What happened
Department store chain J.C. Penney (JCPN.Q) dropped 30% last month, compared to a 3% decrease in the S&P 500, according to data provided by S&P Global Market Intelligence.
That decline led to a new low for the stock, which is down over 90% in the past decade.
So what
March's slump came despite encouraging operating news from the retailer. After declining in each of the prior three quarters, fourth-quarter sales rose by nearly 3%, executives revealed on March 2. And improving gross profit margin helped net income jump to $254 million from $192 million a year ago.
Image source: Getty Images.
However, cash balances fell to below $350 million from $762 million over the holidays, which highlighted the growing pressure on J.C. Penney to engineer a turnaround before a liquidity crisis hits the company.
Now what
Shortly after its earnings report, the retailer announced another trip into the debt market by taking out $400 million of loans at the steep annual interest rate of 8.63%.
These borrowings will buy J.C. Penney time to allow its rebound plan to play out. However, investors were likely hoping their company wouldn't need to resort to such aggressive measures to keep its operations running.
