J.C. Penney has hired advisers in an attempt to explore debt restructuring options, Reuters reports. The goal is to buy more time in order to try and save the once leading U.S. retailer.
The 117-year-old company is $4 billion in debt, and payment will be due in the next few years. J.C. Penney has lost a staggering $1.4 billion over the last five years, and recovery will take a lot of effort.
The company’s stocks dropped a shocking 50% in the last year. Current trades are at $1.15, giving it a market capitalization of $342 million.
In May sales at stores that have been open for at least a year fell more than expected during the first quarter and the net loss nearly doubled, reaching $154 million, the retailer said.
The Texas-based company has been unable to cope with competition in the face of TJX Cos Inc’s, Marshalls and T.J. Maxx chains. J.C. Penney has also struggled to boost its e-commerce business, unable to compete with more established players like Amazon.
The retailer does have more than $1.5 billion under a revolving credit line, but investors have continued to sell stocks, in response to financial losses. Its credit rating is deep in junk territory, increasing its borrowing costs.
J.C. Penney is exploring options that could include raising additional cash or negotiating with creditors to push out debt maturities. The retailer employs 95,000 people and operates more than 860 stores, despite closing shops over the years and revamping remaining locations.
Recent weeks have seen the company hold discussions with lawyers and investment bankers who specialize in advising troubled companies on debt restructurings and other financial workouts.
In the short term, the company has taken steps to increase financial breathing room and avoid potential bankruptcy. However, analysts have expressed concerns that J.C. Penney will run out of money and fail to change its declining fortune in time.