UPDATE 3-J.C. Penney says to raise up to $932 mln in stock sale
Sept 27 (Reuters) - Struggling department store operator J.C. Penney Co Inc expects to raise up to $932 million from a share sale, leaving it with about $2.2 billion in cash at the end of the year.
J.C. Penney, whose shares have been hit by concerns that it does not have enough cash to fund its operations going into the holiday season, said on Friday it would sell 84 million shares in a public offering at $9.65 per share.
Penney's shares were down 7 percent at $9.69 before the bell. The share sale would increase Penney's shares outstanding by 38 percent, excluding the 12.6 million additional shares the underwriters have the option to buy.
The retailer said it expected to end the year with about $1.3 billion in cash, excluding proceeds from the offering.
The company said on Aug. 19 that it expected to end the year with $1.5 billion, suggesting it was burning through cash faster than expected - an issue highlighted by several analysts who have a "sell" rating on the stock.
"While an equity raise improves (near-term) liquidity, we remain concerned that JCP will continue to burn cash in '14 and beyond," UBS analyst Michael Binetti, who has a "sell" rating on the stock, wrote in a note.
JP Morgan analyst Matthew Boss said the offering would dilute earnings per share by 28 percent.
Penney announced the offering after the markets closed on Thursday but did not disclose the pricing.
The company, which has a market value of just over $2 billion, has been hit by collapsing sales after a failed attempt in 2012 to go up-market.
Penney's offering confirmed an exclusive Reuters report on Wednesday that the company was looking to raise as much as $1 billion in new equity to build its cash reserves.
Penney spokeswoman Kristin Hays denied a CNBC report on Thursday that said Chief Executive Mike Ullman had told investors there was no need to raise more money before the end of the fourth quarter, which ends in early February.
Penney's shares climbed on the CNBC report, as well as in response to a statement from the company early Thursday that said it anticipated positive comparable sales trends as it comes out of the current quarter, and throughout the holiday quarter.
Hays said on Thursday the company had decided to do the share offering now because of all the negative headlines this week about its financial health.
The capital raising is in response to uncertainty and is aimed at reassuring suppliers and employees, she said.
"This is not because of panic, it's to be prudent," Hays said. She also noted that Penney had opted for a stock issue because it has $5 billion in debt on its books.
Penney has been struggling since a failed attempt last year to re-make itself into a trendier store group by getting rid of coupons and much of the merchandise that appealed to its long-time shoppers. Sales fell 25 percent last year, and have continued to fall this fiscal year.
Earlier this year, Penney got a $2.25 billion loan arranged by Goldman Sachs, which is the sole book-running manager for the stock offering.
A Goldman research note this week said that weak business fundamentals, the need to rebuild inventory of goods popular with its long-time customers and the poor performance of its home goods department would likely put pressure on Penney's liquidity.
Penney's shares have been on a wild ride in the past two days: plunging on the Goldman research, and declining further on the Reuters report about a capital raising, before recovering some of those losses on the company statement about trading conditions and the CNBC report. The shares fell again on the share sale announcement on Thursday, continuing their slide on Friday.