NEW YORK (AP) -- Fitch Ratings is lowering J.C. Penney's credit ratings because it expects the department store operator will burn through more cash this year than it previously thought.
J.C. Penney Co. is trying to recover from a failed turnaround attempt spearheaded by its former CEO Ron Johnson. Last week the Plano, Texas, company said it planned to sell up to 96.6 million shares of common stock in a public offering, evidence the chain is looking to shore up its cash reserves.
Fitch said Wednesday that it now expects J.C. Penney to burn through $2.8 billion to $3 billion in cash in 2013, which is $1 billion more than its May forecast. The ratings agency also said it is concerned the retailer will need further funding from outside sources next year.
J.C. Penney's board ousted Johnson in April after 17 months on the job and rehired the previous CEO, Mike Ullman. Under Ullman, J.C. Penney is bringing back sales events that had been ditched and restoring basic merchandise eliminated by Johnson.
Fitch said in a statement that restoring coupons and bringing back private brands like St. John's Bay should help the business, but investments in inventory, capital expenditures and promotions have been significant and have yet to spur sales momentum.
Fitch cut J.C. Penney's issuer default ratings further into junk status, moving it to "CCC" from "B-."
The company's stock added 9 cents to $8.84 in afternoon trading.
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