Apple Guy Getting Grief From J.C. Penney Creditors: Not a Good Sign

Filling shelves with merchandise costs lots of money, and retailers often use borrowings to fund inventory, so keeping nice with the lending world is important. JCPenney (JCP) and its new-ish CEO, former Apple (AAPL) retail chief Ron Johnson, received notice from some hedge funds holding Penney paper that the funds think Penney shouldn’t be pledging inventory as collateral for a $1.5 billion line of credit.

The Wall Street Journal does a nice job of shooting the hedge funds’ argument down, but Penney’s overall liquidity will likely garner increasing attention because of falling sales, net losses and a reduced cash position since Johnson came aboard and dispensed with Penney’s former strategy of heavy discounting and coupon offers.

It’s a bleak stock chart since Johnson showed up.

JCP Chart

And the cash cushion has been reduced.

JCP Cash and ST Investments Chart

The quickest way to reverse the cash slide would be for Penney to sell more stuff, and Johnson may have to eat a large plate of crow and resort to coupons and sales -- things Penney customers like -- to achieve that.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com.

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