filing, J.C. Penney said it would allow the due date to pass, noting that it has a “30-day grace period” for repayment before defaulting on the loans.
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“The Company has elected to enter into the 30-day grace period with respect to the Interest Payment in order to evaluate certain strategic alternatives, none of which have been implemented at this time,” J.C. Penney said in the SEC filing.
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Like many traditional retailers, J.C. Penney’s business has been under pressure in recent years amid declining store traffic and a shift toward digital outlets. The company’s struggles were compounded in recent weeks after the coronavirus pandemic forced the closure of 850 J.C. Penney stores.
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With turnaround plans temporarily shelved due to the pandemic, J.C. Penney executives are considering filing for bankruptcy, Reuters reported on Tuesday, citing sources familiar with the matter. While the retailer has enough cash on hand to weather the store closures, bankruptcy protections would allow J.C. Penney to restructure its upcoming debt payments. The company owes nearly $4 billion in long-term debt.
While bankruptcy is one of several potential paths for JC Penney, executives have yet to make any final decisions. A JC Penney spokesperson said the pandemic has “created unprecedented challenges for department store retailers.
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“JCPenney has been engaged in discussions with its lenders since mid-2019 to evaluate options to strengthen its balance sheet and maximize its financial flexibility, a process that has become even more important as our stores have also closed due to the pandemic,” J.C. Penney said in a statement. “Since that time, the Company successfully met or exceeded guidance on all five financial objectives for 2019 and saw comparable store sales improvement in six of eight merchandise divisions in the second half of 2019 over the first half.”
It’s unclear when it will be safe for JC Penney stores and other retail locations to reopen. The possibility of weak store traffic when stores eventually reopen was among the considerations for executives in mulling bankruptcy, according to Reuters.
“We remain focused on our Plan for Renewal, and look forward to when we reopen our doors,” the statement added.
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