J.C. Penney Falls on Report CIT Stopped Funding Suppliers
By Matt Townsend - Jul 31, 2013
J.C. Penney Co. (JCP), the department-store chain seeking to rebound from its worst sales year in more than two decades, tumbled 10 percent after the New York Post reported that CIT Group Inc. (CIT) has stopped funding some of its suppliers.
Commercial lender CIT has stopped supporting deliveries from small manufacturers to J.C. Penney stores, the newspaper reported, without naming its source. The report didn’t say why CIT took this step.
Firms such as CIT provide money on a short-term basis for manufacturers to produce goods for retailers, and in return are paid a fee based on a percentage of the total order. If so-called factors like CIT stop funding suppliers, it can prompt other such lenders to follow suit.
It also may mean that J.C. Penney would have to pay for goods in cash when delivered, Liz Dunn, an analyst for Macquarie Group in New York, said in a note to clients. Less than 10 percent of J.C. Penney’s goods are funded by commercial lenders, of which CIT is the biggest, and if it had to pay up front for all these goods it would total about $300 million, Dunn said.
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http://www.bloomberg.com/news/2013-07-31/j-c-penney-falls-on-report-cit-stopped-funding-suppliers.html
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