J. C. Penney Company, Inc. saw department store sales increase 0.7% for the month of August to $1.39 billion from $1.38 billion last year. Same store sales decreased 0.5%, slightly below initial guidance and down from last year’s 2.8% increase. The best divisional performances were said to be in women’s accessories, particularly fashion jewelry and lingerie, fine jewelry and children’s apparel and footwear. The Company experienced softer sales of big ticket items, particularly furniture, which was up against a stronger sales environment last year. Geographically, the best results were in the southeastern and western regions of the country. For the Back-to-School season to date, a period that runs from mid-July through early-September, sales have generally met the Company’s expectations, with strength at the beginning of the season partially offset by softness in certain categories in August.

Internet sales through www.jcp.com continue to represent the Company’s fastest growing sales channel, increasing approximately 16% in August on top of an increase of nearly 30 percent last year. Direct sales in total increased 0.5% for the period, in line with initial guidance.


Outlook

While sales for August were somewhat below expectations, underlying traffic and transaction trends continue to be favorable, and the Company remains confident in its positioning for the back half of the year. Accordingly, management is reaffirming its previous earnings guidance for the third and fourth quarters, with comparable department store and Direct sales both expected to increase low single digits in the five week September period. In last year’s September period, comparable department store and Direct sales increased 1.4% and 0.4%, respectively.

                   Preliminary August Sales Summary
                           ($ in millions)

                                             % Increase/ (Decrease)
                                          ----------------------------
                         Period ended       All Stores    Comp Stores
                      ------------------  -------------- -------------
                       Aug. 26,  Aug. 27,
                         2006     2005      2006   2005   2006   2005
                      --------- --------  ------- ------ ------ ------
4 Weeks
---------------------
Department stores       $1,386   $1,376      0.7    3.7   (0.5)   2.8
Direct                     195      194      0.5    0.0
                      --------- --------
Total Company           $1,581   $1,570      0.7    3.2

30 Weeks
---------------------
Department stores       $8,552   $8,225      4.0    4.1    3.2    4.1
Direct                   1,487    1,444      3.0    5.3
                      --------- --------
Total Company          $10,039   $9,669      3.8    4.3