J. C. Penney Company third quarter income from continuing operations of $0.27 per share compared with $0.30 per share in last year's quarter. Earnings were in line with management's recent guidance.

Allen Questrom, Chairman and Chief Executive Officer said, “Operating results for Department Stores and Catalog/Internet exceeded our expectations, reflecting better execution, continuing benefits from our centralized business model, and delivery of compelling value in all three channels; Department Stores, Catalog and Internet. Eckerd's results, however, were below expectations due to weak sales trends. As we have stated previously, the Company is in the process of evaluating strategic alternatives for Eckerd, and a decision is expected by the end of the year.”

Questrom added, “We anticipate favorable trends in the consumer environment during the holiday season, and as a result, we expect improving performance in Department Stores and Catalog/Internet compared with last year. At Eckerd, we anticipate continued weakness in both sales and operating profit trends. On a consolidated basis, we currently expect fourth quarter earnings to be in the area of $0.80 per share, and the full year to be about $1.25 per share.”

Department Stores and Catalog

Third quarter LIFO operating profit increased 22 percent, or 90 basis points as a percent of sales, to $207 million compared with $170 million in last year's period. Comparable department store sales increased 1.7 percent. Sales were driven by strong trends in Home, Back-to-School apparel, Family Shoes and Fine Jewelry. Catalog/Internet sales increased 4.1 percent. Print media sales continue to strengthen, with good results from the Fall/Winter Big Book and a positive customer response to the Christmas catalog. In addition, Internet sales continued a strong growth trend, increasing by over 45 percent during the quarter and year-to-date.

Department Stores and Catalog gross margin increased by 190 basis points as a percent of sales, and reflects better execution in a centralized environment. SG&A expenses increased as anticipated, with about half the increase attributable to non-cash pension expense. The remaining increase reflects the completion of the store distribution center network, partially offset by expense savings in store labor from centralized checkouts and the elimination of in-store receiving.

Financial Condition

The Company's financial condition continues to be strong. As part of its longer-term strategy of maintaining a well-funded pension plan, the Company contributed $300 million, or $190 million after-tax, to the plan during the third quarter. At the end of the quarter, the Company's cash investments were consistent with its plan at $1.9 billion, reflecting normal holiday inventory build-up. Full year free cash flow is expected to be in line with previous guidance. 

                      J. C. PENNEY COMPANY, INC.

                     SUMMARY OF OPERATING RESULTS

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              (Amounts in millions except per share data)


                          13 weeks ended            39 weeks ended

                       ---------------------- -----------------------

                        Oct.25, Oct.26, Inc.   Oct.25,  Oct.26,  Inc.

                         2003    2002  (Dec.)   2003     2002   (Dec.)

                       ------- ------- ------ -------- -------- ------


Comparable store sales

 increase/(decrease)

     Department stores    1.7%    3.9%           -0.4%     3.0%

     Eckerd drugstores   -1.0%    4.9%           -0.9%     6.2%


Total retail sales

     Department stores

      and catalog      $4,343  $4,310    0.8% $11,724  $11,939   -1.8%

     Eckerd drugstores  3,642   3,562    2.2%  11,067   10,859    1.9%

                       ------- -------        -------- --------

     Total              7,985   7,872    1.4%  22,791   22,798    0.0%