J.C. Penney's stock has plunged more than 70% over the past year and now trades under $1. Its first-quarter financial loss nearly doubled to $154 million.
But in newly-minted Chief Executive Officer Jill Soltau's turnaround bid, another figure looms larger: $4 billion.
That is the rough total of a potentially crushing debt load on Penney's balance sheet, a ticking time bomb that could derail Soltau's attempt to revitalize the 117-year-old department store chain.
Soltau, hired late last year from craft and fabrics seller Jo-Ann Stores, is attempting to restore Penney's roots as a retailer of mid-priced apparel for middle-class families. In the short term, she is reducing inventory at stores to boost margins on merchandise and closing underperforming outlets.
Soltau, who declined an interview request through a spokeswoman, earlier this year described Penney's turnaround attempt as "a long road" with "no silver bullets" that "will take time."
Penney has about $1.75 billion in liquidity in the form of cash and money available under a revolving credit line, a point Soltau has emphasized in meetings with hedge funds holding the retailer's loans and bonds, a person familiar with the matter said. That makes Penney's near-term debt payments manageable.
But more than $2 billion comes due in 2023, the legacy of a loan tapped six years ago after Penney replaced former CEO Ron Johnson. The onetime pioneer of Apple's retail outlets launched expensive renovations of Penney stores and eliminated coupons, sparking a customer backlash that resulted in plunging sales.
Johnson was one of four executives who have tried to turn Penney around since 2011. Macy's, by comparison, had the same CEO since 2003 until a recent change, while Kohl's recently tapped a new top executive to succeed one who had the reins since 2008.
Declining visits from shoppers have led to years of falling sales and strained cash flow at Penney, raising concerns among shareholders, creditors and vendors shipping merchandise that the company won't be able to meet its financial obligations, even those four years away.
The result is Penney hired advisers to explore debt restructuring options that would buy more time to forge a turnaround, Reuters reported in July. Penney subsequently confirmed hiring advisers to improve its balance sheet after investors dumped its shares, and added it was not making bankruptcy preparations.
"We weren't surprised," said Levi Strauss Chief Executive Officer Chip Bergh in an interview. "We're looking at their debt and we're managing our credit with them appropriately."
Bergh has urged Penney to stock more of his company's denim and purchase less from poorer selling brands. "They've got to turn their business around and put some points on the board," he said.
Penney's latest debt advisers include restructuring specialists from law firm Kirkland & Ellis and investment bank Lazard, according to people familiar with the hires.
The firms, which had no comment, have worked on significant workouts with other retailers, including on a debt restructuring earlier this year for luxury clothier Neiman Marcus Group executed without the need for a bankruptcy filing.
The advisers are not exploring a bankruptcy filing for Penney and are focused on reworking finances outside of court proceedings, one of the sources said. Penney took similar steps in 2013, leading to a new loan it has refinanced to come due in four years.
Levi's Bergh said Penney is a "long way away" from suffering the fate of Sears, which filed for bankruptcy last year. "It's worth pointing out that when Sears declared bankruptcy, we had negligible financial exposure because we had been managing credit in an appropriate way. We're doing the same thing with J.C. Penney," he said.
Options under consideration for Penney include raising additional cash and negotiating with creditors to push out debt maturities, said a person familiar with the matter. Penney could also reduce liabilities and delay debt payments by offering new bonds to investors whose current holdings have declined in value as result of the retailer's financial distress, the source said.
A Penney spokeswoman declined to comment further on the company's advisers or future financial plans.
Joe Shamie, president of Delta Children, which has supplied Penney with children's furniture for more than 30 years, is one of many banking on the retailer and its financial backers coming through with a long-term strategy.
"We need them to survive. We cannot do it without their continuing to receive support and a credit line so we can supply JCP with great product and they can stock their shelves and service their customers," Shamie said.
Soltau is attempting to buck the trend of troubled bricks-and-mortar retailers failing amid the rise of Amazon and dominance from larger rivals such as Kohl's, Walmart and Target. In addition, Penney faces fierce competition from discount retailers such as TJX Cos's Marshalls and T.J. Maxx chains.
She has shifted Penney's strategic priorities to refocus on the retailer's once-thriving and higher-margin apparel business.
The moves have contributed to near-term financial pain. Jettisoning Penney's home appliances business and all but canceling its furniture offerings combined to hurt sales during the first three months of the year.
Penney is revamping stores and clearing out old merchandise to make more room for certain home goods and women's apparel. Penney also is testing a new centralized pickup and returns area expected to be rolled out in hundreds of stores, and recently started a new streamlined checkout process.
Soltau has lured Michelle Wlazlo from Target to be chief merchant and Truett Horne from consulting firm McKinsey & Co to take on a new role developing the company's long-term strategy.
Other efforts predating Soltau include launching a big and tall men's clothing brand featuring former professional basketball star Shaquille O'Neal and a partnership with Fanatics Inc aiming to attract sports fans with the latest team apparel on store racks.
Still, the retailer faces longstanding challenges that stretch beyond stores. Penny's website traffic in the second quarter declined compared with rival Kohls, with stops at its homepage falling 11% and visits beyond there sinking 41.4% compared with the same period last year, according to data from analytics firm SimilarWeb.