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J. C. Penney Reports 4Q Earnings

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J. C. Penney announced that fourth quarter earnings per share from continuing operations increased 40% to $1.16 per share from $0.83 per share last year.

On a dollar basis, income from continuing operations increased to $328 million from $253 million last year. Full year operating profit increased 66 percent to 7.1 percent of sales, and earnings per share from continuing operations increased 84 percent to $2.23 per share compared to $1.21 per share last year. The increase in earnings per share was primarily the result of continued improvement in sales productivity, growth in gross margin and leverage of SG&A expenses. Net income for the quarter, including the effects of discontinued operations, was $1.17 per share compared to a loss of $3.42 per share last year.

Myron (Mike) Ullman, Chairman and Chief Executive Officer said, “We are very pleased with the improvements we continue to achieve in our business. Fourth quarter and full year operating profit exceeded our original expectations and represents the fourth consecutive year of substantial earnings improvement. Our results reflect the impact of effective merchandising programs, including transition of seasonal product, compelling marketing and continued improvement in the shopping experience in our stores.”

Ullman added, “2004 was a breakout year for JCPenney as a result of the organization’s focus on the execution of our business plan. The Company has strong momentum as we pursue compelling merchandise initiatives that respond to the needs and wants of our customer. Based on our improved operating performance, completion of the sale of Eckerd and the ongoing capital repositioning program, the Company’s financial position has improved significantly. As we enter 2005, the Company has increased financial flexibility to support the long range plan that we are developing and places us in a good position to implement additional capital structure repositioning actions.”

During the fourth quarter, comparable department store sales increased 3.0 percent with positive results in all merchandise divisions and all regions of the country. For a comparable 13-week period, catalog/Internet sales increased 3.9 percent over last year. The Internet component of sales increased 33 percent for the quarter and continues to be the fastest growing sales channel.

Gross margin for the fourth quarter improved by 130 basis points as a percent of sales, reflecting the benefits of better buying, merchandise flow, seasonal transition and marketing. Gross margin included a LIFO credit of $18 million, or approximately $0.04 per share, in the fourth quarter of 2004 compared to a $6 million credit in 2003. SG&A expenses were 27.6 percent of sales and well leveraged, declining by 100 basis points as a percent of sales. 2004 SG&A expenses included $8 million, or about $0.02 per share, related to lease accounting adjustments. SG&A expenses decreased by $64 million from last year, with the decrease attributable to last year’s 53rd week, which accounted for approximately $65 million. Last year’s fourth quarter also included $20 million of pre-tax charges related to the implementation of expense savings initiatives.

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J. C. Penney Reports 4Q Earnings
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