J.C. Penney says the SEC is investigating its finances

It looks like the other loafer has dropped for J.C. Penney (JCP).

After coming out of a bruising year-and-a-half tenure under ousted chief executive Ron Johnson, the retailer is facing more challenges with the disclosure that the Securities and Exchange Commission is looking into its financial position. 

On Thursday, the retailer disclosed in a regulatory filing that it had received a letter of inquiry from the SEC. The agency has requested information about Penney’s “liquidity, cash position, and debt and equity financing,” as well as a stock offering the company announced in September. 

The stock offering had already made investors jittery. When Penney announced it would shore up its cash position by selling about $800 million in stock, its shares took a beating, tumbling more than 13%. With the announcement of the SEC inquiry, Penney shares fell as much as 9% on Friday.

The disclosure shines a light into just how far Penney needs to go to restore the chain’s luster. 

The department store is making some headway in reversing a steep decline in sales. Under chief executive Myron “Mike” Ullman, who was brought in to replace Johnson after his policies crippled the chain, there’s some glimmer of hope: sales excluding new stores grew 10% in November, the second straight month of gains. 

But the company continues to bleed, with third-quarter losses amounting to $438 million, wider than the $123 million loss posted a year earlier. Its cash position dwindled during the third quarter, shrinking by 20 percent during the three-month period. 

For now, Penny’s board plans to stick with Ullman, at least until the company finishes its turnaround, although when that might be is unclear, reports The Wall Street Journal

For investors, 2013 is wrapping up to be a faith-trying year. First, Johnson alienated its core shopper by getting rid of coupons and popular clothing lines such as St. John’s Bay. While shoppers are venturing back to the store, it remains to be seen when investors will also return.