J. C. Penney Company, Inc. Reports Solid Fourth Quarter and Full Year Financial Results Exceeding Sales and Earnings Expectations

Company Outlines Fiscal 2011 Targets; Announces $900 Million Share Repurchase Plan

Fourth Quarter and 2010 Highlights

- Fourth quarter earnings of $1.09 per share, up 30% over last year

- Merchandising initiatives drive 4.5 percent same store sales growth for the quarter

- Liz Claiborne® and other exclusive brands deliver strong sales, attract new customers

- Q4 gross margin rate in-line with expectations; expenses well-leveraged against sales

- Adjusted Q4 operating income increased 13 percent versus last year

- Strong financial condition, cash and cash equivalents of $2.6 billion

PLANO, Texas, Feb. 25, 2011 /PRNewswire/ -- J. C. Penney Company, Inc. (NYSE: JCP) today reported income from continuing operations of $1.09 per share for the quarter ended Jan. 29, 2011, including the Company's previously announced one-time restructuring charges of $0.08 per share.  Comparable store sales for the quarter grew 4.5 percent over last year due to the success of the Company's merchandising initiatives, including the launch of exclusive brands such as Liz Claiborne, and the compelling value offered to customers through JCPenney's private brands such as Worthington® and St. John's Bay®.  

(Logo:  https://photos.prnewswire.com/prnh/20110222/DA51975LOGO)

Additionally, the Company announced its Board of Directors has approved a new $900 million open market share repurchase program to be funded using the Company's existing cash reserves.  The Company expects to begin share repurchases under this program in March of this year.

Myron E. (Mike) Ullman, III, chairman and chief executive officer, said, "Our performance in 2010 reflects the strides we have made to deliver on our operating goals and position jcpenney as a retail industry leader.  This was particularly evident in the fourth quarter when the actions we took during the year -- including new growth initiatives and improvements across our merchandise assortments, redefining the jcp.com experience and driving efficiencies across our Company -- enabled us to achieve sales, market share and profitability growth that surpassed our expectations, and to establish a share buyback plan which will return value to our shareholders."

In 2010, the Company became the exclusive department store retailer for Liz Claiborne, MNG by Mango® and Call it Spring® by The ALDO Group – attractions that brought new customers to jcpenney.  The Company ended the year with 231 Sephora inside jcpenney boutiques, and announced plans to open 76 additional locations in 2011, bringing this unique beauty offering and differentiated experience to more customers than ever before.  By the end of 2011, MNG by Mango and Call it Spring will each be in approximately 500 jcpenney locations across the country.

Fourth Quarter Operating Performance

Comparable store sales in the fourth quarter increased 4.5 percent over last year, ahead of the Company's guidance for sales to increase 3 to 4 percent.  Total sales for the quarter increased 2.8 percent, and continued to be impacted by the Company's exit of its catalog business.  Internet sales through jcp.com were $495 million in the fourth quarter, increasing 6.7 percent over last year.  Geographically, the best performance was in the southeast region of the country.  Overall, the strongest merchandise results were in men's apparel, women's accessories and Sephora inside jcpenney.  The continued strength in women's accessories and the Sephora inside jcpenney boutiques reflects the success of the Company's focus on enhancing the center core of its stores to provide both style and value for modern customers.  

For the quarter, gross margin dollars increased $23 million, or approximately 1 percent over last year.  As a percent of sales, gross margin was in-line with the Company's expectations and decreased approximately 60 basis points to 37.6 percent of sales, against the historic peak margins achieved in the fourth quarter of last year.  SG&A expenses decreased $45 million or 3.0 percent versus last year.  SG&A expenses were well leveraged as a percent of sales, decreasing 150 basis points to 25.7 percent of sales in the fourth quarter.  Total operating expenses were 29.6 percent of sales for the quarter.

Operating income for the fourth quarter increased 19.6 percent to $458 million or 8 percent of sales. The non-cash qualified pension plan expense was $55 million in the fourth quarter compared to $71 million in the same period last year.  Excluding the impact of the pension plan expense from both this year's and last year's fourth quarter, adjusted operating income as a percent of sales was 9.0 percent, compared to 8.2 percent last year.  A reconciliation of non-GAAP adjusted operating income is included with this release.

Full Year Operating Performance

For the full year 2010, comparable store sales increased 2.5 percent, in-line with the Company's expectations for comparable store sales to increase low single digits for the year.  Internet sales through jcp.com grew $65 million to $1.5 billion for the year, increasing 4.4 percent over last year.  Total sales increased 1.2 percent for the year.  Total sales were approximately 130 basis points lower than same store sales due to the Company's exit from its traditional catalog business.  In 2010, catalog sales totaled $454 million.  

For the year, the Company's gross margin increased $50 million over last year.  As a percent of sales, gross margin decreased just 20 basis points to 39.2 percent when compared to last year's historic peak of 39.4 percent of sales.  For the year, SG&A dollars decreased $32 million or 0.6 percent when compared to last year.

Adjusted operating income, excluding qualified pension plan expense, increased $92 million in 2010.  As a percent of sales, adjusted operating income increased to 5.9 percent versus 5.5 percent last year.  Adjusted income from continuing operations was $2.16 per share compared with $1.86 per share last year.

The Company's financial position remained strong in 2010, and the cash and cash equivalents balance as of fiscal year-end 2010 was approximately $2.6 billion.  

2011 Outlook

Building upon the success of its strategic initiatives in 2010, the Company expects comparable store sales growth in 2011 to be in the low- to mid- single digit range.  Total sales are expected to grow in the low-single digit range in 2011. The Company noted that its total sales are expected to grow at a slower rate due to the discontinuation of its catalog business and the Company's transition out of its outlet store business over the next two years.  

In 2011, the Company is focused on holding its gross margins to approximately 39 percent, as a rate of sales, the same level it achieved in 2010.  With its in-house design, development and sourcing capabilities, the Company has executed several strategies to mitigate costing pressures in 2011 including product engineering, strategic and alternative raw material acquisitions and advance production planning.  

For the full year, earnings per share are expected to be in the range of $2.00 to $2.10 per share. This guidance does not include the impact from the Company's share repurchase program mentioned above.  Capital expenditures for the year are expected to be approximately $650 million to support the Company's continued investment in its existing store base, as well as key merchandising and growth initiatives, including the expansion of MNG by Mango, Call it Spring by The ALDO Group and Sephora inside jcpenney.

For the first quarter of 2011 specifically, the Company expects comparable store sales to increase 3 to 5 percent over last year, with earnings in the range of $0.18 to $0.23 per share.  This includes one-time charges of $0.02 per share related to expenses associated with the renewal of the Company's revolving credit facility ahead of its maturity in 2012, as well as $0.01 per share for restructuring charges as previously announced by the Company on January 24, 2011.  This guidance does not include the impact from the Company's share repurchase program mentioned above.  The Company plans to announce its first quarter results on Monday, May 16, 2011.

Conference Call/Webcast Details

Management will host a live conference call and real-time webcast today, Feb. 25, 2011, beginning at 9:30 a.m. ET.  Access to the conference call is open to the press and general public in a listen-only mode.  To access the conference call, please dial (877) 407-0778, or (201) 689-8565 for international callers, and reference the J. C. Penney Company, Inc. Fourth Quarter Earnings Conference Call.  The telephone playback will be available for seven days beginning approximately two hours after the conclusion of the call by dialing 877-660-6853, account code 286, conference ID number 350566.   The live webcast may be accessed via jcpenney's Investor Relations page at jcpenney.net, on streetevents.com (for members) or on investorcalendar.com.  Replays of the webcast will be available for up to 90 days after the event.


For further information, contact:



Investor Relations

Kristin Hays and Angelika Torres; (972) 431-5500;

jcpinvestorrelations@jcpenney.com



Media Relations

Darcie Brossart (972) 431-3400

jcpcorpcomm@jcpenney.com



Corporate Website

www.jcpenney.net





About J. C. Penney Company, Inc.

J. C. Penney Company, Inc., one of America's leading retailers, operates over 1,100 jcpenney department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp.com. Serving more than half of America's families each year, the jcpenney brand offers a wide array of private, exclusive and national brands which reflect the Company's vision to be America's shopping destination for discovering great styles at compelling prices. Traded as "JCP" on the New York Stock Exchange, the $17.8 billion retailer is transforming its organization to support its Long Range Plan strategies to build a sustainable, profitable enterprise that serves its customers, engages its associates and rewards its shareholders.  For more information visit, www.jcpenney.net.

This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which reflect the Company's current views of future events and financial performance, involve known and unknown risks and uncertainties that may cause the Company's actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, general economic conditions, including inflation, recession, unemployment levels, consumer spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, trade restrictions, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, the impact of weather conditions, risks associated with war, an act of terrorism or pandemic, and a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information.  Please refer to the Company's most recent Form 10-K and subsequent filings for a further discussion of risks and uncertainties. Investors should take such risks into account when making investment decisions. We do not undertake to update these forward-looking statements as of any future date.


J. C. PENNEY COMPANY, INC.

SUMMARY OF OPERATING RESULTS

(Unaudited)

(Amounts in millions except per share data)



                       Three months ended           Twelve months ended

                       Jan. 29,  Jan. 30,  % Inc.   Jan. 29,  Jan. 30,  % Inc.

                       2011      2010      (Dec.)   2011      2010      (Dec.)

STATEMENTS OF
OPERATIONS:

Total net sales        $ 5,703   $ 5,550   2.8%     $ 17,759  $ 17,556  1.2%

Gross margin           2,143     2,120     1.1%     6,960     6,910     0.7%

Operating expenses:

 Selling, general and
 administrative (SG&A) 1,464     1,509     (3.0)%   5,350     5,382     (0.6)%

 Qualified pension
 plan                  55        71        (22.5)%  221       298       (25.8)%

 Supplemental pension
 plans                 9         10        (10.0)%  34        39        (12.8)%

  Total pension        64        81        (21.0)%  255       337       (24.3)%

 Depreciation and
 amortization          132       131       0.8%     511       495       3.2%

 Pre-opening           1         1         0.0%     8         28        (71.4)%

 Real estate and
 other, net            24        15        60.0%    4         5         (20.0)%

 Total operating
 expenses              1,685     1,737     (3.0)%   6,128     6,247     (1.9)%

Operating income       458       383       19.6%    832       663       25.5%

Net interest expense   58        65        (10.8)%  231       260       (11.2)%

Bond premiums and
unamortized costs      -         -         -        20        -         -

Income from continuing
operations

before income taxes    400       318       25.8%    581       403       44.2%

Income tax expense     140       120       16.7%    203       154       31.8%

Income from continuing
operations             $ 260     $ 198     31.3%    $ 378     $ 249     51.8%

Discontinued
operations, net of
income tax

expense of $4, $1, $4,
and $1                 11        2         100+%    11        2         100+%

Net income             $ 271     $ 200     35.5%    $ 389     $ 251     55.0%



Earnings per share
from continuing

operations - diluted   $ 1.09    $ 0.84    29.8%    $ 1.59    $ 1.07    48.6%



Earnings per share -
diluted                $ 1.13    $ 0.84    34.5%    $ 1.63    $ 1.08    50.9%



FINANCIAL DATA:

Comparable store sales
increase/(decrease)    4.5%      (4.5)%             2.5%      (6.3)%



Ratios as a percentage
of sales:

 Gross margin          37.6%     38.2%              39.2%     39.4%

 SG&A expenses         25.7%     27.2%              30.1%     30.7%

 Total operating
 expenses              29.6%     31.3%              34.5%     35.6%

 Operating income      8.0%      6.9%               4.7%      3.8%

Effective income tax
rate                   35.0%     37.8%              34.9%     38.2%



COMMON SHARES DATA:

Outstanding shares at
end of period          236.7     236.0              236.7     236.0

Average shares
outstanding (basic
shares)                236.6     236.0              236.4     232.0

Average shares used
for diluted EPS        239.0     237.3              238.0     233.1






SUMMARY BALANCE SHEETS AND STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in millions)



                                                     Jan. 29,    Jan. 30,

                                                     2011        2010



SUMMARY BALANCE SHEETS:

Cash in banks and in transit                         $ 169       $ 163

Cash short-term investments                          2,453       2,848

 Cash and cash equivalents                           2,622       3,011

Merchandise inventory                                3,213       3,024

Income taxes receivable                              334         395

Prepaid expenses and other                           201         222

Property and equipment, net                          5,231       5,357

Prepaid pension                                      763         -

Other assets                                         678         572

 Total assets                                        $ 13,042    $ 12,581



Merchandise accounts payable                         $ 1,133     $ 1,226

Other accounts payable and accrued expenses          1,514       1,630

Current maturities of long-term debt                 -           393

Long-term debt                                       3,099       2,999

Long-term deferred taxes                             1,192       817

Other liabilities                                    644         738

 Total liabilities                                   7,582       7,803

Stockholders' equity                                 5,460       4,778

 Total liabilities and stockholders' equity          $ 13,042    $ 12,581





                                                     Twelve months ended

                                                     Jan. 29,    Jan. 30,

                                                     2011        2010

SUMMARY STATEMENTS OF CASH FLOWS:

Net cash provided by/(used in):

 Total operating activities                          $ 592       $ 1,573

 Investing activities:

  Capital expenditures                               (499)       (600)

  Proceeds from sale of assets                       14          13

 Total investing activities                          (485)       (587)

 Financing activities:

  Proceeds from debt                                 392         -

  Payments of debt                                   (693)       (113)

  Financing costs                                    (14)        (32)

  Changes in stock                                   8           1

  Dividends paid                                     (189)       (183)

 Total financing activities                          (496)       (327)

Net (decrease)/increase in cash and cash equivalents (389)       659

Cash and cash equivalents at beginning of period     3,011       2,352

Cash and cash equivalents at end of period           $ 2,622     $ 3,011






Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in millions except per share data)





ADJUSTED OPERATING INCOME, INCOME FROM CONTINUING OPERATIONS AND
EARNINGS PER SHARE



We define (i) adjusted operating income as operating income excluding the
non-cash impact of the qualified pension plan and (ii) adjusted income from
continuing operations and adjusted earnings per share from continuing
operations as income from continuing operations and earnings per share from
continuing operations, respectively, excluding the after-tax non-cash impact
of the qualified pension plan. We believe that the presentation of adjusted
operating income, adjusted income from continuing operations, and adjusted
earnings per share from continuing operations, which our management relies on
to assess our operating results, is useful in order to better understand the
operating performance of our core business, provide enhanced visibility into
our selling, general and administrative expense structure and to facilitate
the comparison of our results to the results of our peer companies. Unlike our
normal operating expenses, pension expense is determined using numerous
complex assumptions about changes in pension assets and liabilities that are
subject to factors that are beyond our control, such as market volatility. We
believe it is useful to investors to understand the impact of the non-cash
qualified pension expense on our results of operations, which provides more
meaningful year-over-year comparisons.



ADJUSTED OPERATING
INCOME



The following table reconciles operating income, the most directly comparable
GAAP measure, to adjusted operating income, a non-GAAP financial measure,
which excludes the impact of the qualified pension plan:



                        Three months ended          Twelve months ended

                        Jan. 29,  Jan. 30,          Jan. 29,  Jan. 30,

                        2011      2010      % Inc.  2011      2010      % Inc.

Operating income        $ 458     $ 383     19.6%   $ 832     $ 663     25.5%

 As a percent of sales  8.0%      6.9%              4.7%      3.8%

Add: Qualified pension
plan expense            55        71                221       298

Adjusted operating
income (non-GAAP)       $ 513     $ 454     13.0%   $ 1,053   $ 961     9.6%

 As a percent of sales  9.0%      8.2%              5.9%      5.5%



ADJUSTED INCOME FROM
CONTINUING OPERATIONS



The following table reconciles income from continuing operations, the most
directly comparable GAAP measure, to adjusted income from continuing
operations, a non-GAAP financial measure, which excludes the impact of the
qualified pension plan:



                        Three months ended          Twelve months ended

                        Jan. 29,  Jan. 30,          Jan. 29,  Jan. 30,

                        2011      2010      % Inc.  2011      2010      % Inc.

Income from continuing
operations              $ 260     $ 198     31.3%   $ 378     $ 249     51.8%

Earnings per share from
continuing

 operations - diluted   $ 1.09    $ 0.84    29.8%   $ 1.59    $ 1.07    48.6%

Add: Qualified pension
plan expense net of tax

 of $21, $27, $86 and
 $114                   34        44                135       184

Adjusted income from
continuing operations

(non-GAAP)              $ 294     $ 242     21.5%   $ 513     $ 433     18.5%

Adjusted earnings per
share from continuing

operations - diluted
(non-GAAP)              $ 1.23    $ 1.02    20.6%   $ 2.16    $ 1.86    16.1%






Reconciliation of Non-GAAP Financial Measures

(Unaudited)

(Amounts in millions)





FREE CASH FLOW



Free cash flow is a key financial measure of our ability to generate
additional cash from operating our business and in evaluating our
financial performance. We define free cash flow as cash flow from
operating activities excluding discretionary cash contributions to our
primary pension plan and associated tax impact, less capital expenditures
and dividends paid, plus proceeds from the sale of assets. Adjustments to
exclude discretionary pension plan contributions are more indicative of
our ability to generate cash flows from operating activities. We believe
discretionary contributions to our pension plan are more reflective of
financing transactions to pay-down off-balance sheet debt relating to the
pension liability. Free cash flow is a relevant indicator of our ability
to repay maturing debt, both on and off-balance sheet, revise our dividend
policy or fund other uses of capital that we believe will enhance
stockholder value. Free cash flow is considered a non-GAAP financial
measure under the rules of the SEC. Free cash flow is limited and does not
represent remaining cash flow available for discretionary expenditures due
to the fact that the measure does not deduct payments required for debt
maturities, pay-down of off-balance sheet pension debt, and other
obligations or payments made for business acquisitions. Therefore, it is
important to view free cash flow in addition to, rather than as a
substitute for, our entire statement of cash flows and those measures
prepared in accordance with GAAP.



The following table reconciles cash flow from operating activities, the
most directly comparable GAAP measure, to free cash flow, a non-GAAP
financial measure:








                                            Twelve months ended

                                            Jan. 29,  Jan. 30,

                                            2011      2010

Net cash provided by operating activities   $ 592     $ 1,573

Add:

      Discretionary pension contribution    392       -

      Proceeds from sale of assets          14        13

Less:

      Tax benefit from pension contribution (152)     (126)

      Capital expenditures                  (499)     (600)

      Dividends paid                        (189)     (183)

Free cash flow (non-GAAP)                   $ 158     $ 677








Non-cash transaction: On May 18, 2009, we made a voluntary contribution of
approximately 13.4 million newly issued shares of JCPenney common stock, valued
at $340 million, to the J. C. Penney Corporation, Inc. Pension Plan.





SOURCE J. C. Penney Company, Inc.