JCPenney September 2008 Sales Pre-Recorded Conference Call – Final

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Now let’s discuss our sales results for the month of September. For the five weeks ended October 4, 2008 JCPenney’s comparable store sales decreased 12.4% which was below guidance for a mid to high single digit decrease. In last year’s September period, comparable store sales declined 3.7%. For the month, total Company’s sales decreased 10.9%.

During September, a weakening economic climate combined with the events that took place in the financial markets took a toll on already weak consumer sentiment and declining spending. These factors impacted the Company’s sales performance as well as declining mall traffic that reached its lowest point of the past year. Additionally the Company experienced some minimal impact on September sales results from the disruption that resulted from store closures due to hurricanes affecting the Southeast and Southwest regions.

Overall, while sales declines were broad-based, the Southwest delivered the weakest results. However, there were some brighter spots in the Northeast and Central parts of the country were cooler temperatures began to set in at the end of the month and we were encouraged to see a notably good response to such categories as women’s sweaters and outerwear. Internet sales through JCP.com decreased 4% in September compared to a 6.4% increase in September 2007, with home furnishings in particular seeing a weak response.

Looking at merchandise trends across our business, on a relative basis given the weakened sales Tiffany Rings women’s apparel and children’s were the better performing merchandise divisions during the month, while fine jewelry and home continued to be our weakest performing divisions.

With respect to weekly sales trends, sales were weak throughout most of the month but softest during the third week. Sales improved during the last week of the period, aided by the cooler weather experienced in the Northeast and Central regions. Overall, the Company’s off-mall stores continued to see better traffic patterns than our mall locations which, as I mentioned, experienced the weakest traffic trends of the year.

The Company opened 12 new stores on October 3. Four of these stores are in Alabama, two are in Texas and one store is opening in each of the following states — Arizona, Kentucky, Tennessee, Washington, Ohio and Louisiana. One of the 12 new stores opened last week was a relocation and 11 were in the off-mall format.

Eight of the 12 new stores include a Sephora Inside JCPenney. We also added Sephora Inside JCPenney to existing stores in St. Joseph, Missouri and Roseville, California. This brings our total Sephora count to 91 locations. This round of openings completes the group of 35 new or relocated stores we planned to open in 2008 and brings our total store count to 1093. In addition, over the course of the year JCPenney will complete extensive renovations of 21 stores, three store expansions and refurbishments and upgrades to 90 others across the country.

With that let me discuss our outlook. In light of September sales, we believe it is prudent to lower expectations for the coming months. But we remain confident in the underlying strength of our business. Despite the challenging environment, customers are continuing to respond to the newness and innovation we provide through new brands such as Decree, through Sephora and through a merchandise selection that is designed specifically to meet their family’s style preferences and need for quality at a sharp price point that makes sense in this economic climate.

As part of the Company’s continuing effort to provide newness in its merchandise assortments, it announced the launch of I “Heart” Ronson, a complete women’s fashion sportswear line designed by Charlotte Ronson to be sold exclusively at JCPenney. Targeted toward the 21 to 35 year old women, the collection will feature a complete sportswear line with tees, knit tops, blouses, sweaters, jeans, skirts, dresses and jackets. I “Heart” Ronson will be offered at JCPenney’s better price points and will debut in JCPenney stores, online at JCP.com and via catalog for spring 2009.

As we focus on offering a compelling shopping experience, we continue to rigorously control operating expenses and manage inventory levels to be in alignment with expected sales trends. The Company continues to maintain a strong financial position with $2.1 billion of cash investments available as of the end of the second quarter to fund peak seasonal inventory needs of approximately $1 billion. The Company’s liquidity position is further supported by a $1.2 billion revolving credit facility.

Based on these factors together, we believe that we are well positioned to increase market share during this economic period and to be an even stronger competitor when the downturn is over. With that let me provide more specific information about our expectations for the October period, during which we expect the consumer spending environment to remain weak.

Management’s guidance for the four-week period ending November 1, 2008 is for a low double-digit decrease in comparable store sales compared to a 1% decrease during the same period last year. In addition, we are now guiding to a low double-digit decrease in comparable store sales for the third quarter.

Third quarter earnings are now expected to be approximately $0.50 to $0.60 per share. The Tiffany Bangles previous guidance was for third quarter comparable store sales to decline mid single digits and earnings to be in the range of $0.70 to $0.75 per share.

Before we conclude the call, let me note that the new third quarter earnings release date is Friday, November 14, 2008. And the fourth quarter and full-year earnings release date is Friday, February 20, 2009. Thank you for listening to the September 2008 JCPenney sales call.