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Department store chain J.C. Penney Company, Inc. (JCP) said Friday that lower consumer spending and declining mall traffic led to a profit for the third quarter that was less than half the level seen last year.

The retailer also gave a disappointing forecast for the fourth quarter and predicted that the challenging retail conditions will last well into 2009.

J.C. Penney is one of a growing list of retailers that has announced a weak third quarter and provided a bleak forecast for the final three months of the fiscal year.

Earlier in the day, Abercrombie & Fitch (ANF) revealed a sharp decline in quarterly profits and a weak forecast for the rest of the fiscal year. This followed similar reports from Kohl's (KSS) and Nordstrom (JWN) the night before.

J.C. Penney said income from continuing operations fell to $123 million or $0.55 per share, or the third quarter. This compared to last year's mark of $261 million, or $1.17 per share.

Market experts were looking for the company to earn $0.53 per share. Analysts' estimates typically exclude special items.

Quarterly revenues dropped nearly 9% to $4.3 billion, the company said, compared to $4.7 billion in the same period last year. Comparable store sales, a key measure of retailing performance that strips out the impact of new store openings, dipped more than 10%.

Gross margins dropped to 38.5% for the quarter down 120 basis points from last year.

Looking ahead the company predicted earnings of about $0.90 to $1.05 per share. Analysts were looking for the company to make $1.32 per share in the fourth quarter, which includes the key holiday shopping season.

Total sales for the fourth quarter are projected to fall by 7%-9%, the company said, with a 9%-11% slide in comparable store sales. Analysts had expected a revenue slide of about 6%.

The company said that it has been lowering its expenses in the wake of the weakening economy, though it has tried to be careful not to compromise customer experience. JC Penney stated that it is also attempting to manage its inventories for appropriate levels, given the fact that consumers are cutting back.

"With the expectation that challenging conditions will persist well into 2009, we will be planning our business accordingly," Myron Ullman, III, the retailer's chairman and chief executive officer, said in a statement.

He added, "Specifically, the continuation of vigilant expense control, inventory management in alignment with expected sales trends, and maintaining our financial strength will position our Company to regain its growth trajectory when the environment improves."


Source :
1. J.C. Penney Q3 Earnings Slide, Provides Disappointing Q4 Forecast, 11/14/2008 8:29 AM ET.