J. C. Penney Company, Inc. reported first quarter net income of $0.20 per share compared with $0.29 per share in last year’s quarter.

Allen Questrom, Chairman and Chief Executive Officer said, “The past three months have represented one of the most difficult retailing environments in recent memory. Although I am disappointed with the Company’s execution, results for the first quarter should not detract from the significant progress that we have made in improving the fundamentals of our business over the past two years. We know that we have many opportunities for further improvement, and our strong financial condition supports our business initiatives.”

Questrom added, “We are beginning to see some signs that the environment may be improving, and are maintaining our earnings guidance for the second quarter as well as the back half of the year. If the retail environment does improve, we believe that we could still achieve our previously communicated full year earnings guidance.”

First quarter operating profit for Department Stores and Catalog was $83 million compared with $157 million last year, a decrease of 170 basis points as a percent of sales. Comparable department store sales decreased 4.9 percent compared with a strong 7.9 percent increase last year. The best merchandise categories for the quarter were Fine Jewelry and Children’s. Catalog sales decreased 11.1 percent. Internet sales, which are included in Catalog, continued their strong growth trend, increasing in excess of 25 percent during the quarter.

Department Stores and Catalog gross margin increased by 140 basis points as a percent of sales, and reflects additional benefits from our growth as a centralized organization. SG&A expenses were well controlled and increased by 1.5 percent. The increase results from planned investments in advertising and transition costs for the new distribution network, as well as higher non-cash pension expense. Spending in these areas was partially offset by expense savings in store labor, as a result of centralized checkouts and progress made toward eliminating in-store receiving and lower Catalog expenses.

                      J. C. PENNEY COMPANY, INC.
                           and subsidiaries
              (Amounts in millions except per share data)

                                              13 weeks ended
                                            ------------------- ------
                                                April    April    
                                                  26,      27,   Inc.
                                                 2003     2002  (Dec.)
                                            ----------- ------- ------
Comparable store sales (decrease)/increase
      Department stores                           -4.9%    7.9%
      Eckerd drugstores                           -1.1%    7.6%

Total retail sales
      Department stores and catalog             $3,723  $4,006   -7.1%
      Eckerd drugstores                          3,770   3,722    1.3%
                                            ----------- -------
      Total                                      7,493   7,728   -3.0%

Margins and expenses
Gross margin - LIFO
      Department stores and catalog              1,460   1,514   -3.6%
      Eckerd drugstores                            866     839    3.2%
                                            ----------- -------
      Total                                      2,326   2,353   -1.1%

Selling, general and
administrative (SG&A) expenses
      Department stores and catalog             (1,377) (1,357)   1.5%
      Eckerd drugstores                           (748)   (739)   1.2%
                                            ----------- -------
      Total                                     (2,125) (2,096)   1.4%

Segment operating profit - LIFO
      Department stores and catalog                 83     157  -47.1%
      Eckerd drugstores                            118     100   18.0%
                                            ----------- -------
      Total                                        201     257  -21.8%

Other unallocated                                    7     (10)   N/A
Net interest expense                              (104)   (102)   2.0%
Acquisition amortization                           (10)    (10)   0.0%
                                            ----------- -------

Income before income taxes                          94     135  -30.4%

Income taxes                                       (33)    (49) -32.7%

                                            ----------- -------
Net income                                         $61     $86  -29.1%