FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549


(Mark One)

   X          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended July 26, 2003      Commission file number 1-15274

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       For the transitional period from ______________ to ________________
                       Commission File No. ______________

                           J. C. PENNEY COMPANY, INC.
             (Exact name of registrant as specified in its charter)

                               Delaware 26-0037077
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

                  6501 Legacy Drive, Plano, Texas 75024 - 3698
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (972) 431-1000
              (Registrant's telephone number, including area code)


              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes       X       No

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes       X       No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

271,850,210  shares of Common  Stock of 50 cents par value,  as of  September 3,
2003.





                                      INDEX

                                                                                                           
                                                                                                              Page
                                                                                                           ----------
                                                                                                           ----------
Part I               Financial Information
    Item 1.          Financial Statements
                     Consolidated Statements of Operations                                                     1
                     Consolidated Balance Sheets                                                               2
                     Consolidated Statements of Cash Flows                                                     4
                     Notes to the Unaudited Interim Consolidated Financial Statements                          5

    Item 2.          Management's Discussion and Analysis of Financial Condition and Results of
                     Operations                                                                                16
    Item 3.          Quantitative and Qualitative Disclosures about Market Risk                                25
    Item 4.          Controls and Procedures                                                                   25


Part II              Other Information
    Item 1.          Legal Proceedings                                                                         26
    Item 4.          Submission of Matters to a Vote of Security Holders                                       26
    Item 6.          Exhibits and Reports on Form 8-K                                                          27

Signature Page                                                                                                 28
                                       i




PART I - FINANCIAL INFORMATION

Item 1 - Unaudited Financial Statements


                                                     J. C. Penney Company, Inc.
                                                Consolidated Statements of Operations
                                                             (Unaudited)
                                                                                                          

       ($ in millions, except per share data)                           13 weeks ended                  26 weeks ended
                                                                 -----------------------------  -------------------------------
                                                                   July 26,         July 27,      July 26,         July 27,
                                                                     2003             2002          2003             2002
                                                                 --------------    -----------  -------------   ---------------
                                                                                                -------------   ---------------

       Retail sales, net                                             $ 7,313        $ 7,198       $ 14,806          $ 14,926

       Costs and expenses
          Cost of goods sold                                           5,166          5,063         10,333            10,438
          Selling, general and administrative expenses                 2,042          2,040          4,167             4,136
          Other unallocated                                              (11)             5            (18)               15
          Net interest expense                                           108             92            212               194
          Acquisition amortization                                         8              7             18                17
                                                                 --------------    -----------  -------------   ---------------
                                                                 --------------    -----------  -------------   ---------------
              Total costs and expenses                                 7,313          7,207         14,712            14,800
                                                                 --------------    -----------  -------------   ---------------
       Income/(loss) before income taxes                                   0             (9)            94               126
       Income taxes                                                        0               3           (33)              (46)
                                                                 --------------    -----------  -------------   ---------------
                                                                                                -------------   ---------------
       Net income/(loss)                                                $  0          $  (6)         $  61              $ 80
       Less: preferred stock dividends                                    (6)             (7)          (13)              (14)
                                                                 --------------    -----------  -------------   ---------------
                                                                 --------------    -----------  -------------   ---------------
       Net (loss)/income applicable to common
          stockholders                                                 $  (6)       $                $  48              $ 66
                                                                                   (13)
                                                                 ==============    ===========  =============   ===============




       (Loss)/earnings per share:
           Basic                                                     $(0.02)        $ (0.05)         $0.18             $0.25
           Diluted                                                   $(0.02)        $ (0.05)         $0.18             $0.24



The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.


                                      -1-




                                                J. C. Penney Company, Inc.
                                                Consolidated Balance Sheets
                                                        (Unaudited)

                                                                                                    
       ($ in millions)                                                    July 26,       July 27,        Jan. 25,
                                                                            2003           2002            2003
                                                                        --------------  ------------  ---------------

       Assets
       Current assets
         Cash and short-term investments
               (including restricted balances of $87,
                $121 and $86)                                              $ 2,631        $ 2,004         $ 2,474

         Receivables (net of bad debt reserves
                of $14, $15 and $14)                                           713            695             705

         Merchandise inventory (net of LIFO
                reserves of $421, $401 and $403)                             5,175          5,002           4,945

         Prepaid expenses                                                      128                            118
                                                                                              132
                                                                        --------------  ------------  ---------------

              Total current assets                                           8,647          7,833           8,242


       Property and equipment (net of accumulated
              depreciation of $3,336, $3,575 and $3,253)                     4,829          4,889           4,901


       Goodwill                                                              2,311          2,312           2,304


       Intangible assets (net of accumulated
              amortization of $352, $285 and $322)                             469            513             494


       Other assets                                                          1,803          1,532           1,815

                                                                        --------------  ------------  ---------------

       Total Assets                                                       $ 18,059       $ 17,079        $ 17,756
                                                                        ==============  ============  ===============

       The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.


                                      -2-







                                                J. C. Penney Company, Inc.
                                               Consolidated Balance Sheets
                                                       (Unaudited)

                                                                                                   
       ($ in millions except per share data)                              July 26,       July 27,       Jan. 25,
                                                                            2003           2002            2003
                                                                        --------------  ------------  --------------

       Liabilities and Stockholders' Equity
       Current liabilities
         Accounts payable and accrued expenses                               $3,302         $3,370           $3680
         Short-term debt                                                         25             17              13

         Current maturities of long-term debt                                   642             14             288
         Deferred taxes                                                         112             88              80
                                                                        --------------  ------------  --------------
              Total current liabilities                                       4,081          3,489           4,061

       Long-term debt                                                         5,161          5,172           4,927

       Deferred taxes                                                         1,396          1,256           1,391

       Other liabilities                                                        979            999           1,007
                                                                        --------------  ------------  --------------

              Total Liabilities                                              11,617         10,916          11,386

       Stockholders' equity
       Capital stock
         Preferred stock, no par value and stated value
              of $600 per share: authorized, 25 million shares;
              issued and outstanding, 0.5, 0.6 and 0.6 million
              shares of Series B ESOP convertible preferred                     317                           333
                                                                                               345
         Common stock, par value $0.50 per share:
             authorized, 1,250 million shares; issued and
             outstanding, 272, 268 and 269 million shares                     3,486          3,409          3,423
                                                                        --------------  ------------  --------------
       Total capital stock                                                    3,803          3,754          3,756
                                                                        --------------  ------------  --------------

       Reinvested earnings at beginning of year                               2,817          2,573          2,573

         Net income                                                              61             80            405
         Dividends declared                                                     (80)           (80)          (161)
                                                                        --------------  ------------  --------------
       Reinvested earnings at end of period                                   2,798                         2,817
                                                                                             2,573

         Accumulated other comprehensive (loss)                                (159)          (164)          (203)
                                                                        --------------  ------------  --------------

             Total Stockholders' Equity                                       6,442          6,163          6,370
                                                                        --------------  ------------  --------------

       Total Liabilities and Stockholders' Equity                           $18,059       $ 17,079       $ 17,756
                                                                        ==============  ============  ==============

       The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.


                                      -3-






                                                J. C. Penney Company, Inc.
                                           Consolidated Statements of Cash Flows
                                                        (Unaudited)
                                                                                                      
       ($ in millions)                                                                   26 weeks ended
                                                                             ---------------------------------------
                                                                             ---------------------------------------
                                                                                 July 26,              July 27,
                                                                                   2003                  2002
                                                                             -----------------      ----------------
       Cash flows (used in)/provided by operating activities:
       Net income                                                               $  61                      $ 80
       Adjustments to reconcile net income to net cash
         from operating activities:
          Asset impairments, PVOL and other unit closing costs                     16                        28

          Depreciation and amortization, including intangible assets              355                       324

          Net gains on sale of assets                                             (51)                      (10)

          Benefit plans expense                                                    35                         4

          Vesting of restricted stock awards                                        3                         3

          Deferred taxes                                                           37                        14

          Change in cash from:
             Receivables                                                          (25)                        3
             Sale of drugstore receivables                                         44                         -

             Inventory                                                           (230)                      (72)

             Prepaid expenses and other assets                                     14                         1
             Accounts payable                                                      64                       302

             Current income taxes payable                                         (30)                      (19)

             Other liabilities                                                   (334)                     (228)
                                                                             -----------------      ----------------
       Net cash (used in)/provided by operating activities                        (41)                      430
                                                                             -----------------      ----------------

       Cash flows (used in)/provided by investing activities:
       Capital expenditures                                                      (352)                     (286)

       Proceeds from sale of assets                                                68                        18

                                                                             -----------------      ----------------

       Net cash (used in) investing activities                                   (284)                     (268)

                                                                             -----------------      ----------------

       Cash flows provided by/(used in) financing activities:
       Change in short-term debt                                                   12                         2

       Proceeds from equipment financing                                            9                         9

       Net proceeds from issuance of long-term debt                               586                         -

       Payment of long-term debt, including capital leases                        (42)                     (929)

       Common stock issued, net                                                    13                        18

       Preferred stock redeemed                                                   (16)                      (18)

       Dividends paid                                                             (80)                      (80)

                                                                             -----------------      ----------------
       Net cash provided by/(used in) financing activities                        482                      (998)
                                                                             -----------------      ----------------
       Net increase/(decrease) in cash and short-term investments                 157                      (836)

       Cash and short-term investments at beginning of year                     2,474                     2,840

                                                                             -----------------      ----------------
       Cash and short-term investments at end of period                       $ 2,631                   $ 2,004
                                                                             =================      ================

       The accompanying notes are an integral part of these unaudited Interim Consolidated Financial Statements.

                                      -4-



Notes to the Unaudited Interim Consolidated Financial Statements

1)       Summary of Significant Accounting Policies

A description  of significant  accounting  policies is included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 25, 2003 (the "2002
10-K"). The accompanying  unaudited Interim  Consolidated  Financial  Statements
should be read in conjunction  with the  Consolidated  Financial  Statements and
notes thereto in the 2002 10-K.

The accompanying Interim Consolidated Financial Statements are unaudited but, in
the opinion of management, include all material adjustments necessary for a fair
presentation.  Because of the seasonal nature of the retail business,  operating
results for interim periods are not  necessarily  indicative of the results that
may be expected for the full year.  The January 25, 2003  financial  information
has been  derived  from the  audited  Consolidated  Financial  Statements,  with
related footnotes, included in the 2002 10-K.

Certain reclassifications have been made to prior year amounts to conform to the
current period presentation.

Holding Company

Effective  January 27, 2002, J. C. Penney  Company,  Inc.  changed its corporate
structure to a holding company format.  As part of this structure,  J. C. Penney
Company,  Inc.  changed its name to J. C.  Penney  Corporation,  Inc.  (JCP) and
became a wholly owned  subsidiary of a newly formed  affiliated  holding company
(Holding  Company).  The Holding  Company assumed the name J. C. Penney Company,
Inc. The Holding Company has no direct  subsidiaries other than JCP, nor does it
have any independent assets or operations.  All outstanding shares of common and
preferred stock were automatically  converted into the identical number and type
of shares in the  Holding  Company.  Stockholders'  ownership  interests  in the
business did not change as a result of the new structure.  Shares of the Company
remain  publicly  traded  under  the same  symbol  (JCP)  on the New York  Stock
Exchange.  The Holding  Company is a co-obligor (or guarantor,  as  appropriate)
regarding  the  payment of  principal  and  interest on JCP's  outstanding  debt
securities. The guarantee by the Holding Company of certain of JCP's outstanding
debt is  full  and  unconditional.  The  Holding  Company  and its  consolidated
subsidiaries,  including  JCP, are  collectively  referred to in this  quarterly
report as "Company" or "JCPenney," unless indicated otherwise.

Stock-Based Compensation
------------------------
The Company has a stock-based compensation plan for associates that provides for
grants of stock  awards,  stock  appreciation  rights or options to purchase the
Company's  common stock. The Company accounts for the plan under the recognition
and measurement  principles of Accounting  Principles  Board Opinion No. 25 (APB
25), "Accounting for Stock Issued to Employees," and related Interpretations. No
stock-based  employee   compensation  cost  is  reflected  in  the  consolidated
statement of operations for stock options, as all options granted under the plan
had an exercise price equal to the market value of the  underlying  common stock
on the date of grant.  Compensation expense for fixed stock awards with pro rata
vesting is recorded on a  straight-line  basis over the  vesting  period,  which
typically ranges from one to five years.

                                      -5-


The following table  illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of Statement
of  Financial  Accounting   Standards  No.  123  (SFAS  123),   "Accounting  for
Stock-Based Compensation," to stock options.

                                                                                                        
  $ in millions, except EPS                                          13 weeks ended                   26 weeks ended
                                                              ----------------------------     ----------------------------
                                                               July 26,       July 27,          July 26,       July 27,
                                                                  2003           2002              2003           2002
                                                              ------------    ------------     ------------    -------------

  Net income/(loss) - as reported                                $   0         $   (6)           $   61         $   80

  Add:  Stock-based employee compensation
      expense included in reported net income, net of
      related tax effects                                            1              1                 2              2

  Deduct:  Total stock-based employee compensation
      expense determined under fair value
      method(1) for all awards, net of related
      tax effects                                                   (6)            (6)              (12)           (12)
                                                                 --------       --------         --------        ---------

  Pro forma net (loss)/income                                    $  (5)        $  (11)           $   51          $  70
                                                                 ========       ========         ========        =========


  (Loss)/earnings per share:
      Basic--as reported                                       $   (0.02)       $  (0.05)         $ 0.18          $ 0.25
      Basic--pro forma                                         $   (0.04)       $  (0.07)         $ 0.14          $ 0.21

      Diluted--as reported                                     $   (0.02)       $  (0.05)         $ 0.18          $ 0.24
      Diluted--pro forma                                       $   (0.04)       $  (0.07)         $ 0.14          $ 0.21

(1) The fair  value of each  option  grant for the  Company's  plans is  estimated  on the date of the
grant using the Black-Scholes option pricing model.




Effect of New Accounting Standards
----------------------------------

The  Company  adopted  Emerging  Issues  Task  Force  (EITF)  Issue  No.  02-16,
"Accounting  by a Customer  (Including  a Reseller)  for  Certain  Consideration
Received  from a  Vendor,"  in the first  quarter  of 2003.  This  pronouncement
requires  that vendor  allowances  be treated as a reduction of inventory  costs
unless  specifically  identified  as a  reimbursement  of costs to advertise the
vendor's  products  or  payment  for other  services.  In  addition,  any vendor
allowances received in excess of costs incurred should be treated as a reduction
of inventory costs. The adoption of this  pronouncement  did not have a material
impact on Eckerd  segment  results,  but did  impact a small  portion  of vendor
allowances for Department Stores and Catalog and reduced the segment's operating
profit by $1 million  and $6 million  for the second  quarter  and first half of
2003, respectively. The adoption resulted in lower net income for the Company of
approximately $1 million for the second quarter and $4 million in the first half
of 2003.

In  November  2002,  the  FASB  issued  FASB  Interpretation  No.  45 (FIN  45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Guarantees   of   Indebtedness   of   Others."   Disclosures   related  to  this
interpretation  were effective for year-end 2002  reporting,  and the accounting
requirements  are  effective  for  guarantees  entered  into or  modified  after
December 31, 2002, and require all guarantees  and  indemnifications  within its
scope to be recorded at fair value as liabilities, and the maximum possible loss
to the Company  under these  guarantees  and  indemnifications  to be disclosed.
Current  period  disclosures  related to  guarantees  are  included  in Note 10.
Adoption of FIN 45 did not have a material impact on the Company's  consolidated
financial statements.


                                      -6-


In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation Costs - Transition and Disclosure." This statement amended SFAS 123
and provides  alternative  methods of transition for an entity that  voluntarily
changes  to  the  fair   value-based   method  of  accounting  for   stock-based
compensation.  It also  requires  additional  disclosures  about the  effects on
reported net income of an entity's accounting policy with respect to stock-based
employee  compensation.  As  discussed  previously,  the  Company  accounts  for
stock-based   compensation   in   accordance   with  APB  25  and   adopted  the
disclosure-only  alternative  of SFAS 123.  The Company  adopted the  disclosure
provisions of SFAS 148 effective for fiscal 2002.

On January 17, 2003, FIN 46,  "Consolidation of Variable Interest  Entities,  an
interpretation  of ARB 51," was issued.  The primary  objective  of FIN 46 is to
provide guidance on the  identification  and  consolidation of variable interest
entities,  or VIEs,  which are  entities for which  control is achieved  through
means other than through voting rights. The provisions of FIN 46 are required to
be applied to VIEs  created or in which the Company  obtains an  interest  after
January 31, 2003.  For VIEs in which the Company holds a variable  interest that
it acquired  before February 1, 2003, the provisions of FIN 46 are effective for
the third quarter of 2003. The Company does not expect the adoption of FIN 46 in
the third quarter of 2003 to have a material  impact on its financial  position,
results of operations or cash flows.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristics  of both  Liabilities  and Equity."  SFAS 150
establishes  standards  that  require  companies to classify  certain  financial
instruments as liabilities that were previously  classified as equity.  SFAS 150
was effective for financial  instruments  entered into or modified after May 31,
2003,  and  there  was no  second  quarter  impact  on the  Company's  financial
statements.  The remaining provisions of SFAS 150 will be effective beginning in
the third  quarter of 2003,  and the Company  does not expect SFAS 150 to have a
material impact on its consolidated financial position or operating results.

Additionally,   in  May  2003,  the  EITF  reached   consensus  on  Issue  01-8,
"Determining  Whether  an  Arrangement  Contains  a Lease."  This  pronouncement
provides guidance in determining whether an arrangement contains a lease that is
within the scope of SFAS 13,  "Accounting  for Leases." If the delivery of goods
or services is dependent on the use of specified  property,  plant and equipment
(property) and if the purchaser (lessee) has the right to operate or control the
property  while  controlling or obtaining more than a minor amount of the output
or other utility of the property,  the arrangement may be required to be treated
as a lease.  This  consensus  should be applied to new or modified  arrangements
entered into in the first interim period after May 28, 2003,  which would be the
third  quarter for the Company.  The Company does not expect EITF 01-8 to have a
material impact on its consolidated financial position or operating results.


                                      -7-





2)  Earnings per Share
    ------------------

Basic  earnings  per share (EPS) is computed by dividing  income  applicable  to
common  stockholders by the average number of common shares  outstanding for the
period.  Except  when  the  effect  would  be  anti-dilutive,  the  diluted  EPS
calculation includes the impact of restricted stock awards and shares that could
be issued under  outstanding  stock  options as well as common shares that would
result from the conversion of convertible  debentures and convertible  preferred
stock. In addition,  the related interest on convertible debentures (net of tax)
and preferred stock dividends (net of tax) are added back to income, since these
would not be paid if the debentures or preferred  stock were converted to common
stock.

The computation of basic and diluted earnings per share follows:



                                                                                                  
(In millions, except per share data)                              13 weeks ended                 26 weeks ended
                                                             -------------------------      -------------------------
                                                             July 26,      July 27,         July 26,      July 27,
                                                                2003          2002             2003          2002
                                                             -----------  ------------      -----------   -----------
Earnings:
Net income/(loss)                                              $   0        $  (6)           $   61         $  80

Less: preferred dividends, net of tax                             (6)          (7)              (13)          (14)
                                                             -----------  ------------      -----------   -----------

(Loss)/income for basic and diluted EPS calculations           $  (6)       $  (13)          $   48         $  66
                                                             ===========  ============      ===========   ===========

Shares:
Average shares outstanding (basic shares)                        271            268             271           267
Effect of dilutive securities:
    Stock options and restricted stock units                       -            -                 2             3
                                                             -----------  ------------      -----------   -----------
Average shares used for diluted EPS                              271            268             273           270

                                                             ===========  ============      ===========   ===========
(Loss)/earnings per share:
Basic                                                        $  (0.02)    $   (0.05)        $   0.18      $   0.25
Diluted                                                      $  (0.02)    $   (0.05)        $   0.18      $   0.24



The following  potential shares of common stock and their effects on income were
excluded  from the  diluted  EPS  calculations  because  their  effect  would be
anti-dilutive:

o    Options to  purchase 26 million  and 23 million  shares of common  stock at
     exercise  prices  ranging from $9 to $71 were  outstanding at July 26, 2003
     and  July  27,  2002,  respectively,  and were  excluded  from the  quarter
     calculations. Options to purchase 17 million and 9 million shares of common
     stock  at  exercise  prices  ranging  from  $19 to $71 and $22 to $71  were
     excluded  from  the  calculations  for the  first  half of 2003  and  2002,
     respectively,  because their  exercise  prices were higher than the average
     stock price.

o    The $650 million aggregate  principal amount of notes convertible into 22.8
     million common shares at a price of $28.50 per share were excluded from all
     periods shown.

o    Preferred  stock  convertible  into 10.6  million and 11.5  million  common
     shares was  issued  and  outstanding  at July 26,  2003 and July 27,  2002,
     respectively, and was excluded from all periods shown.

                                      -8-



3)  Cash and Restricted Short-Term Investment Balances
    --------------------------------------------------

Restricted  short-term  investment balances of $87 million, $121 million and $86
million as of July 26, 2003,  July 27, 2002 and January 25, 2003,  respectively,
were  included in the total cash and  short-term  investment  balances of $2,631
million,  $2,004  million and $2,474  million for the same  periods.  Restricted
balances are pledged as collateral for import  letters of credit,  which are not
included in the bank credit  facility,  and for a portion of casualty  insurance
program liabilities. Cash and short-term investments on the consolidated balance
sheet  included  $17  million,  $5 million and $6 million of cash as of July 26,
2003, July 27, 2002 and January 25, 2003, respectively.


4)  Supplemental Cash Flow Information
    ----------------------------------

     ($ in millions)                               26 weeks ended
                                        -----------------------------------
                                         July 26, 2003       July 27, 2002
                                        -----------------    --------------
     Interest paid                           $196             $ 230
     Interest received                         14                23
     Income taxes paid                         37                43

Non-cash transactions:
----------------------

o    The Company  issued 2.4 million shares of common stock in February 2003 and
     2.9  million  shares of common  stock in March  2002 to fund  savings  plan
     contributions of $47 million for 2002 and $58 million for 2001.

o    The Company acquired $16 million of drugstore  equipment  utilizing capital
     leases in the first six months of 2003.

o    During the second quarter of 2002, the Company  exchanged certain notes and
     debentures  with a net  carrying  amount  of $206  million  for  new  notes
     recorded at a fair value of $205 million.


5)  Eckerd Managed Care Receivables Securitization
    ----------------------------------------------

As  disclosed in the 2002 10-K,  JCP,  through  Eckerd,  has received a total of
approximately  $250 million from the  securitization  of certain  Eckerd managed
care receivables. Of the total proceeds, $200 million was received in 2001, when
a revolving  receivables  purchase  facility  agreement was entered into with an
unrelated  entity.  In  February  2003,  the  agreement  was  amended to add two
additional third party purchasers and additional Eckerd managed care receivables
were securitized with approximately $50 million of cash proceeds received. Under
the agreement  Eckerd sells,  on a continuous  basis,  substantially  all of its
managed care receivables to ECR Receivables, Inc. (ECR), a subsidiary of Eckerd.
ECR then  sells to the third  party  purchasers  an  undivided  interest  in all
eligible receivables while retaining a subordinated interest in a portion of the
receivables.

As of July 26, 2003,  securitized managed care receivables totaled $291 million,
of which the subordinated  retained  interest was $47 million,  resulting in net
securitized  receivables  of  $244  million.  Losses  and  expenses  related  to
receivables  sold under this  agreement for the second quarter and first half of
2003 were $1 million and $3  million,  respectively,  and are  included in other
unallocated in the accompanying  consolidated  statements of operations.  Losses
and expenses  for the second  quarter and first half of 2002 were $1 million and
$2 million, respectively.

6) Goodwill and Other Intangible Assets
   ------------------------------------

Effective  January 27, 2002,  the Company  adopted SFAS No. 142,  "Goodwill  and
Other  Intangible  Assets." Upon adoption,  the Company ceased  amortization  of
goodwill and other  indefinite-lived  intangible  assets,
                                      -9-


primarily the  Eckerdtrade  name.  These assets are now subject to an impairment
test on an annual  basis,  or when there is reason to believe  that their values
have been diminished or impaired.  These tests are performed on each business of
the Company where goodwill is recorded.  There were no impairment losses related
to goodwill or intangible assets recorded during the first half of 2003 or 2002.

The carrying amounts of goodwill were $2,311 million,  $2,312 million and $2,304
million as of July 26, 2003,  July 26, 2002 and January 25, 2003,  respectively.
The  changes in  carrying  value are  related to  foreign  currency  translation
adjustments.  At July 26, 2003, the total carrying amount of goodwill  consisted
of $42 million for the Department  Store and Catalog  segment and $2,269 million
for the Eckerd Drugstore  segment.  Intangible assets, all of which are included
in the Eckerd Drugstore segment, consisted of the following:


                                                                                                  
 ($ in millions)                                                 July 26,            July 27,            Jan. 25,
                                                                   2003                2002                2003
                                                              ----------------    ----------------    ---------------
Amortizing intangible assets:
    Prescription files                                               $ 294              $ 271              $ 289
    Less accumulated amortization                                      174                137                157
                                                              ----------------    ----------------    ---------------
    Prescription files, net                                            120                134                132
                                                              ----------------    ----------------    ---------------

    Favorable lease rights                                             205                205                205
    Less accumulated amortization                                      178                148                165
                                                              ----------------    ----------------    ---------------
    Favorable lease rights, net                                         27                 57                 40
                                                              ----------------    ----------------    ---------------

    Carrying amount of amortizing
        intangible assets                                              147                191                172

Non-amortizing intangible assets
    Eckerd trade name                                                  322                322                322

                                                              ----------------    ----------------    ---------------
Total intangible assets                                              $ 469              $ 513              $ 494
                                                              ================    ================    ===============



The net carrying  amount of intangible  assets  decreased $25 million during the
first  half of 2003 due to $30  million of  amortization  of  intangible  assets
partially offset by $5 million of prescription files acquired.

The following  table provides  amortization  expense for the periods  presented.
Amortization  expense  related to major  business  acquisitions  is  reported as
acquisition  amortization  on the  consolidated  statements of  operations.  The
remaining  amount of  amortization  expense is included in selling,  general and
administrative (SG&A) expenses.



                                                                                             
($ in millions)                                           13 weeks ended                  26 weeks ended
                                                     --------------------------     ---------------------------
                                                      July 26,        July 27,         July 26,       July 27,
                                                        2003             2002             2003           2002
                                                     ----------    ------------     ------------    -----------
                                                                                    ------------    -----------
Major business acquisitions(1)                           $ 8             $ 7             $ 18           $ 17
Other acquisitions                                         6               5               12             11
                                                     ----------    ------------     ------------    -----------
   Total for amortizing intangible assets                $14            $ 12             $ 30           $ 28
                                                     ==========    ============     ============    ===========

(1) Major business  acquisitions include Eckerd Corporation acquired in early 1997, Lojas Renner S.A. acquired
in January 1999 and Genovese Drug Stores, Inc. acquired in March 1999.



Amortization expense for the intangible assets reflected above is expected to be
approximately  (in  millions)  $66, $35, $26, $17 and $11 for fiscal years 2003,
2004, 2005, 2006 and 2007, respectively.  Of these amounts, amortization related
to major business  acquisitions  is expected to be  approximately  (in millions)
$40, $9, $6 and $1 for fiscal years 2003, 2004, 2005 and 2006, respectively.
                                      -10-



7)  Restructuring Reserves
    ----------------------

At July 26,  2003,  the  consolidated  balance  sheet  included  $97  million of
remaining  reserves  that were  established  in  connection  with the  Company's
restructuring  initiatives  compared  to $148  million at July 27, 2002 and $113
million at January 25, 2003. The remaining  reserves are related to future lease
obligations for both department stores and drugstores that have closed.

Costs  are  being  charged  against  the  reserves  as  incurred.  Reserves  are
periodically  reviewed for adequacy  and are  adjusted as  appropriate.  Imputed
interest expense and any other adjustments to the reserves are included in other
unallocated.  During  the  first  half of 2003,  cash  payments  related  to the
reserves  were $18 million.  The reserves  were  increased by  approximately  $2
million  for imputed  interest  and other  adjustments  during the first half of
2003.  Cash payments  related to these reserves are expected to approximate  $11
million for the second half of 2003,  with most of the  remainder to be paid out
by the end of 2005.


8)  Financing Transactions
    ----------------------
Issuance of $600 Million Debt

On February 28, 2003, JCP issued $600 million principal amount of 8.0% Notes Due
2010 ("Notes") priced at 99.342% of their principal  amount to yield 8.125%.  J.
C. Penney Company,  Inc. is a co-obligor on the Notes. The Notes pay interest on
March 1 and September 1 each year. The Notes are redeemable in whole or in part,
at the Company's  option at any time, at a redemption price equal to the greater
of (i) 100% of the principal amount of such Notes or (ii) the sum of the present
values of the remaining scheduled payments, discounted to the redemption date on
a semi-annual  basis at the "treasury  yield" plus 50 basis points,  together in
either case with accrued interest to the date of redemption.

Payments of Sinking Fund Debt

On June 16, 2003,  JCP retired $25 million of its 9.75%  Debentures  Due 2021 at
par through a mandatory  sinking fund  payment of $12.5  million and an optional
sinking fund payment of $12.5  million.  During the quarter,  JCP also purchased
$4.1 million  principal  amount of its 8.25% Debentures Due 2022 for application
to future mandatory sinking fund payments.
                            -11-




9)   Comprehensive    Income/(Loss)   and   Accumulated   Other    Comprehensive
     (Loss)/Income

Comprehensive Income /(Loss)

                                                                                                              
($ in millions)                                                                   13 weeks ended              26 weeks ended
                                                                            ---------------------------  -------------------------
                                                                             July 26,       July 27,      July 26,     July 27,
                                                                               2003           2002          2003         2002
                                                                            -----------    ------------  -----------  ------------
Net income/(loss)                                                              $ 0             $ (6)        $ 61           $ 80
Other comprehensive income/(loss):
    Foreign currency translation adjustments                                    18              (29)          26            (31)
    Net unrealized gains/(losses) in real estate investment trusts               9               (3)          18              4
                                                                            -----------    ------------  -----------  ------------
                                                                                27              (32)           44           (27)
                                                                            -----------    ------------  -----------  ------------
Total comprehensive income/(loss)                                             $ 27            $ (38)       $ 105           $ 53
                                                                            ===========    ============  ===========  ============




Accumulated Other Comprehensive (Loss)/Income

                                                                                                     
($ in millions)                                                      July 26,            July 27,         Jan. 25,
                                                                       2003                2002             2003
                                                                  ----------------    ---------------  ---------------
Foreign currency translation adjustments                               $ (138)             $(131)           $(164)
Non-qualified plan minimum liability adjustment                           (58)               (51)             (58)
Net unrealized gains in real estate investment trusts                      37                 18               19
                                                                  ----------------    ---------------  ---------------
Accumulated other comprehensive (loss)                                 $ (159)             $(164)           $(203)
                                                                  ================    ===============  ===============

Net unrealized gains in real estate  investment trusts are shown net of deferred
taxes of $20 million,  $10 million and $10 million as of July 26, 2003, July 27,
2002  and  January  25,  2003,  respectively.  The  non-qualified  plan  minimum
liability is shown net of deferred tax asset of $39 million, $33 million and $39
million as of July 26, 2003, July 27, 2002 and January 25, 2003, respectively. A
deferred tax asset has not been  established  for foreign  currency  translation
adjustments  due to the  historical  reinvestment  of  earnings  in the  foreign
subsidiaries.


10)  Guarantees
     ----------

JCP had  guarantees,  which are  described in detail in the 2002 10-K,  totaling
$264 million at July 26, 2003. These guarantees include:  $172 million potential
remaining  obligation  for building and equipment  leases  entered into by third
party  operators of certain of the Company's  store support  centers (SSCs) upon
termination of services for any reason;  $43 million related to investments in a
real estate investment trust; $20 million maximum exposure on insurance reserves
established by a former subsidiary  included in the sale of the Company's Direct
Marketing Services business; and $29 million of lease guarantees on certain sold
drugstores, $22 million of which is recorded in other liabilities.

                                      -12-

11)  Other Unallocated
     -----------------
Other unallocated  consists of real estate activities,  investment  transactions
and other items related to corporate  initiatives or  activities,  which are not
allocated to an operating  segment but are included in total  Company  operating
results.

                                                                                                           
($ in millions)                                                       13 weeks ended                  26 weeks ended
                                                               -----------------------------   ------------------------------
                                                               July 26,          July 27,         July 26,          July 27,
                                                                  2003              2002             2003              2002
                                                               --------------  -------------   ------------- ----------------
Asset impairments, PVOL and other unit closing costs              $ 24               $ 8             $ 39              $ 30

Gains from sale of real estate                                     (30)                -              (51)              (10)

Real estate operations                                              (6)               (9)             (10)              (15)

Third party fulfillment losses and other                             1                 6                4                10
                                                               --------------  -------------   ------------- ----------------
     Total                                                       $ (11)              $ 5            $ (18)            $  15
                                                               ==============  =============   ============= ================




The Company  recorded  charges of $24 million for the second quarter of 2003 for
asset impairments,  the present value of lease obligations (PVOL) and other unit
closing  costs.  These  charges  were  comprised  of $10 million of  accelerated
depreciation for catalog facilities closed in second quarter of 2003, $9 million
of asset  impairments  and $5  million  related  primarily  to  remaining  lease
obligations  for  closed  units.  For the second  quarter  of 2002  these  costs
included $9 million of asset impairments offset by a net credit adjustment of $1
million primarily related to remaining lease obligations for closed units. Asset
impairments, PVOL and other unit closing for the first half of 2003 included $22
million of accelerated  depreciation for catalog facilities closed in the second
quarter  of 2003,  $9 million of asset  impairments  and $8 million of  expenses
related primarily to remaining lease  obligations for closed units.  Charges for
the first half of 2002  consisted  of $17 million of asset  impairments  and $13
million related to remaining lease obligations and other costs for closed units.

Real estate gains were recorded from the sale of facilities  that were no longer
being used in Company operations.

Real estate  operations  consist  primarily of operating income of the Company's
real estate subsidiary.

Third party fulfillment losses and other consists of operating losses related to
third party  fulfillment  operations that were  discontinued in 2002, losses and
expenses  related  to  receivables  sold  as  part of the  Eckerd  managed  care
receivables securitization (see Note 5) and other corporate costs.

                                      -13-

12) Segment Reporting
    ------------------
Reportable  segments are determined based on similar  economic  characteristics,
the nature of products and services and the method of distribution.  Performance
of the  segments  is  evaluated  based  on  segment  operating  profit.  Segment
operating profit is LIFO gross margin less SG&A expenses. Segment assets include
goodwill and  intangible  assets;  however,  segment  operating  profit does not
include  the  amortization  of  intangible  assets  related  to  major  business
acquisitions.  The Company operates in two business segments:  Department Stores
and Catalog (including  internet),  and Eckerd Drugstores.  Other unallocated is
provided for purposes of reconciling to total Company amounts.

                                                                                                        
Business Segment Information
($ in millions)
                                                           Dept. Stores        Eckerd             Other            Total
                                                            & Catalog        Drugstores        Unallocated        Company
-------------------------------------------------------------------------------------------------------------------------------
2nd Quarter - 2003
Retail sales, net                                            $ 3,658           $ 3,655            $  -           $ 7,313

                                                        -----------------------------------------------------------------------
Segment operating profit                                          51                54               -               105

Net interest expense                                                                              (108)             (108)
Other unallocated                                                                                   11                11
Acquisition amortization                                                                            (8)              (8)
                                                                                                             ------------------
Income before income taxes                                                                                             0
                                                                                                             ------------------
Depreciation and amortization expense                             88                69              18               175
-------------------------------------------------------------------------------------------------------------------------------
1st Half - 2003
Retail sales, net                                            $ 7,381           $ 7,425                          $ 14,806
                                                        -----------------------------------------------------------------------
Segment operating profit                                         134               172                               306

Net interest expense                                                                              (212)             (212)
Other unallocated
                                                                                                    18                18
Acquisition amortization
                                                                                                   (18)              (18)
                                                                                                             ------------------
Income before income taxes                                                                                            94
                                                                                                             ------------------
Depreciation and amortization expense                            177               138              40               355
Total assets                                                $ 11,072           $ 6,813           $ 174          $ 18,059
===============================================================================================================================
2nd Quarter - 2002
Retail sales, net                                            $ 3,623           $ 3,575           $   -            $7,198
                                                        -----------------------------------------------------------------------

Segment operating profit                                          22                73               -                95

Net interest expense                                                                               (92)              (92)
Other unallocated                                                                                                     (5)
                                                                                                    (5)
Acquisition amortization                                                                            (7)               (7)
                                                                                                             ------------------
(Loss) before income taxes
                                                                                                                      (9)
                                                                                                             ------------------
Depreciation and amortization expense                             94                60               7               161

-------------------------------------------------------------------------------------------------------------------------------
1st Half - 2002
Retail sales, net                                            $ 7,629           $ 7,297            $  -           $14,926
Segment operating profit                                         179               173               -               352

Net interest expense                                                                              (194)             (194)

Other unallocated                                                                                  (15)              (15)

Acquisition amortization                                                                           (17)              (17)

                                                                                                             ------------------
Income before income taxes                                                                                           126
                                                                                                             ------------------
Depreciation and amortization expense                            186               121              17               324
Total assets                                                $ 10,305           $ 6,628          $  146          $ 17,079
===============================================================================================================================

                                      -14-


13)  Subsequent Events
     ------------------

On August 15, 2003,  bondholders  exercised their option to redeem approximately
$117 million of $119 million 6.9%  Debentures  Due 2026.  On the same date,  JCP
retired  $37.5  million of its 8.25%  Debentures  Due 2022 at par,  through  the
mandatory  sinking fund payment of $12.5 million and available  optional sinking
fund  payments  totaling  $25  million.  Also  in  August  2003,  JCP  purchased
approximately $12.8 million of the 8.25% Sinking Fund Debentures Due 2022. These
purchases,  together  with the $4.1 million  purchases in the second  quarter of
2003, will be applied to unspecified future mandatory sinking fund payments.

                                      -15-


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
     of Operations


Holding Company
----------------

Effective  January 27, 2002, J. C. Penney  Company,  Inc.  changed its corporate
structure to a holding company format.  As part of this structure,  J. C. Penney
Company,  Inc.  changed its name to J. C.  Penney  Corporation,  Inc.  (JCP) and
became a wholly owned  subsidiary of a newly formed  affiliated  holding company
(Holding  Company).  The Holding  Company assumed the name J. C. Penney Company,
Inc. The Holding Company has no direct  subsidiaries other than JCP, nor does it
have any independent assets or operations.  All outstanding shares of common and
preferred stock were automatically  converted into the identical number and type
of shares in the  Holding  Company.  Stockholders'  ownership  interests  in the
business did not change as a result of the new structure.  Shares of the Company
remain  publicly  traded  under  the same  symbol  (JCP)  on the New York  Stock
Exchange.  The Holding  Company is a co-obligor (or guarantor,  as  appropriate)
regarding  the  payment of  principal  and  interest on JCP's  outstanding  debt
securities. The guarantee by the Holding Company of certain of JCP's outstanding
debt is  full  and  unconditional.  The  Holding  Company  and its  consolidated
subsidiaries,  including  JCP,  are  collectively  referred to in this report as
"Company" or "JCPenney," unless indicated otherwise.


Critical Accounting Policies
----------------------------

Management's  discussion and analysis of its financial  condition and results of
operations is based upon the Company's consolidated financial statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America.  The preparation of these financial  statements
requires  the Company to make  estimates  and  judgments  that  affect  reported
amounts of assets,  liabilities,  revenues and expenses, and related disclosures
of  contingent  assets  and  liabilities.  Management  bases  its  estimates  on
historical  experience  and  on  other  assumptions  that  are  believed  to  be
reasonable under the circumstances.  On an ongoing basis,  management  evaluates
estimates used,  including those related to inventory valuation under the retail
method;  revenue  recognition;  valuation of long-lived and  intangible  assets,
including goodwill; estimation of reserves and valuation allowances specifically
related to closed stores, insurance,  income taxes, litigation and environmental
contingencies;  and  pension  accounting.  Actual  results may differ from these
estimates  under  different  assumptions  or  conditions.  Item 7,  Management's
Discussion and Analysis of Financial Condition and Results of Operations, in the
2002 10-K includes  detailed  descriptions of certain  judgments that management
makes in applying its accounting policies in these areas.

                                      -16-



                                                                                                            
Consolidated Results of Operations
($ in millions except EPS)                                          13 weeks ended                        26 weeks ended
                                                             ------------------------------       --------------------------------
                                                               July 26,        July 27,             July 26,         July 27,
                                                                 2003            2002                 2003             2002
                                                             -------------- ---------------       -------------- -----------------
     Department Stores and Catalog                                 $ 51           $ 22                $ 134             $ 179
     Eckerd Drugstores                                               54             73                  172               173
                                                             -------------- ---------------       -------------- -----------------
Total segments                                                      105             95                  306               352
Other unallocated                                                    11             (5)                  18               (15)
Net interest expense                                               (108)           (92)                (212)             (194)
Acquisition amortization                                             (8)            (7)                 (18)              (17)
                                                             -------------- ---------------       -------------- -----------------
Income before income taxes                                            0             (9)                  94               126
Income taxes                                                          0              3                  (33)              (46)
                                                             -------------- ---------------       -------------- -----------------
Net income                                                         $  0          $  (6)                $ 61              $ 80
                                                             ============== ===============       ============== =================
Earnings per share, diluted                                     $ (0.02)       $ (0.05)              $ 0.18            $ 0.24
                                                             ============== ===============       ============== =================


For the second  quarter of 2003,  the Company  reported net income of zero, or a
loss of $0.02 per share (due to preferred stock dividends, net of tax), compared
to a loss of $6  million,  or $0.05 per share for the  comparable  2002  period.
Results reflect good sales growth and expense  control in Department  Stores and
Catalog, including internet, which offset the lower sales and profit results for
Eckerd.  For the first half of 2003, the Company reported $61 million,  or $0.18
per share,  compared to $80 million,  or $0.24 per share for the comparable 2002
period.  The decline in  year-to-date  earnings was primarily the result of soft
sales in the first quarter for Department  Stores and Catalog and higher planned
SG&A expenses,  partially  offset by gross margin  improvement in both operating
segments in the first quarter of 2003. As previously disclosed in the 2002 10-K,
the second quarter and first half of 2003 were  negatively  impacted as a result
of higher incremental non-cash pension expense.

Also  affecting  the  quarter's  results were certain items that are recorded in
other unallocated. These items included $30 million of pre-tax real estate gains
on the sale of  closed  department  store  facilities,  partially  offset by $10
million of  accelerated  depreciation  for catalog  facilities  closed in second
quarter  of 2003,  $9 million of asset  impairments  and $5 million of  expenses
related  primarily to the present value of lease  obligations  (PVOL) for closed
units.  Results of operations for the second quarter of 2002 included $8 million
of asset  impairments,  PVOL and other unit closing costs also recorded in other
unallocated.

For the first half of 2003,  the results of  operations  included $51 million of
pre-tax gains on the sale of several  closed units,  $22 million of  accelerated
depreciation  for catalog  facilities  closed in the second  quarter of 2003, $9
million of asset impairments and $8 million of expenses related primarily to the
PVOL for  closed  units.  For the  first  half of 2002,  results  of  operations
included a $10 million pre-tax gain on the sale of a closed unit and $30 million
of asset  impairments,  PVOL and other unit closing costs in other  unallocated.
Items are discussed in other unallocated on page 21 and in Note 11.

                                      -17-


Segment Operating Results
                                                                                             
Department Stores and Catalog
($ in millions)                                      13 weeks ended                      26 weeks ended
                                               ----------------------------
                                                                                  ------------------------------
                                               July 26,        July 27,             July 26,         July 27,
                                                 2003            2002                 2003             2002
                                             -------------   --------------       --------------    ------------

Retail sales, net                                 3,658      $     3,623          $     7,381       $   7,629
                                             -------------   --------------       --------------    ------------
FIFO/LIFO gross margin                            1,314            1,307                2,774           2,821
SG&A expenses                                    (1,263)          (1,285)              (2,640)         (2,642)
                                             -------------   --------------       --------------    ------------
Segment operating profit                          $  51           $   22              $   134         $   179
                                              =============   ==============       ==============    ============

Sales percent increase/(decrease):
    Comparable stores(1)                           2.1%           (2.4)%               (1.6)%           2.5%
    Total department stores                        0.5%           (2.7)%               (3.0)%           1.2%
    Catalog                                        3.9%           (21.4)%              (4.3)%         (23.3)%

Ratios as a percent of sales:
    FIFO/LIFO gross margin                        35.9%            36.1%                37.6%          37.0%
    SG&A expenses                                 34.5%            35.5%                35.8%          34.6%
    Segment operating profit                       1.4%             0.6%                 1.8%           2.4%

(1)      Comparable  store  sales  include  sales from stores  which have been open for 12  consecutive  months.  A
     store's sales become comparable on the first day of the 13th fiscal month.



Segment operating profit for Department Stores and Catalog in this year's second
quarter more than doubled to $51 million  compared to $22 million last year, and
represented  an  increase of 80 basis  points as a percent of sales.  Comparable
store  sales  gains,  improved  catalog  performance  and good  control  of SG&A
expenses led to the improvement.

Comparable  department  store sales increased 2.1% in the second quarter.  Total
department  store sales  increased  0.5%. All  merchandise  divisions  generated
comparable  store  sales gains for the  quarter,  with the best  performance  in
Children's,  Young Men's and Family Footwear. In addition, both fine jewelry and
fashion  jewelry  performed  well compared to last year.  The Home division also
continued  to have  good  results,  led by  window  coverings  and the  expanded
housewares department. During the quarter, the new women's accessory and fashion
jewelry concept was rolled out to about 550 stores and fine jewelry was expanded
in 200 stores.  The transition was well executed and customer  response has been
better than planned.

Catalog  sales  increased  3.9%  for  the  quarter  compared  to last  year  and
represented the first quarterly increase since the second quarter of 2000. Sales
reflected  an  improving  print  business,  both in the Big Books and  specialty
catalogs,  as well as an increase in internet sales. Total internet sales, which
are  reported as a component  of catalog  sales and are an integral  part of the
Company's  three-channel  retailing  strategy,  increased  more than 60% to $112
million.

As discussed in Note 1, the Company  adopted EITF Issue 02-16,  "Accounting by a
Customer  (Including  a Reseller)  for  Certain  Consideration  Received  from a
Vendor," in the first  quarter of 2003.  This  change  resulted in a decrease in
segment  operating  profit of approximately $1 million in the second quarter and
$6 million in the first half.

Gross  margin  declined  20 basis  points as a percent  of sales in this  year's
second  quarter  as a  result  of a more  aggressive  clearance  strategy.  This
compared to last year when low  inventory  levels and light  clearance  activity
generated a strong 290 basis point improvement in the second quarter.

                                      -18-




SG&A  expenses  for the quarter  improved 100 basis points as a percent of sales
and were $22 million below last year's level. This improvement was primarily the
result of  salary  savings  from  centralized  checkouts  (also  referred  to as
customer  service  centers),  the  elimination  of in-store  receiving and lower
expenses  in Catalog  that more than  offset  transition  costs to the new store
distribution network and higher non-cash pension expenses. The new Store Support
Center (SSC) network for  department  stores,  an integral part of the Company's
centralization  efforts, was fully operational by the end of the second quarter.
All stores are now being  served by one of the 13 SSCs.  Once this  distribution
network matures, the Company expects to see additional benefits from operational
efficiencies and a consistently better flow of merchandise to individual stores.
The transition to a centralized  distribution network has gone according to plan
without any significant issues. The last major piece of the centralized model is
allocation  and  distribution  technology.  These  systems are expected to be in
place by the end of 2003 and should begin to provide benefits in the latter part
of 2004.

Segment  operating  profit for the first half of 2003 was $45 million lower than
last year, or 60 basis points as a percent of sales,  principally as a result of
a weak first quarter.  Comparable store sales declined 1.6% and catalog declined
4.3%.  Gross margin  improved 60 basis points as a percent of sales,  but due to
first quarter sales  declines,  gross margin dollars were $47 million lower than
last year.  The gross  margin ratio  improved as a result of better  merchandise
offerings and benefits from the  centralized  merchandising  model,  offset to a
large extent by the Company's  aggressive clearance strategies toward the end of
the half. SG&A dollars were well controlled and flat with last year; however, as
a percent of sales,  expenses  were higher  than last year by 120 basis  points.
SG&A expenses levels reflect planned increases in advertising,  transition costs
for the SSC distribution network and higher non-cash pension expense. Offsetting
these  increases were savings in store labor costs as a result of the transition
to centralized  checkouts in department  stores,  catalog expense management and
benefits from centralized management of store expenses.

As the Company continues executing its turnaround strategy for Department Stores
and  Catalog,  steps have been taken to  continue  to  improve  the  merchandise
offerings,  present a more integrated and powerful  marketing  message and lower
expenses.  For the second half of the year,  management is expecting  Department
Stores and Catalog to generate improvements in sales and profit. Sales trends in
August 2003, driven by Back-to-School and Fall transition merchandise, have been
positive. The retail environment is showing signs of improvement,  including the
positive impact of the tax package and tax rebates on customer  spending levels.
Department  stores are up against  3.9%  comparable  store  sales  gains in last
year's  third  quarter,  with a 13.7%  increase in  October,  as a result of the
Company's  successful  100th  Anniversary  promotion.  The  catalog  sales  plan
reflects fewer promotions in the third quarter compared to last year. Department
Stores and Catalog segment  operating profit is planned higher than last year in
both the third and  fourth  quarters,  reflecting  improvements  in  merchandise
assortments,  marketing,  store environment and overall  execution.  The Company
recently  began a cost  savings  initiative  with a goal of reducing the expense
structure for the entire  segment by $200 million over the next 18 months to two
years. The successful  execution of the turnaround and progress toward improving
the  profitability  of  Department  Stores and Catalog is impacted by customers'
response to the merchandise offerings,  competitive  conditions,  the effects of
the  current  economic  climate  and  the  reduction  of the  Company's  expense
structure.
                                      -19-



Eckerd Drugstores
-----------------

                                                                                  
($ in millions)                                13 weeks ended                   26 weeks ended
                                         ---------------------------    -------------------------------
                                          July 26,       July 27,         July 26,         July 27,
                                            2003          2002              2003             2002
                                         ------------ --------------    -------------    --------------

Retail sales, net                            3,655          3,575       $    7,425            7,297
                                         ------------ --------------    -------------    --------------
FIFO gross margin                              844            837            1,717            1,691
LIFO charge                                    (11)           (9)              (18)             (24)
                                         ------------ --------------    -------------    --------------
LIFO gross margin                              833            828            1,699            1,667

SG&A expenses                                 (779)          (755)          (1,527)          (1,494)
                                         ------------ --------------    -------------    --------------
Segment operating profit                        54             73       $      172              173
                                         ============ ==============    =============    ==============
Sales percent (decrease)/increase:
    Comparable stores(1)                    (0.8)%           6.1%           (1.0)%              6.9%
    Total sales                               2.3%           6.5%             1.8%              7.1%

Ratios as a percent of sales:
    FIFO gross margin                        23.1%          23.4%            23.2%             23.2%
    LIFO gross margin                        22.8%          23.2%            22.9%             22.9%
    SG&A expenses                            21.3%          21.1%            20.6%             20.5%
    Segment operating profit                  1.5%           2.1%             2.3%              2.4%

(1)      Comparable  store  sales  include  the sales from  stores  that have been open for at least one full year.
      Comparable store sales include the sales for relocated stores.



Eckerd's segment  operating profit was $54 million in this year's second quarter
compared  to $73  million  last year,  a decrease of 26%. As a percent of sales,
operating  profit  declined  60 basis  points  from 2.1% to 1.5%.  The  decrease
resulted  from a  combination  of lower  gross  margin and higher  SG&A  expense
ratios.

Total sales increased 2.3%,  while comparable store sales decreased 0.8% for the
quarter, with pharmacy sales increasing 1.7% and general merchandise (front-end)
sales  decreasing  6.0% from last year. As a percent of total  drugstore  sales,
pharmacy  sales were 70.0% for the  quarter,  an increase  of 150 basis  points.
Sales to  customers  covered  by  third  party  programs  such as  managed  care
organizations,  as well as government and private  insurance,  have continued to
increase as a percent of total  pharmacy  sales.  Third party pharmacy sales for
the second  quarter of 2003 increased 60 basis points to 93.2% of total pharmacy
sales. Total pharmacy sales were negatively  impacted by approximately 430 basis
points from a shift from branded  drugs to lower priced  generic drugs and other
changes  in branded  drugs,  such as  Claritin  being  made  available  over the
counter.  Competitor  store  openings,  particularly in Florida and South Texas,
coupled with execution issues, impacted sales trends. These execution issues are
being addressed  through  merchandise and marketing  changes,  as well as a more
competitive store opening program.  The best performing front-end categories for
the quarter were seasonal items and  over-the-counter  medications,  while photo
and cigarette sales declined significantly.

LIFO gross  margin for the  quarter  decreased  40 basis  points as a percent of
sales compared to last year, while gross margin dollars were basically flat. The
decline  was  principally  from a shift  in the mix of  sales  to  lower  margin
merchandise.


                                      -20-


SG&A  expenses for the quarter  increased  3.2% and were 20 basis points  higher
than last year as a percent of sales.  The increase was related  principally  to
higher  rent  and  depreciation  expense  associated  with  new,  relocated  and
remodeled  stores,  increased  advertising  and  higher  general  liability  and
workers'  compensation  insurance  costs.  During the  quarter,  10 stores  were
relocated, 22 new stores opened and 135 stores were remodeled.

Segment  operating profit dollars for the first half of 2003 were flat with last
year, and declined 10 basis points as a percent of sales. Comparable store sales
were down 1.0%, while total sales were up 1.8%. Gross margin dollars were up $32
million  compared  to last  year,  and as a percent to sales were flat with last
year.

SG&A expenses were up $33 million,  principally as a result of higher rent
and  depreciation  expenses  from  the  new,  relocated  and  remodeled  stores,
increased  advertising  and higher general  liability and workers'  compensation
insurance  costs.  As a percent of sales,  SG&A  expenses  were 10 basis  points
higher than last year.

Eckerd is in the third year of its turnaround  initiative.  Operating results in
the second quarter, as well as the first half, were below original expectations,
and the Company  expects a difficult  second half.  For the third  quarter,  the
Company  anticipates  a slight  increase in comparable  store sales,  with a low
single  digit  increase in pharmacy and a decline in  front-end  sales.  Certain
changes  are being  made to  improve  operating  results,  as  discussed  below.
Management  recognizes  that it will take time for these changes to impact sales
and profit trends. Consequently, third quarter FIFO operating profit dollars are
expected  to be about 30% below  last  year.  Fourth  quarter  operating  profit
dollars are expected to be about equal to last year. This reflects the impact of
this year's  fifty-third week as well as some of the early benefits from current
initiatives.  Eckerd's full year FIFO operating  profit margin is expected to be
in the range of 2.5% to 3.0% of sales.

As communicated  in the first quarter of 2003, the FIFO operating  profit target
remains  at 4% to 4.5% of sales,  but is  expected  to take  longer to  achieve.
Changes  continue  to be  made to the  Eckerd  business  model  to  improve  the
fundamentals  of the  business  and the  long-term  competitive  position in the
industry.  For the year,  the  Company  plans to open or  relocate  250  stores,
including  about 30 stores  that had soft  openings  in late  January  2003.  In
addition to a more aggressive store opening and relocation  plan,  management is
taking a number  of steps to  improve  Eckerd's  sales  trends,  with a focus on
pricing,  service and being in stock on merchandise  that customers want.  These
steps include optimizing  pricing through a newly implemented  program to better
monitor and adjust pricing across the store to achieve and maintain  parity with
drugstore competition,  expanding print and radio marketing,  the rollout of the
new supply chain management system (Quantum Leap),  focusing on speed of service
and the Courtesy  Refill  program in pharmacy and  introducing  a new  front-end
sales and  procurement  team to improve  overall  execution  in all areas of the
front end,  including  assortments,  presentation  and pricing.  The  successful
continuation  of the Eckerd  turnaround  is  dependent  on  Eckerd's  ability to
attract  and  retain  customers  through  various  marketing  and  merchandising
programs,  to secure suitable new drugstore  locations at favorable lease terms,
to  attract  and  retain  qualified  pharmacists,   and  to  maintain  favorable
reimbursement  rates from managed  care  organizations,  governmental  and other
third-party payors.

Other Unallocated
------------------

Other unallocated consists of real estate activities,  investment  transactions,
and other items that are related to corporate  initiatives or activities,  which
are not  allocated  to an operating  segment but are  included in total  Company
operating  results.  Other  unallocated for the second quarter of 2003 was a net
credit of $11  million,  which  consisted of $30 million of real estate gains on
the sale of closed  department  store  facilities,  $10  million of  accelerated
depreciation of catalog  facilities closed in second quarter of 2003, $9 million
of  asset   impairments,   $5  million  related  primarily  to  remaining  lease
obligations for closed units, a $6 million credit for operating income from real
estate  activities  and $1 million of other  costs.  Other  unallocated  for the
second  quarter  of 2002 was a net  expense of $5  million,  which  included  $8
million of asset  impairments  on  certain  underperforming  department  stores,
remaining lease obligations for stores scheduled to close and other unit closing
activities, $9 million of real estate operating activities and a $6 million loss
from third party fulfillment and other corporate activities.
                             -21-


For the first half of 2003,  other  unallocated was a net credit of $18 million,
which included $51 million of gains on the sale of closed units,  $22 million of
accelerated  depreciation  primarily  related to the closing of certain  catalog
facilities,  $9 million of asset  impairments,  $8 million of  expenses  related
primarily to remaining lease  obligations for closed units, a $10 million credit
for real estate  operations and $4 million of other expenses.  Other unallocated
for the first half of 2002 was a net  expense of $15 million  and  included  $30
million of asset  impairments  on  certain  underperforming  department  stores,
remaining lease obligations for stores scheduled to close and other unit closing
activities,  a $10 million  gain on the sale of a closed  store,  $15 million of
real  estate  operating  activities  and a $10  million  loss from  third  party
fulfillment and other corporate activities.

Net Interest Expense
--------------------

Net interest  expense for the second quarter of 2003 was $16 million higher than
the same period last year.  This  increase was due to higher  average  long-term
borrowing  levels with a higher  average  interest  rate, in particular the $600
million 8% Notes Due 2010  issued in  February  2003.  Interest  was $18 million
higher for the first half of the year  compared to the same period last year due
to higher  average  long-term  borrowings  at a higher  interest rate as well as
lower interest income earned on short-term investments.


Acquisition Amortization
------------------------

The amortization of intangible assets related to major business acquisitions was
$8 million  and $7 million  for second  quarter of 2003 and 2002,  respectively.
Acquisition amortization for the first half of 2003 and 2002 was $18 million and
$17 million,  respectively.  For the full year of 2003, acquisition amortization
is expected to be approximately $40 million.


Income Taxes
-------------

The Company's  effective  income tax rate was 35.4% for both the second  quarter
and first half of 2003 compared  with 36.5% for the same periods last year.  The
improved rate is primarily due to increased utilization of state tax benefits.

Merchandise Inventories
------------------------

On  July  26,  2003,  consolidated  merchandise  inventories  on  the  first-in,
first-out  (FIFO) basis were $5,596  million  compared to $5,403 million at July
27, 2002 and $5,348 million at January 25, 2003.  The 3.6% increase  compared to
last  year's  second  quarter  reflects  higher  inventories  in both  operating
segments.

Inventories  on a FIFO  basis for the  Department  Stores  and  Catalog  segment
totaled  $3,166  million and $3,100  million at July 26, 2003 and July 27, 2002,
respectively.  Inventory  levels  entering the third  quarter are up about 3% in
comparable  stores,  and are balanced and in line with sales  expectations.  All
divisions  had good  sell-through  on clearance  merchandise  during  July,  and
inventories  are focused and well  positioned  for the  Back-to-School  and Fall
selling seasons.

Eckerd  Drugstore  inventories on a FIFO basis totaled $2,430 million at the end
of the  quarter  compared  to $2,303  million at the end of last  year's  second
quarter.  The increase is primarily related to the timing of inventory purchases
and taking advantage of pricing  opportunities on certain pharmacy  inventory as
well as inventory related to new and relocated stores.

The current  cost of  consolidated  inventories  exceeded  the LIFO basis amount
carried on the balance  sheet by  approximately  $421  million at July 26, 2003,
$401  million  at July 27,  2002 and $403  million  at  January  25,  2003.  The
drugstore   segment   comprises   the  majority  of  the  LIFO  reserve  and  is
predominantly the result of inflation on pharmacy inventories.

                                      -22-


Liquidity and Capital Resources
-------------------------------

The Company's financial condition remains strong with approximately $2.6 billion
in cash and  short-term  investments  as of July  26,  2003,  which  represented
approximately  43% of the $5.8 billion of  outstanding  long-term debt including
current   maturities  and  proceeds  of  approximately  $250  million  from  the
securitization  of Eckerd managed care  receivables.  Included in the total cash
and short-term investment balance were restricted short-term investment balances
of $87 million as of July 26, 2003,  which are pledged as collateral  for import
letters of credit not included in the bank credit  facility and for a portion of
casualty  program  liabilities.  Cash flow used in operating  activities for the
first  half of 2003  was $41  million  compared  to  cash  flow  generated  from
operating  activities  of $430  million in the  comparable  period of 2002.  The
decrease was due primarily to inventory and related accounts payable.

On June 16, 2003,  JCP retired $25 million of its 9.75%  Debentures  Due 2021 at
par through the  mandatory  sinking  fund  payment and an optional  sinking fund
payment. During the quarter, JCP also purchased $4.1 million principal amount of
its 8.25%  Debentures Due 2022 for  application for a future  mandatory  sinking
fund payment.

On August 15, 2003,  bondholders  exercised their option to redeem approximately
$117 million of the $119 million 6.9% Debentures Due 2026. On the same date, JCP
retired  $37.5  million of its 8.25%  Debentures  Due 2022 at par,  through  the
mandatory  sinking fund payment of $12.5 million and available  optional sinking
fund  payments  totaling  $25  million.  Also  in  August  2003,  JCP  purchased
approximately $12.8 million of the 8.25% Sinking Fund Debentures Due 2022. These
purchases  together  with the $4.1 million  purchases  in the second  quarter of
2003, will be applied to unspecified future mandatory sinking fund payments.

During  the  first  quarter,   the  Company   completed  two  transactions  that
strengthened  its overall  liquidity  position.  First, on February 3, 2003, the
Company  raised  approximately  $50 million by  securitizing  additional  Eckerd
managed care receivables (See Note 5). Second,  on February 28, 2003, JCP issued
$600 million  principal  amount of  unsecured 8% Notes Due 2010  ("Notes") at an
effective  rate of 8.125% with the Holding  Company as co-obligor  (See Note 8).
Additional  liquidity  strengths  include  the  available  $1.5  billion  credit
facility  discussed  in the  2002  10-K  and  significant  unencumbered  assets,
primarily Eckerd FIFO inventory,  which totaled $2,430 million at July 26, 2003,
that  could be used to secure  additional  short-term  funding,  if  needed.  No
borrowings,  other than the  issuance of trade and  stand-by  letters of credit,
which  totaled  $227 million as of the end of the second  quarter of 2003,  have
been made under this credit  facility.  The Company was in  compliance  with all
financial covenants of the credit facility at July 26, 2003.

For the remainder of 2003,  management  believes that cash flow  generated  from
operations,  combined with the short-term investment position,  will be adequate
to fund cash requirements for capital expenditures, working capital and dividend
payments and,  therefore,  no external funding will be required.  The payment of
dividends  is subject to  approval  by the  Company's  Board of  Directors  on a
quarterly  basis.  Management  does not  currently  expect to access the capital
markets for any  external  financing  for the  remainder of 2003.  However,  the
Company manages its financial  position on a multi-year basis and may access the
capital markets on an  opportunistic  basis. On May 29, 2003,  Standard & Poor's
(S&P)  downgraded the Company and its  subsidiaries'  corporate  credit,  senior
unsecured  and secured bank loan ratings to BB+ from BBB-.  This change  brought
the S&P rating more in line with the Moody's and Fitch ratings.  This change has
notimpacted  the Company's  liquidity or financial  position as the lower credit
rating had already been  incorporated  into the  long-term  financing  strategy.
Management  believes  that the  Company's  financial  position  will continue to
provide the financial flexibility to support its turnaround initiatives.

Operating cash flows may be impacted by many factors,  including the competitive
conditions  in the  retail  industry  and the  effects of the  current  economic
conditions.  Based  on  the  nature  of  the  Company's  businesses,  management
considers the above factors to be normal business risks.
                               -23-


Capital  expenditures  were $352 million through the first half of 2003 compared
with $286 million for the comparable 2002 period.  This year's  investments were
primarily  to support the  implementation  of the SSC  distribution  network for
department stores,  department store  modernizations and renewals and technology
improvements,  as  well  as for  new and  relocated  Eckerd  drugstores  and the
continued remodeling of existing Eckerd drugstores. Management currently expects
total  capital  expenditures  for the full  year to be near the lower end of the
original  $900  million  to $1.1  billion  range,  about  evenly  split  between
department stores and Eckerd.

A quarterly  dividend of $0.125 per share on the  Company's  outstanding  common
stock was paid on May 1, 2003 to stockholders of record on April 10, 2003.

Stock Option Accounting
-----------------------

As discussed in the 2002 10-K, the Company follows  Accounting  Principles Board
Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," which does not
require  expense  recognition  for stock  options when the exercise  price of an
option equals, or exceeds, the fair market value of the common stock on the date
of grant.  Among other reasons,  the Company  follows APB 25 accounting  because
management  believes  that the impact of options  is already  factored  into the
earnings calculation through the dilutive effect of option shares.

The Financial Accounting Standards Board (FASB) is currently reviewing the rules
governing stock option  accounting and has made a tentative  decision to require
expense  recognition of stock options in the statement of  operations.  The FASB
intends to develop  revised rules that would be effective for 2004.  The Company
will  adopt any new rules  required  by the FASB  when  they are  effective.  As
disclosed in the 2002 10-K, the annual impact of expensing stock options for the
Company  using current  valuation  models would be  approximately  five to seven
cents per share.  See Note 1 for the pro forma impact on the second quarters and
first six months of 2003 and 2002.

Recently Issued Accounting Pronouncements
-------------------------------------------

Recently  issued  accounting  pronouncements  are  discussed  in  Note  1 to the
unaudited Interim Consolidated Financial Statements.


Pre-Approval of Auditor Services
--------------------------------

During the first quarter of 2003, the Audit  Committee of the Company's Board of
Directors  approved  estimated  fees for the  remainder  of 2003  related to the
performance  of both audit and  allowable  non-audit  services by the  Company's
external auditors, KPMG LLP.

Seasonality
-----------

The  Company's  business  depends to a great  extent on the last  quarter of the
year. Historically,  sales for that period have averaged approximately one-third
of  annual  sales  and  comprise  about  45% of the  Company's  annual  profits.
Accordingly,  the results of  operations  for the 13 and 26 weeks ended July 26,
2003 are not necessarily indicative of the results for the entire year.

                                      -24-



Item 3 - Quantitative and Qualitative Disclosure about Market Risk

The Company is exposed to market  risks in the normal  course of business due to
changes in interest  rates and currency  exchange  rates.  The Company's  market
risks related to interest rates at July 26, 2003 are similar to those  disclosed
in the  Company's  2002 10-K.  For the 26 weeks  ended  July 26,  2003 the other
comprehensive income on foreign currency translation was $26 million. Due to the
relatively  small  size of  foreign  operations,  management  believes  that its
exposure to market risk  associated  with  foreign  currencies  would not have a
material impact on its financial condition or results of operations.


Item 4 - Controls and Procedures

Based on their  evaluation of the Company's  disclosure  controls and procedures
(as defined in Rules 13a-14(c) and 15d-14(c)  under the Securities  Exchange Act
of 1934) as of the end of the period  covered by this  Quarterly  Report on Form
10-Q, the Company's  principal executive officer and principal financial officer
have  concluded  that the  design  and  operation  of the  Company's  disclosure
controls and  procedures are effective for the purpose of ensuring that material
information  required  to be in this  Quarterly  Report is made known to them by
others on a timely  basis.  There  have not been any  changes  in the  Company's
internal  control over financial  reporting  that occurred  during the Company's
last fiscal quarter that have materially  affected,  or are reasonably likely to
materially affect, the Company's internal control over financial reporting.


This report 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,  competition,   consumer  demand,  seasonality,   economic  conditions,  and
government  activity.  Investors should take such risks into account when making
investment decisions.

                                      -25-

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

         The Company has no material legal proceedings pending against it.


Item 4 -  Submission of Matters to a Vote of Security Holders

The Annual  Meeting of  Stockholders  of the Company was held on May 16, 2003 at
which the five matters described below were submitted to a vote of stockholders,
with the voting results as indicated.

(1)  Election  of  directors  for a  three-year  term  expiring at the Year 2006
     Annual Meeting of the Company's stockholders:

                                                              AUTHORITY
         NOMINEE                        FOR                    WITHHELD
         V. E. Jordan, Jr.          171,088,508               80,327,793
         Burl Osborne               218,955,069               32,461,232
         J. C. Pfeiffer             217,400,381               34,015,920
         R. G. Turner               218,597,493               32,818,808


(2)  The  Board  of  Directors'  proposal  regarding  employment  of KPMG LLP as
     auditors for the fiscal year ending January 31, 2004:

                                                              BROKER
         FOR               AGAINST          ABSTAIN           NON-VOTES
         237,991,380    10,745,620        2,679,297              903


(3)  A  stockholder  proposal  relating to  amending  JCPenney's  written  equa1
     employment  opportunity policy to explicitly prohibit  discrimination based
     on sexual orientation:

                                                             BROKER
         FOR              AGAINST          ABSTAIN           NON-VOTES
         218,226,637   15,677,855       17,510,906               903


(4)  A  stockholder  proposal  relating to  expensing  the cost of stock  option
     grants:

                                                                BROKER
         FOR                 AGAINST          ABSTAIN           NON-VOTES
         104,904,392      98,178,169       24,562,146          23,771,594


(5)  A stockholder  proposal  relating to eliminating the  classification of the
     Board:
                                                               BROKER
         FOR                AGAINST          ABSTAIN           NON-VOTES
         144,459,028     77,788,782        5,498,099          23,670,392

                                      -26-

Item 6 - Exhibits and Reports on Form 8-K

(a)      Exhibits

          Exhibit No.   Description
          -------------------------

               31.1 Certification of Chief Executive Officer pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002

               31.2 Certification of Chief Financial Officer pursuant to Section
                    302 of the Sarbanes-Oxley Act of 2002

               32.1 Certification of Chief Executive Officer pursuant to Section
                    906 of the Sarbanes-Oxley Act of 2002

               32.2 Certification of Chief Financial Officer pursuant to Section
                    906 of the Sarbanes-Oxley Act of 2002

(b)      Reports on Form 8-K

          The Company filed the  following  report on Form 8-K during the period
          covered in this report:

          o    Current  Report  on  Form  8-K  dated  May  13,  2003  (Item 7 --
               Financial  Statements  and  Exhibits;  Item  9 --  Regulation  FD
               Disclosure)

                                      -27-







                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.












                                           J. C. PENNEY COMPANY, INC.
                                           By   /s/ W. J. Alcorn
                                           -------------------------------
                                                   W. J. Alcorn
                                           Senior Vice President and Controller
                                           (Principal Accounting Officer)









Date: September 8, 2003


                                      -28-






                                                                    Exhibit 31.1

                                  CERTIFICATION

I, Allen Questrom, Chairman and Chief Executive Officer, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of J. C. Penney Company,
     Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     (b)  [Intentionally omitted]

     (c)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date:  September 8, 2003.

                                           /s/ Allen Questrom
                                           ___________________________
                                           Allen Questrom
                                           Chairman and Chief Executive Officer
                                           J. C. Penney Company, Inc.

                                      -29-



                                                                    Exhibit 31.2

                                 CERTIFICATION

I, Robert B. Cavanaugh,  Executive Vice President and Chief  Financial  Officer,
certify that:

1.   I have reviewed this quarterly report on Form 10-Q of J. C. Penney Company,
     Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer(s) and I are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     (b)  [intentionally omitted]

     (c)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's  fourth fiscal quarter in
          the case of an annual  report)  that has  materially  affected,  or is
          reasonably  likely to materially  affect,  the  registrant's  internal
          control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     (a)  All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date:  September 8, 2003.

                                                  /s/ Robert B. Cavanaugh
                                                  ___________________________
                                                  Robert B. Cavanaugh
                                                  Executive Vice President and
                                                  Chief Financial Officer
                                                  J. C. Penney Company, Inc.
                                      -30-



                                                                    Exhibit 32.1


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the  Quarterly  Report of J. C. Penney  Company,  Inc. (the
"Company") on Form 10-Q for the period ending July 26, 2003 (the  "Report"),  I,
Allen Questrom,  Chairman and Chief Executive  Officer of the Company,  certify,
pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1)  the Report fully complies with the  requirements  of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  the information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.

DATED this 8th day of September 2003.

                                            /s/ Allen Questrom
                                            _____________________________
                                            Allen Questrom
                                            Chairman and Chief Executive Officer

                                      -31-



                                                                    Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with the  Quarterly  Report of J. C. Penney  Company,  Inc. (the
"Company") on Form 10-Q for the period ending July 26, 2003 (the  "Report"),  I,
Robert B. Cavanaugh, Executive Vice President and Chief Financial Officer of the
Company,  certify,  pursuant to 18 U.S.C.  Section 1350, as adopted  pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  the Report fully complies with the  requirements  of section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

(2)  the information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operations of the Company.

DATED this 8th day of September 2003.

                                                 /s/ Robert B. Cavanuagh
                                                 _____________________________
                                                 Robert B. Cavanaugh
                                                 Executive Vice President and
                                                 Chief Financial Officer

                                      -32-