By Siddharth Cavale
(Reuters) - J.C. Penney Co Inc (NYS:JCP) Chief Executive Myron Ullman told investors he does not see the need to raise cash this year, CNBC reported, reversing a sharp fall in the retailer's shares.
J.C. Penney shares jumped 18 percent from their early morning low after CNBC reported Ullman's comment, citing a source. (http://link.reuters.com/huq43v)
The shares fell 15 percent on Wednesday after Goldman Sachs said Penney's sales would likely grow more slowly than expected.
That added to concerns the company may not be able to boost its cash reserves ahead of the crucial holiday season when it needs to buy merchandise, advertise and hire staff.
Reuters, citing sources, reported on Wednesday that J. C. Penney was looking to raise up to $1 billion in new equity.
A J. C. Penney spokeswoman declined to comment on Ullman's reported statement but said vendors were still supportive of the company's efforts to turn its business around.
The company said earlier on Thursday it was pleased with the progress of its turnaround efforts and still expected positive comparable-store sales trends coming out of the third quarter and throughout the fourth.
Penney's sales fell 25 percent last year after former Chief Executive Ron Johnson eliminated coupons and jettisoned merchandise that was popular with long-time customers in a push to present a trendier image for the 111-year-old retailer.
Even after Penney reinstated coupons and discounts in the spring, sales kept falling.
"We still believe JCP has ample liquidity for 2013, but if cash burn is running worse than our estimates, the company may need to raise capital to cushion against a potentially challenging holiday season," Citigroup analyst Deborah Weinswig said in a note.
The turnaround is taking longer than hoped in a softening macroeconomic environment, Weinswig said.
Weinswig kept her "sell" rating on the stock, cutting her price target to $7 from $11.
J.C. Penney's volatile shares were up 5.2 percent at $10.65 in early afternoon trading on Thursday. The stock has fallen about 50 percent this year.
BOND DEFAULT FEARS HIGH
The cost for insurance against a J.C. Penney default has shot back to near record-high levels over the last week.
The company, which has a "CCC+" credit rating from Standard & Poor's, reflecting a substantial risk in owning its debt, has about $2.6 billion of outstanding bonds.
The company's benchmark 5-year credit default swap contract price surged by more than 13 percent on Wednesday, according to Markit data.
The cost to insure $10 million of J.C. Penney bonds against a default for five years now requires an upfront payment of about $2.2 million plus quarterly payments of about $300,000 for the duration of the contract. The contract's pricing reflects a default probability of nearly 65 percent.
(Reporting by Siddharth Cavale in Bangalore and Dan Burns and Phil Wahba in New York; Editing by Kirti Pandey and Saumyadeb Chakrabarty)