Dive Brief:
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A notable aspect of J.C. Penney’s fairly bright earnings report last week was its debt-reduction goals. CFO Edward J. Record said that, as it did last year, the company would vanquish another $400 million and $500 of its $4.8 billion debt this year.
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In its conference call last week, Record noted that that company has already upsized its revolving line of credit under its senior secured ABL facility and used cash on hand to retire the outstanding term loan principal previously issued under the ABL. These actions will reduce annual interest expense by approximately $20 million, beginning this fiscal year.
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Earlier this month the retailer said it would sell its sprawling Plano, TX, headquarters, saying that leasing back some of the 1.8 million-square-foot, 64-acre property would net it considerable savings.
Dive Insight:
As Phil Wahba at Fortune notes, J.C. Penney’s crushing debt load has weighed on its prospects in various ways, tempering its fortunes on Wall Street and preventing major investments in technology that could boost its e-commerce.
J.C. Penney has been somewhat lackluster when it comes to online, a situation that comes with a silver lining, which is, simply, that it now has plenty of room for improvement. The retailer did manage to ignite some e-commerce growth in time for the holidays, last month reporting record web sales during November and December.
CEO Marvin R. Ellison attributed that web sales surge in part to the company’s omnichannel efforts, which include using stores as fulfillment centers and offering in-store pickup of online orders in some stores.
“[N]ot only did we make considerable progress on an operational front by growing the top line, expanding our gross margin, and significantly reducing expenses, we also took several steps to address our capital structure,” Record said on the call.