JC Penney's sales decline slows but default fears persist JC Penney sought to shore up investor confidence in its troubled retail business by reporting that the decline in its sales was slowing, but worries over the risk of it defaulting on its debt continue to smoulder in credit markets. The department store voluntarily disclosed on Tuesday that like-for-like sales in September fell 4 per cent from a year ago - against a 9.8 per cent decline in August and a 12 per cent fall in the previous quarter. JC Penney remains the US's sickest big retailer, and modest forecasts for sector-wide sales growth in the end-of-year shopping season suggest that the recovery efforts of Mike Ullman, chief executive, are unlikely to be helped by a spending bonanza. The September sales figures - and an assurance from the retailer that it was making "solid progress in its turnaround" - helped boost its share price, which jumped as much as 6 per cent on Tuesday, before settling up 3.9 per cent at $8.01. In previous days the shares hit their lowest level in about 30 years. Liz Dunn, analyst at Macquarie, said they had been in "free fall." In credit markets, which are preoccupied with JC Penney's liquidity, the cost of insuring against a JC Penney bond default remained high. On Monday, the premium on JC Penney five-year credit default swaps - a form of debt insurance that reflect market views of a company's creditworthiness - traded at a record 1,436 basis points, according to Markit data. The spread fell 23 basis points on Tuesday following the release of the September sales figures. By comparison, five-year CDS spreads for Sears, another struggling US department store, stood at 927 basis points. The cost of insuring against a default at Macy's, a stronger chain that has benefited from its peers" woes, was 106bp on Tuesday. JC Penney released the sales figures less than two weeks after an unexpected decision to raise $785m by selling new shares, which some investors saw as a sign of desperation. The share sale further damaged confidence in the company, whose performance nosedived under former chief executive Ron Johnson. His decisions to scrap discounting and some clothing brands are being reversed by Mr Ullman. "JC Penney has a tough road ahead and the environment for retail is not great," said Evan Mann, senior high-yield analyst at Gimme Credit, an independent research service. "Today's report shows things may be getting a bit better for the company, but I still want a little bit more evidence," he said. JC Penney stressed on Tuesday that at the end of its financial year in January it expected to have more than $2bn of liquidity. Macquarie's Ms Dunn said: "If you look at the cash burn this year, it's been pretty horrific, but things are moving in the right direction." Given the proceeds of its latest share sale, she said the prospect of a default "seems pretty far off."