Tomahawk, WI 02/03/2014 (BasicsMedia) – J.C. Penney Company, Inc. (NYSE:JCP), after reporting nine quarters of no profit, is now using molding its losses into reduced taxes certainty in the coming time. The department store chain said in a statement that it is all set to prompt its shareholder rights plan in case investors get hold of more than 4.9% of the shares, down from the 10% earlier. The company has extended its poison pill until 2017.
Poison pill trigger cut by half
Penney, the struggling departmental store operator, has reduced the threshold at which it would weaken the holdings of any shareholder as a measure to prevent a takeover of the retailer. The company said that present shareholders who own greater than 4.9% of the shares will be allowed to trigger the pill only if they increase their stake. Nevertheless, the company has also said that there are some exceptions to this. J.C. Penney Company, Inc. (NYSE:JCP) believes that any alteration in the stock ownership of more than or up to 5% could significantly limit its net operating loss carry forwards in accordance with the U.S. tax code. Hence, an ownership change would maintain its capacity to use more than $2 billion, which Penney has said it has in such carry forwards, to decrease tax liabilities in the future.
Extension of 3 years
J.C. Penney Company, Inc. (NYSE:JCP) has been struggling to perk up its sales since 2012 when the retailer had made a failed attempt to rise up the ladder. Chief Executive Officer Mike Ullman had, to some extent, undone the decline in its same store sales by bringing back popular private label brands. He had also revived sales events at Penney. In august, it had placed a one year poison pill which sought at putting a stop to any risks of takeover by restricting any individual shareholder’s holding to 10%. At that time, many hedge funds had owned high stakes in the Penney. According to Thomas Reuters data, the only investors now which have a stake greater than the new value now are Soros Fund Management, State Street Global Advisors and The Vanguard Group.
If the shareholders do not vote against the poison bill at the annual meeting to be held in May, it will be valid till Jan 26, 2017. Earlier, J.C. Penney Company, Inc. (NYSE:JCP) had set the rights plan to expire in Aug 20 this year.
Analyst expect that the loss in the department store chain in the quarter through January will decrease from the previous year’s $552 million to $225.2 million. Wall Street analysts estimate the retailer to report a loss of about $1.86 billion for the fiscal year ending this week. Penney will report earnings by the end of this month. According to an analyst at Macquarie Group in New York, Liz Dunn the rating on J.C. Penney Company, Inc. (NYSE:JCP)’s stock is neutral, the equivalent of hold. J.C. Penney Company, Inc. (NYSE:JCP)’s recent move suggests, said Dunn that the company has hopes of turning positive earnings at some point and they also intend to use it at the appropriate time.