J.C. Penney Reports Sharp Drop in 3Q Profit

FILE - In this Friday, Oct. 23, 2009 file photo, shoppers visit a J.C. Penney store in New York....

FILE - In this Friday, Oct. 23, 2009 file photo, shoppers visit a J.C. Penney store in New York. J.C. Penney Co. is reporting a 78 percent drop in its third-quarter earnings Friday, Nov. 13, 2009, because of a big expense to fund its pension plan. (AP Photo/Mark Lennihan, file)

(AP)

Department store chain J.C. Penney Co. reported a 78 percent drop in its third-quarter earnings because of a big expense for its pension plan, and its revenue slipped from a year earlier.

The moderate-price retailer upgraded its annual profit and sales outlook for the year because it is selling more items at full price or on planned promotions, but the outlook for holiday shopping remains uncertain.

After retailers used unprecedented price-cutting in a desperate attempt to liquidate mounds of inventory last Christmas, Myron Ullman III, chairman and chief executive, told investors during a conference call Friday that the big question this holiday season is, "What's the customer's reaction going to be to less clearance."

Given high unemployment and tight credit, consumers will "shop for the most part on a very tight family budget," Ullman said.

The company expects sales at stores open at least a year, a key measure of a retailer's health, to fall between 4 percent and 6 percent in the quarter that includes the holidays, less than the 10.8 percent drop it suffered in the period in 2008. It expects to earn 70 cents to 85 cents per share for the period, compared with 95 cents a year ago, on revenue 3 percent to 5 percent lower than a year ago.

The retailer, which is based in Plano, Texas, said it earned $27 million, or 11 cents per share in the third quarter. That compares with $124 million, or 56 cents per share, a year earlier.

The third-quarter results included a charge of $73 million, or 19 cents per share, to write down the value of the company's pension-plan assets. Excluding that impact, adjusted income from continuing operations was $72 million, or 30 cents per share. That's down from $103 million, or 46 cents per share, in last year's third quarter, excluding a pension plan benefit.

The boosted annual outlook and better earnings than the company forecast got investors' attention, and the stock rose $1.82, or 6.2 percent, to close at $31.21 Friday.