J.C. Penney posts wider loss, but outlook draws investors; New Enterprise makes 'monster move'

By Stephanie N. Rotondo

Phoenix, Nov. 20 - J.C. Penney Co. Inc. was a bright spot in an otherwise negative-toned day on Wednesday.

The besieged retailer reported third quarter results early in the session, showing a wider loss and a 4.8% decline in same-store sales. However, the company pointed out signs of improvement, such as the fact that the last month of the quarter - October - saw a gain in sales.

Perhaps investors thought that was a good omen going into the much-relied on holiday season as the bonds jumped "at least 2 to 3 points," a trader said.

New Enterprise Stone & Lime Co. was meantime the day's biggest winner. The company's debt ran up 11 to 12 points, according to one trader, after new details of a cost cutting plan emerged.

But away from those names, it was a mostly downward day. In the distressed realm, NII Holdings Inc. and Caesars Entertainment Corp. were leading the laggards.

J.C. Penney investors enthused

A trader said J.C. Penney's 7.95% notes due 2017 experienced a "solid rebound" on Wednesday following the company's third quarter earnings release.

The trader called the issue up "2 and change points" at 883/4.

He also saw the 6 7/8% notes due 2015 at 94, which was up nearly 3½ points.

Another trader said the bonds were up "at least 2 to 3 points," depending on which issue you were looking at. He pegged the 6 7/8% notes at 94, deeming that up 3 to 4 points from the previous session.

Yet another market source called the 5.65% notes due 2020 up over a point at 79 bid.

For the quarter, the Plano, Texas-based retailer posted a loss of $489 million, or $1.94 per share. That compared to a loss of $123 million, or 56 cents per share, the year before.

On an adjusted basis, the loss was $1.81 per share. Analysts polled by Thomson Reuters were expecting a loss of $1.72 per share.

Revenue declined 5.1% to $2.78 billion and same-store sales dropped 4.8%.

However, in October, the company reported its first monthly sales increase, which could be a good omen for the holiday season.

J.C. Penney also said it had $1.7 billion of liquidity as of Nov. 2.

"Although J.C. Penney's fiscal 2013 third quarter results appear to be a little light compared to consensus expectations, the retailer was encouraging about its fourth quarter outlook," wrote Gimme Credit LLC analyst Evan Mann in an afternoon report.

"The retailer expects both same-store sales and the gross margin to improve sequentially and year-over-year in the fourth quarter and reiterated its forecast for year-end liquidity to be in excess of $2 billion."

New Enterprise spikes

New Enterprise Stone & Lime's 11% notes due 2018 had a "monster move" during midweek trading, rising 12 to 13 points, according to a trader.

The trader pegged the debt at just over 62.

The gains came as the company announced more details regarding its cost cutting plan and said it had hired a new auditor.

The construction materials supplier said it expected to save $10 million in fiscal 2015. The savings will come in part from workforce reductions and "modifications to benefit plans."

The company also said it had appointed BDO USA LLP as its new auditor.

NII Holdings, Caesars weaken

There continued to be weakness in NII Holdings' debt, traders reported.

One trader said the 8 7/8% notes due 2019 fell 1½ points to 491/2. Another trader also saw the bonds at that level, calling it off just a point.

Meanwhile, Caesars' 10% notes due 2018 remained depressed. There was no fresh news to act as catalyst, but a trader opined that it "could be some profit taking," given the bonds' run-up in the previous week.

The trader quoted the issue in a 48 to 49 ZIP code.

Another trader said the paper was down almost 1½ points at 49.

"So they're sub-50 now," he said.

A third market source deemed the notes down a deuce at 48½ bid.

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