""JCP will recover, they have more than enought cash to turn the business around for the better.""
THis statement and the one analyst that said they had 2 years of cash it waaaayyyy out on a limb. THey have $2b now...cap ex coming out of that too. If they get below $1.5b with $2.5b owned to vendors, vendors will start to pull the plug. IMHO, they have $500m at most to burn and then it gets really ugly, just my opinion.
Ask yourself....would you ship to them on credit if they had $1b in cash and $2.5b owed to all vendors that are unsecured creditors? I certainly would not. and understanding this is the whole point I feel.
ANd BTW..you don't run inventory down or customers won't come back....it really is that simple
People need to understand the vendor relationship is the key to this. Vendors offer product to JCP for credit. JCP hopes to sell it for a higher price and pocket a profit. BUTTTT if JCP decides to file CHap 11 (doubt now) they become unsecured creditors and have to fight to get their money back. It is a scary situation for them. But JCP needs vendor credit to make the whole thing work.
JCP offers a PLACE to sell their product. Stores and distribution centers. This is why the vendor sells to them...obviously. JCP must make enough to pay for RE and sales staff expenses.
JCP does not have enough cash to buy all it's inventory. It must have a cushion of cash to pay vendors over time. Without vendor credit the whole business plan falls apart. The cash is for vendors, hence the quick sale of stock....to calm vendors.