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 April 30, 2005     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 number _______________________


                           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.

263,293,480 shares of Common Stock of 50 cents par value, as of June 7, 2005.





                      INDEX

                                                                           Page
                                                                         -------

Part I               Financial Information
   Item 1.           Unaudited 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        19
                     Condition and Results of Operations

   Item 3.           Quantitative and Qualitative Disclosures about           31
                     Market Risk

   Item 4.           Controls and Procedures                                  31

Part II              Other Information

   Item 1.           Legal Proceedings                                        32

   Item 2.           Unregistered Sales of Equity Securities                  32
                     and Use of Proceeds

   Item 6.           Exhibits                                                 33

Signature Page                                                                34

Certifications                                                                35

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

                                                                         Apr. 30,               May 1,
                                                                            2005                 2004
                                                                  -----------------    -----------------

Retail sales, net                                                        $ 4,192              $ 4,033
Cost of goods sold                                                         2,463                2,418
                                                                  -----------------    -----------------
Gross margin                                                               1,729                1,615
Selling, general and administrative expenses                               1,416                1,386
Net interest expense                                                          53                   57
Bond premiums and unamortized costs                                           13                    -
Real estate and other (income)                                               (22)                  (8)
                                                                  -----------------    -----------------
Income from continuing operations before income taxes                        269                  180
Income tax expense                                                            97                   62
                                                                  -----------------    -----------------
Income from continuing operations                                        $   172              $   118
Discontinued operations, net of income tax (benefit)
       of $- and $(90)                                                         -                  (77)
                                                                  -----------------    -----------------
Net income                                                               $   172              $    41

Less: preferred stock dividends                                                -                    6
                                                                  -----------------    -----------------
Net income applicable to common stockholders                             $   172              $    35
                                                                  =================    =================



Basic earnings/(loss) per share:
    Continuing operations                                                 $ 0.63               $ 0.40
    Discontinued operations                                                    -                (0.27)
                                                                  -----------------    -----------------
    Net income                                                            $ 0.63               $ 0.13
                                                                  =================    =================



Diluted earnings/(loss) per share:
    Continuing operations                                                 $ 0.63               $ 0.38
    Discontinued operations                                                    -                (0.25)
                                                                  -----------------    -----------------
    Net income                                                            $ 0.63               $ 0.13
                                                                  =================    =================



     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)                                                    Apr. 30,         May 1,        Jan. 29,
                                                                     2005            2004           2005
                                                                ---------------   ------------  --------------

Assets
Current assets
   Cash and short-term investments
         (including restricted balances of $64,
         $88 and $63)                                               $ 4,147         $ 3,027        $ 4,687

  Receivables (net of bad debt reserves
         of $7, $5 and $7)                                              382             243            404

  Merchandise inventory (net of LIFO
         reserves of $25, $43 and $25)                                3,293           3,338          3,169

  Prepaid expenses                                                      173             203            167
                                                                ---------------   ------------  --------------

        Total current assets                                          7,995           6,811          8,427

Property and equipment (net of accumulated
         depreciation of $2,150, $2,178 and $2,077)                   3,636           3,462          3,638

Prepaid pension                                                       1,524           1,302          1,538

Other assets                                                            544             508            524

Assets of discontinued operations (net of fair value
        adjustment of $-, $615 and $-)                                    -           6,077              -
                                                                ---------------   ------------  --------------
Total Assets                                                        $13,699        $ 18,160       $ 14,127
                                                                ===============   ============  ==============


       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)                             Apr. 30,         May 1,        Jan. 29,
                                                                     2005            2004           2005
                                                                 --------------   ------------  -------------
Liabilities and Stockholders' Equity
Current liabilities
  Trade payables                                                     $ 1,193        $  1,302        $ 1,200
  Accrued expenses and other                                           1,549           1,109          1,766
  Short-term debt                                                        111              34             22
  Current maturities of long-term debt                                   264             243            459
  Deferred taxes                                                           -             875              -
                                                                 --------------   ------------  -------------
       Total current liabilities                                       3,117           3,563          3,447

Long-term debt                                                         3,461           5,113          3,464
Deferred taxes                                                         1,328           1,204          1,318
Other liabilities                                                      1,031             819          1,042
Liabilities of discontinued operations                                     -           1,863              -
                                                                 --------------   ------------  -------------
       Total Liabilities                                               8,937          12,562          9,271

Stockholders' equity
Capital stock
  Preferred stock(1)                                                       -             297              -
  Common stock and additional paid-in capital(2)                       4,192           3,717          4,176
                                                                 --------------   ------------  -------------
Total capital stock                                                    4,192           4,014          4,176
                                                                 --------------   ------------  -------------
Reinvested earnings at beginning of year                                 812           1,728          1,728

  Net income                                                             172              41            524
  Retirement of common stock                                            (259)              -         (1,290)
  Dividends declared                                                     (34)            (34)          (150)
                                                                 --------------   ------------  -------------
Reinvested earnings at end of period                                     691           1,735            812

Accumulated other comprehensive (loss)                                  (121)           (151)          (132)
                                                                 --------------   ------------  -------------
      Total Stockholders' Equity                                       4,762           5,598          4,856
                                                                 --------------   ------------  -------------
Total Liabilities and Stockholders' Equity                           $13,699        $ 18,160        $14,127
                                                                 ==============   ============  =============



(1)  Preferred stock has a stated value of $600 per share; 25 million shares are
     authorized.  At April 30, 2005 and January 29, 2005,  no shares were issued
     and outstanding  due to the redemption of all preferred  shares into common
     stock  during  2004.  At May 1, 2004,  0.5 million  shares of Series B ESOP
     convertible preferred stock were issued and outstanding.

(2)  Common stock has a par value of $0.50 per share;  1,250 million  shares are
     authorized.  At April 30,  2005,  May 1, 2004 and  January  29,  2005,  267
     million  shares,  282 million shares and 271 million shares were issued and
     outstanding, respectively.

     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)                                                                   13 weeks ended
                                                                      ----------------------------------------
                                                                          Apr. 30,                May 1,
                                                                            2005                   2004
                                                                      ------------------     -----------------
Cash flows from operating activities:
Income from continuing operations                                           $   172               $   118
Adjustments to reconcile income from continuing operations
  to net cash provided by/(used in) operating activities:
   Asset impairments, PVOL and other unit closing costs                           1                     1
   Depreciation and amortization                                                 90                    87
   Net gains on sale of assets                                                  (14)                   (2)
   Benefit plans expense                                                         20                    16
   Stock-based compensation                                                      22                     3
   Deferred taxes                                                                42                     9
Change in cash from:
    Receivables                                                                  (9)                  (22)
    Inventory                                                                  (124)                 (182)
    Prepaid expenses and other assets                                           (20)                   20
    Trade payables                                                               (7)                  137
    Current income taxes payable                                                 45                    43
    Accrued expenses and other liabilities                                     (206)                 (248)
                                                                      ------------------     -----------------
Net cash provided by/(used in) operating activities                              12                   (20)
                                                                      ------------------     -----------------
Cash flows from investing activities:
Capital expenditures                                                            (99)                  (64)
Proceeds from sale of assets                                                     16                    19
                                                                      ------------------     -----------------
Net cash (used in) investing activities                                         (83)                  (45)
                                                                      ------------------     -----------------
Cash flows from financing activities:
Change in short-term debt                                                        17                    16
Payment of long-term debt, including capital
   leases and bond premiums                                                    (138)                   (3)
Common stock repurchased                                                       (318)                    -
Common stock dividends paid                                                     (35)                  (34)
Proceeds from stock options exercised                                            75                   130
                                                                      ------------------     -----------------
Net cash (used in)/provided by financing activities                            (399)                  109
                                                                      ------------------     -----------------
Cash (paid to) discontinued operations                                          (70)                  (11)
                                                                      ------------------     -----------------

Net (decrease)/increase in cash and short-term investments                     (540)                   33
Cash and short-term investments at beginning of year                          4,687                 2,994
                                                                      ------------------     -----------------
Cash and short-term investments at end of period                            $ 4,147               $ 3,027
                                                                      ==================     =================




     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 29, 2005 (the "2004
10-K"). The accompanying  unaudited Interim  Consolidated  Financial  Statements
present the results of J. C. Penney  Company,  Inc.  and its  subsidiaries  (the
Company or JCPenney)  and should be read in  conjunction  with the  Consolidated
Financial  Statements  and  notes  thereto  in the 2004  10-K.  All  significant
intercompany transactions and balances have been eliminated in consolidation.

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 29, 2005  financial  information
was derived from the audited  Consolidated  Financial  Statements,  with related
footnotes, included in the 2004 10-K.

Certain  reclassifications  were made to prior  year  amounts  to conform to the
current period presentation. Additionally, as a result of guidance issued by the
Securities and Exchange  Commission,  the Company  reviewed its lease accounting
policies at year-end  2004.  As a result of this review,  a  cumulative  pre-tax
expense  adjustment  was  recorded  in the  fourth  quarter  of 2004  related to
recognizing rent on a straight-line  basis over the lease term and synchronizing
depreciation  periods for fixed assets with the related lease terms.  The impact
on prior  years was not  material.  The  Company  also  recorded a $111  million
balance  sheet  adjustment  at January  29, 2005 to increase  net  Property  and
Equipment and establish a deferred rent liability, included in Other Liabilities
in the Company's  Consolidated  Balance Sheet,  for the  unamortized  balance of
developer/tenant  allowances.  As of April 30, 2005, the balance of the deferred
rent liability was $111 million.

Certain debt securities were issued by J. C. Penney Corporation, Inc. (JCP), the
wholly owned  operating  subsidiary of the Company.  The 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 Company of certain of
JCP's outstanding debt securities is full and unconditional.

Stock-Based Compensation
The Company has a  stock-based  compensation  plan that  provides  for grants to
associates of stock awards, stock appreciation rights or options to purchase the
Company's common stock. Prior to fiscal year 2005, the Company accounted for the
plan under the recognition and measurement  principles of Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to Employees" (APB No. 25),
and related  Interpretations.  No  stock-based  employee  compensation  cost was
reflected in the  Consolidated  Statements of Operations for stock options prior
to fiscal year 2005,  since all options  granted under the plan have an exercise
price equal to the market  value of the  underlying  common stock on the date of
grant.

Effective  January 30, 2005,  the Company  early-adopted  Statement of Financial
Accounting Standards No. 123 (revised),  "Share-Based  Payment" (SFAS No. 123R),
which  requires  the  use of the  fair  value  method  for  accounting  for  all
stock-based  compensation,  including  stock options.  The statement was adopted
using the modified  prospective  method of  application.  Under this method,  in
addition to reflecting  compensation expense for new share-based awards, expense
is also  recognized to reflect the remaining  vesting  period of awards that had
been included in pro-forma disclosures in prior periods. The impact of expensing
stock options on the Company's first quarter of 2005 was compensation expense of
$19 million  ($12  million  after tax),  a reduction of $0.05 for both basic and
diluted  earnings per share.  In the first quarter of 2005, the adoption of SFAS
No. 123R had no impact on the Company's Consolidated Statement of Cash Flows

                                      -5-




related  to the new  treatment  of excess  tax  benefits,  which  requires  such
benefits to be reflected as financing cash inflows. The Company has not adjusted
prior year financial statements under the optional modified retrospective method
of adoption.

Under APB No. 25, pro-forma  expense for stock options with pro-rata vesting was
calculated  on a  straight-line  basis over the  stated  vesting  period,  which
typically ranges from one to five years. Upon the adoption of SFAS No. 123R, the
Company records  compensation expense on a straight-line basis over the employee
service period,  which is to the earlier of the retirement  eligibility  date or
the stated vesting period (the non-substantive vesting period approach).

The following table  illustrates the effect on net income and earnings per share
as if the fair value  method had been applied to all  outstanding  awards in the
first  quarter  of 2004.  The 2005  information  is  provided  in the  table for
purposes of comparability.



                                                                                          
  ($ in millions, except EPS)                                                     13 weeks ended
                                                                       ---------------- -----------------
                                                                               Apr.30             May 1,
                                                                                 2005             2004(1)
                                                                       ---------------- -----------------
  Net income, as reported                                                       $ 172             $  41
  Add:  Stock-based employee compensation
      expense included in reported net income, net of
      related tax effects                                                          14                 2
  Deduct:  Total stock-based employee compensation
      expense determined under the fair value method
      for all awards, net of related tax effects                                  (14)               (6)
                                                                       ---------------- -----------------
  Pro-forma net income                                                          $ 172             $  37
                                                                       ================ =================

  Earnings per share:
      Basic--as reported                                                       $ 0.63            $ 0.13
      Basic--pro forma                                                         $ 0.63            $ 0.11
      Diluted--as reported                                                     $ 0.63            $ 0.13
      Diluted--pro forma                                                       $ 0.63            $ 0.12



(1)  If  the  prior  year  pro-forma  expense  had  been  attributed  using  the
     non-substantive   vesting  period  approach,   total  stock-based  employee
     compensation expense would have been $12 million, net of tax, and pro-forma
     net  income  would  have  been $31  million.  Basic and  diluted  pro-forma
     earnings  per share would have been $0.09 and $0.10 for last  year's  first
     quarter, respectively.

Prior to fiscal year 2005,  the Company  used the  Black-Scholes  option-pricing
model to  estimate  the grant date fair value of its stock  option  awards.  For
grants  subsequent to the adoption of SFAS No. 123R,  the Company  estimates the
fair value of stock option awards on the date of grant using a binomial  lattice
model.  The Company  believes that the binomial lattice model is a more accurate
model for valuing  employee stock options since it better reflects the impact of
stock price changes on option exercise behavior.

The  expected  volatility  used in the  binomial  lattice  model  is based on an
analysis of  historical  prices of  JCPenney's  stock and open market  exchanged
options,  and was developed in consultation with an outside valuation specialist
and the  Company's  financial  advisors.  The expected  volatility  reflects the
volatility  implied  from a price quoted for a  hypothetical  call option with a
duration  consistent  with the expected life of the options,  and the volatility
implied by the trading of options to purchase the Company's stock on open-market
exchanges.  As a result of the Company's turnaround over the past four years and
the disposition of the Eckerd drugstore operations, a significant portion of the
historical  volatility  is not  considered  to be a  good  indicator  of  future
volatility. The expected term of options

                                      -6-




granted  is  based  primarily  on  historical   exercise   patterns,   but  also
incorporates an early exercise assumption in the event of a significant increase
in stock price. The risk-free rate is based on zero-coupon U.S.  Treasury yields
in effect at the date of grant with the same period as the expected option life.
The  dividend  yield is assumed to increase  ratably to the  Company's  expected
dividend  yield level based on targeted  payout ratios over the expected life of
the options. The option cancellation assumption, which impacts the total expense
recognized  as  opposed  to the fair  value of the  award,  takes  into  account
historical patterns, adjusted to reflect the Company's turnaround efforts.

The following table presents the assumptions utilized to estimate the grant date
fair value of stock options:



                                                                                                

                                                                                       13 weeks ended
                                                                          Apr. 30, 2005             May 1, 2004
                                                                      ----------------------- ------------------------
Valuation model                                                          Binomial Lattice          Black-Scholes
Expected volatility                                                           30.0%                    30.0%
Expected dividend yield                                                    1.12%-1.20%                 1.40%
Expected term                                                               5.0 years                5.0 years
Risk-free rate                                                                 4.0%                    3.0%
Weighted-average fair value of options at grant date                         $ 12.81                  $ 8.43



See Note 10 for additional discussion of the Company's stock-based compensation.

Effect of New Accounting Standards
On May 19, 2004,  the Financial  Accounting  Standards  Board (FASB) issued FASB
Staff Position  (FSP) SFAS No. 106-2,  "Accounting  and Disclosure  Requirements
Related to the Medicare Prescription Drug,  Improvement and Modernization Act of
2003." The  referenced  legislation  (the Act) was passed in December  2003, and
provides for a federal subsidy to employers that offer retiree prescription drug
benefits  that are at least  actuarially  equivalent  to those offered under the
government sponsored Medicare Part D. While the provisions of FSP SFAS No. 106-2
were effective in the Company's third quarter of 2004,  final  regulations  that
define  actuarial  equivalency  were not issued until January 2005. As a result,
the expense amounts shown in Note 11 do not reflect the potential effects of the
Act, which, due largely to the cap on Company contributions, are not expected to
have a material effect on the Company's consolidated financial statements.


2)   Discontinued Operations
     ------------------------

Eckerd Drugstores
On July 31, 2004, the Company and certain of its subsidiaries closed on the sale
of its Eckerd drugstore  operations for a total of approximately $4.7 billion in
cash proceeds that included a $209 million adjustment for the estimated increase
in Eckerd's  working  capital  from  January 31,  2004 to July 31,  2004.  After
deducting taxes,  fees and other transaction  costs, and estimated  post-closing
adjustments,  the ultimate net cash proceeds  from the sale total  approximately
$3.5 billion. The Jean Coutu Group (PJC) Inc. (Coutu) acquired Eckerd drugstores
and support facilities located in 13 Northeast and Mid-Atlantic  states, as well
as the Eckerd Home Office located in Florida.  CVS Corporation and CVS Pharmacy,
Inc.  (collectively,  CVS) acquired  Eckerd  drugstores  and support  facilities
located in the remaining Southern states, principally Florida and Texas, as well
as Eckerd's  pharmacy  benefits  management,  mail order and specialty  pharmacy
businesses.  Proceeds from the sale are being used for common stock  repurchases
and debt  reduction,  as announced in August 2004,  and more fully  discussed in
Note 3.


                                      -7-



The loss on the sale was $713 million pre-tax, or $1,433 million on an after-tax
basis. The relatively high tax cost is a result of the tax basis of Eckerd being
lower than its book basis because the Company's previous drugstore  acquisitions
were largely  tax-free  transactions.  Of the total  after-tax loss on the sale,
$1,325  million was  recorded in 2003 to reflect  Eckerd at its  estimated  fair
value  less  costs to sell.  During  the  first  and  second  quarters  of 2004,
after-tax losses of $77 million and $31 million, respectively,  were recorded to
reflect  revised  estimates of certain  post-closing  adjustments  and resulting
sales proceeds.

Additionally,  $3.4 billion of the present value of operating lease  obligations
(PVOL),  which was an off-balance  sheet  obligation  under  generally  accepted
accounting  principles  (GAAP), was eliminated with the transfer of these leases
to the  purchasers of the Eckerd  drugstore  operations  upon the closing of the
sale.

The Company  established  reserves at July 31,  2004 for  estimated  transaction
costs  and  post-closing   adjustments.   Certain  of  these  reserves  involved
significant  judgment and actual costs  incurred over time could vary from these
estimates.  The more  significant  estimates  relate  to the  estimated  working
capital  adjustment,  the costs to exit the  Colorado  and New  Mexico  markets,
assumption  of the  Eckerd  Pension  Plan and  various  post-employment  benefit
obligations  and   environmental   indemnifications.   Management  is  currently
negotiating with both CVS and Coutu regarding the working capital  adjustment as
required in the respective sale agreements.  Management  continues to review and
update the reserves on a quarterly  basis.  While  adjustments have been made to
individual  reserves,  management  believes that, in total,  the reserves remain
adequate  at the  end of the  first  quarter  of  2005.  Cash  payments  for the
Eckerd-related reserves are included in the Company's Consolidated Statements of
Cash Flows as Cash Paid to Discontinued Operations.

As part of the Asset  Purchase  Agreement  with CVS,  it was agreed  that,  with
respect to the Colorado and New Mexico locations (CN real estate interests),  at
closing any of these  properties  that were not disposed of would be transferred
to CVS. On August 25, 2004,  the Company and CVS entered into the CN  Rescission
Agreement,  whereby the Company  received a one-time  payment  from CVS of $21.4
million,  which represented the agreed-upon  limit of CVS's liability  regarding
the CN real estate interests plus net proceeds from dispositions as of August 25
minus  expenses  borne and paid by CVS as of August 25  relating  to the CN real
estate  interests.  Effective  August 25, CVS  transferred to the Company all CN
real estate interests not disposed of,  corresponding third party agreements and
liabilities.  The  Company  has  engaged a  third-party  real estate firm and is
working through disposition plans for each individual property.

At the  closing  of the sale of Eckerd on July 31,  2004,  the  Company  assumed
sponsorship  of the Eckerd Pension Plan,  the Eckerd  Contingent  Separation Pay
Programs  and  various  other  terminated  non-qualified  retirement  plans  and
programs.  The Company further assumed all severance and post-employment  health
and welfare benefit obligations under various Eckerd plans, employment and other
specific agreements. The Company is evaluating its options with respect to these
assumed  liabilities,   including,  but  not  limited  to,  termination  of  the
agreements,  plans or  programs  and/or  settlement  of the  underlying  benefit
obligations.

As part of the Eckerd sale agreements,  the Company retained  responsibility  to
remediate environmental conditions that existed at the time of the sale. Certain
properties,  principally  distribution  centers,  were identified as having such
conditions at the time of sale. Preliminary cost estimates have been established
by management,  in  consultation  with an  environmental  engineering  firm, for
specifically  identified  properties,  as well as a  certain  percentage  of the
remaining properties, considering such factors as age, location and prior use of
the properties.  Further studies are underway to develop  remediation  plans and
refine cost estimates, which could vary from preliminary estimates.


                                      -8-





Both CVS and Coutu  entered into  agreements  with the Company and the Company's
insurance  provider in order to assume the obligations for general liability and
workers'  compensation  claims that had been  transferred  to the  purchasers at
closing.  The agreement with CVS was entered into  concurrent  with the closing,
while the  agreement  with Coutu was  finalized in the third quarter of 2004. At
closing,  the Company had approximately $64 million in letters of credit pledged
as  collateral  to its  insurance  provider in support of general  liability and
workers'  compensation  claims  that  were  transferred  to Coutu as part of the
Eckerd sale. Upon the finalization of the insurance assumption agreements,  this
amount was reduced to approximately $8.5 million.  Based on a separate agreement
between Coutu and the Company,  Coutu will provide replacement letters of credit
to the insurance  company no later than  September 17, 2006,  which will release
the Company from any further potential obligation.

The  Company  is  providing  to  the  purchasers  certain  information  systems,
accounting,  banking,  vendor contracting,  tax and other transition services as
set  forth  in  the  Company's   Transition  Services   Agreements   (Transition
Agreements)  with CVS and Coutu for a period of 12 months from the closing date,
unless  terminated  earlier by the  purchasers.  One  Transition  Agreement with
Pharmacare  Management  Services,  Inc.,  a  subsidiary  of  CVS,  involves  the
provision of information and data  management  services for a period of up to 15
months from the  closing  date.  Under the  Transition  Agreements,  the Company
receives monthly service fees, which are designed to recover the estimated costs
of providing the specified services.  To the extent actual costs to provide such
services  exceed the estimates,  any additional  costs incurred are reflected in
Discontinued Operations.

Discontinued  Operations in the  Consolidated  Statements of Operations  reflect
Eckerd's  operating  results  for all  periods  presented,  including  allocated
interest expense.  Interest expense was allocated to the discontinued  operation
based on  Eckerd's  outstanding  balance  on its  intercompany  loan  payable to
JCPenney, which accrued interest at JCPenney's weighted-average interest rate on
its net debt  (long-term  debt net of  short-term  investments)  calculated on a
monthly basis.

There was no  operating  activity  during the first  quarter of 2005  related to
discontinued  operations.  Results  of  the  Eckerd  discontinued  operation  as
reflected in the Consolidated Statement of Operations for the 13 weeks ended May
1, 2004 are summarized below:



($ in millions)                                              13 weeks ended
                                                               May 1, 2004
                                                        -----------------------
   Net sales                                                            $3,722
                                                        -----------------------
   Gross margin                                                            843
   Selling, general and administrative expenses                            794
   Interest expense                                                         46
   Acquisition amortization                                                  2
   Other                                                                     1
                                                        -----------------------
Income before income taxes                                                   -
Income tax expense                                                           -
                                                        -----------------------
Income from operations                                                       -
(Loss) on sale of Eckerd, net of income tax
  (benefit) of $(90)                                                       (77)
                                                        -----------------------
Total discontinued operations, net                                      $  (77)
                                                        =======================

                                      -9-





With the  closing of the Eckerd sale on July 31,  2004,  there were no assets or
liabilities of discontinued operations as of April 30, 2005 or January 29, 2005.
Assets and  liabilities of the Eckerd  discontinued  operation as of May 1, 2004
were as follows:

($ in millions)                                               May 1,
                                                              2004
                                                      -----------------

Current assets                                              $ 2,381
Other assets                                                  4,311
                                                      -----------------
    Total assets                                            $ 6,692
                                                      -----------------
Current liabilities                                         $ 1,375
Other liabilities                                               488
                                                      -----------------
    Total liabilities                                       $ 1,863
                                                      -----------------
JCPenney's net investment in Eckerd                         $ 4,829
Fair value adjustment                                          (615)
                                                      -----------------
Fair value of JCPenney's investment in Eckerd               $ 4,214
                                                      =================


3)   Capital Structure Repositioning
     -------------------------------

In August 2004, the Company  initiated a major equity and debt reduction program
focused on enhancing stockholder value,  strengthening the capital structure and
improving the credit rating  profile.  On March 18, 2005,  the JCPenney Board of
Directors  authorized  additional common stock repurchases and debt retirements.
The Company is using the $3.5 billion in net cash  proceeds from the sale of the
Eckerd drugstore operations and existing cash and short-term investment balances
to fund the programs, which consist of the following:

Common Stock Repurchases
--------------------------
The  Company  is  executing  common  stock  repurchase  programs  of up to $3.75
billion,  including $3.0 billion  authorized in 2004 and $750 million authorized
in 2005. Share repurchases have been and will continue to be made in open-market
transactions,  subject  to  market  conditions,  legal  requirements  and  other
factors.  During the first quarter of 2005, the Company  repurchased and retired
7.7 million  shares of common  stock at a cost of  approximately  $360  million,
bringing  the total  purchases  up to date under the  programs  to 57.8  million
shares of common stock at a cost of approximately $2.3 billion.  This represents
approximately   60%  of  the  planned   repurchases.   As  of  April  30,  2005,
approximately  $1.4  billion  remained  authorized  under the programs for share
repurchases.

Debt Reduction
---------------
The  Company's  debt  reduction  programs  currently  consist  of  planned  debt
retirements of $2.13 billion,  including  approximately $1.88 billion authorized
in 2004 and $250 million  authorized in 2005. JCP's $400 million 7.4% Debentures
Due 2037,  which were subject to  redemption  at the option of the holders,  had
initially  been  included in the 2004  program,  but upon  expiration of the put
option on March 1, 2005,  virtually all of the holders extended their debentures
to the stated 2037 maturity date.

By the end of the  first  quarter  of 2005,  the  Company  had  reduced  debt by
approximately   $1.9  billion,   including  $194  million  of  open-market  debt
repurchases completed in the first quarter, and 2004 transactions that consisted
of $650 million of debt converted to common stock, $822 million of cash payments
and the termination of the $221 million Eckerd securitized  receivables program.
Of the $194 million of JCP's  outstanding debt repurchased in the first quarter,
$125  million  principal  amount  cash  settled  in the first  quarter,  and the
remaining  $69 million  principal  amount cash  settled in the first week of the
second quarter. The Company incurred pre-tax charges of $13 million in the first
quarter  related  to these  early debt  retirements.  As of the end of the first
quarter, $56 million of authorized open-market

                                      -10-




debt  purchases  remained  under the 2005  program.  During the third and fourth
quarters of 2004,  the Company  incurred  total  pre-tax  charges of $47 million
related to early debt retirements.

The 2004 debt reduction  program was completed during the second quarter of 2005
upon the payment of $193 million of  long-term  debt at the  scheduled  maturity
date in May 2005.

Series B Convertible Preferred Stock Redemption
------------------------------------------------

On August 26, 2004, the Company  redeemed,  through  conversion to common stock,
all of its  outstanding  shares of  Series B ESOP  Convertible  Preferred  Stock
(Preferred   Stock),   all  of  which  were  held  by  the  Company's   Savings,
Profit-Sharing  and Stock  Ownership Plan, a 401(k) savings plan. Each holder of
Preferred Stock received 20 equivalent  shares of JCPenney common stock for each
one share of Preferred  Stock in their Savings Plan account in  accordance  with
the original terms of the Preferred  Stock.  Preferred Stock shares,  which were
included in the diluted  earnings per share  calculation  as  appropriate,  were
converted into approximately nine million common stock shares.

Common Stock Outstanding
During the first three months of 2005,  common stock  outstanding  decreased 4.8
million  shares  to 266.6  million  shares  from  271.4  million  shares  at the
beginning of the year.  The decline in  outstanding  shares is  attributable  to
approximately  eight million shares  repurchased and retired partially offset by
approximately three million shares issued due to the exercise of stock options.


4)   Earnings/(Loss) per Share
     --------------------------

Basic  earnings/(loss)  per share (EPS) is computed by dividing  net income less
dividend  requirements on the Series B ESOP Convertible  Preferred Stock, net of
tax as  applicable,  by the  weighted-average  number of shares of common  stock
outstanding for the period. Except when the effect would be anti-dilutive at the
continuing  operations level, the diluted EPS calculation includes the impact of
restricted  stock  units and shares  that,  during the  period,  could have been
issued under outstanding stock options, as well as common shares that would have
resulted from the conversion of convertible debentures and convertible preferred
stock.  If the applicable  shares are included in the  calculation,  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.  Both  the
convertible debentures and preferred stock were converted to common stock in the
second half of 2004. See Note 3.

                                      -11-




Income from continuing operations and shares used to compute EPS from continuing
operations, basic and diluted, are reconciled below:

(in millions, except EPS)                                   13 weeks ended
                                                      --------------------------
                                                        Apr. 30,         May 1,
                                                           2005           2004
                                                      ------------    ----------
Earnings:
Income from continuing operations                         $ 172          $ 118
Less: preferred stock dividends, net of tax                   -              6
                                                      ------------    ----------
Income from continuing operations, basic                    172            112
Adjustment for assumed dilution:
   Interest on 5% convertible debt, net of tax                -              5
                                                      ------------    ----------
Income from continuing operations, diluted                $ 172          $ 117
                                                      ============    ==========


Shares:
Average common shares outstanding (basic
shares)                                                     271            278
Adjustments for assumed dilution:
    Stock options and restricted stock units                  3              5

    Shares from convertible debt                              -             23
                                                      ------------    ----------
Average shares assuming dilution (diluted
shares)                                                     274            306
                                                      ============    ==========

EPS from continuing operations:
Basic                                                    $ 0.63          $0.40
Diluted                                                  $ 0.63          $0.38

The following potential shares of common stock were excluded from the EPS
calculation:

(shares in millions)
                                                             13 weeks ended
                                                     --------------------------
                                                        Apr. 30,        May 1,
                                                         2005            2004
                                                     -----------    -----------
Stock options (1)                                           2               7
Preferred stock                                             -              10(2)

(1)  These stock options had exercise prices per
share above the average price of the Company's
common stock for the period.  Such exercise prices
for the respective periods ranged from:               $48 to $71    $34 to $71

(2) The effect of these potential shares of common
stock was anti-dilutive.


5)   Cash and Short-Term Investments
     --------------------------------

                                                                                           
($ in millions)                                           Apr. 30,              May 1,           Jan. 29,
                                                            2005                 2004               2005
                                                     -------------------  -----------------   ---------------
Cash                                                        $   144             $   96            $   46
Short-term investments                                        4,003              2,931             4,641
                                                     -------------------  -----------------   ---------------
Total cash and short-term investments                       $ 4,147             $3,027            $4,687
                                                     ===================  =================   ===============



                                      -12-




Restricted Short-Term Investment Balances
Short-term  investments include restricted balances of $64 million,  $88 million
and $63  million  as of April  30,  2005,  May 1,  2004 and  January  29,  2005,
respectively.  Restricted  balances are pledged as collateral for import letters
of credit not  included  in the  Company's  bank  credit  facility  and/or for a
portion of casualty insurance program liabilities.


6)   Supplemental Cash Flow Information
     -----------------------------------

                                                                                                
($ in millions)                                                                      13 weeks ended
                                                                         ---------------------------------------
                                                                          Apr. 30, 2005           May 1, 2004
                                                                         -----------------      ----------------
Total interest paid                                                                $ 112                 $ 168
  Less:  interest paid attributable to discontinued operations                         -                    44
                                                                         -----------------      ----------------
Interest paid by continuing operations                                             $ 112                 $ 124
                                                                         =================      ================
Interest received by continuing operations(1)                                      $  21                 $   6
                                                                         =================      ================
Income taxes paid by continuing operations(1)                                      $  17                 $   5
                                                                         =================      ================



(1)  There  was no  interest  received  or income  taxes  paid  attributable  to
     discontinued operations in the first quarters of 2005 or 2004.


7)   Goodwill
     ---------

The carrying amount of goodwill for Renner Department Stores in Brazil, which is
reflected in Other Assets in the Company's  Consolidated Balance Sheets, was $42
million,  $42  million  and $43  million as of April 30,  2005,  May 1, 2004 and
January 29, 2005, respectively. Changes in carrying value are related to foreign
currency  translation  adjustments.  There were no impairment  losses related to
goodwill recorded during the first quarter of 2005 or 2004.


8)   Credit Agreement
     ----------------

On April 7, 2005,  the  Company,  JCP and J. C.  Penney  Purchasing  Corporation
entered into a five-year  $1.2 billion  revolving  credit  facility (2005 Credit
Facility)  with a  syndicate  of lenders  with  JPMorgan  Chase Bank,  N.A.,  as
administrative  agent.  The 2005 Credit  Facility  replaces the  Company's  $1.5
billion  credit  facility  that was  scheduled  to expire in May 2005.  The 2005
Credit  Facility  is  unsecured,  and all  collateral  securing  the  previously
existing  $1.5  billion  credit  facility  has been  released.  The 2005  Credit
Facility is available for general corporate purposes,  including the issuance of
letters of credit.  Pricing  under the 2005 Credit  Facility is tiered  based on
JCP's senior unsecured  long-term debt ratings by Moody's and Standard & Poor's.
Obligations under the 2005 Credit Facility are guaranteed by the Company.

The 2005 Credit Facility includes a requirement that the Company maintain, as of
the  last  day  of  each  fiscal  quarter,  a  maximum  ratio  of  total  Funded
Indebtedness  to  Consolidated  EBITDA  (Leverage  Ratio, as defined in the 2005
Credit Facility), as measured on a trailing four-quarters basis, of no more than
3.0 to 1.0.  Additionally,  the 2005 Credit  Facility  requires that the Company
maintain,  for each period of four consecutive fiscal quarters,  a minimum ratio
of Consolidated  EBITDA plus Consolidated Rent Expense to Consolidated  Interest
Expense plus  Consolidated Rent Expense (Fixed Charge Coverage Ratio, as defined
in the 2005 Credit  Facility) of at least 3.2 to 1.0. As of April 30, 2005,  the
Company's  Leverage Ratio was 2.2 to 1.0 and the Fixed Charge Coverage Ratio was
4.2 to 1.0, both in compliance with the requirements.

                                      -13-




No borrowings,  other than the issuance of trade and standby  letters of credit,
which  totaled  $149  million as of the end of the first  quarter of 2005,  have
been, or are expected to be, made under this facility.


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

Comprehensive Income/(Loss)

($ in millions)                                           13 weeks ended
                                                  -----------------------------
                                                      Apr. 30,          May 1,
                                                          2005           2004
                                                  --------------   ------------
Net income                                              $  172          $  41
Other comprehensive (loss)/income:
    Foreign currency translation adjustments                (1)            (1)
    Net unrealized gains/(losses)
    in real estate investment                               12            (12)
    trusts                                         ------------    ------------
                                                            11            (13)
                                                   ------------    ------------
Total comprehensive income                              $  183          $  28
                                                   ============    ============

Accumulated Other Comprehensive (Loss)/Income



                                                                                                      
($ in millions)                                                           Apr. 30,            May 1,          Jan. 29,
                                                                            2005               2004              2005
                                                                      ---------------    ---------------  --------------
Foreign currency translation adjustments (1)                                $ (105)          $ (116)           $ (104)
Net unrealized gains in real estate investment trusts (2)                       86               48                74
Non-qualified retirement plan minimum liability adjustment (3)                (102)             (82)             (102)
Other comprehensive (loss) from discontinued operations                          -               (1)(4)             -
                                                                      ---------------    ---------------  --------------
Accumulated other comprehensive (loss)                                      $ (121)          $ (151)           $ (132)
                                                                      ===============    ===============  ==============



(1)  A  deferred  tax  asset  has not  been  established  due to the  historical
     reinvestment of earnings in the Company's Brazilian subsidiary.

(2)  Shown net of a deferred tax  liability of $47 million,  $26 million and $41
     million  as  of  April  30,  2005,  May  1,  2004  and  January  29,  2005,
     respectively.

(3)  Shown net of a  deferred  tax asset of $66  million,  $52  million  and $66
     million  as  of  April  30,  2005,  May  1,  2004  and  January  29,  2005,
     respectively.

(4)  Shown net of a deferred tax asset of $1 million.


10)  Stock-Based Compensation
     ------------------------

In May 2001, the Company's  stockholders  approved the 2001 Equity  Compensation
Plan (2001 Plan), which initially reserved 16 million shares of common stock for
issuance,  plus 1.2 million shares  reserved but not subject to awards under the
Company's 1997 and 2000 equity plans.  No future grants are being made under the
1997 and 2000 plans.  The 2001 Plan provides for grants to associates of options
to purchase the Company's  common stock,  restricted  and  non-restricted  stock
awards  (shares  and units) and stock  appreciation  rights.  The 2001 Plan also
provides for grants of restricted  and  non-restricted  stock awards (shares and
units) and stock options to non-employee  members of the Board of Directors.  At
April 30, 2005,  2.8 million  shares of stock were  available for future grants.
Stock options and awards  typically vest over  performance  periods ranging from
one to five years.  The number of option shares is fixed at the grant date,  and
the exercise  price of stock options is generally set at the market price on the
date of grant.  The 2001 Plan  does not  permit  awarding  stock  options  below
grant-date market value.  Options have a maximum term of 10 years. Over the past
three years, the Company's

                                      -14-


annual stock option grants have averaged about 1.4% of total outstanding  stock.
The Company issues new shares upon the exercise of stock options.

The cost that has been charged against income for all  stock-based  compensation
was $22 million and $3 million for the quarters  ended April 30, 2005 and May 1,
2004, respectively.  The total income tax benefit recognized in the Consolidated
Statements  of  Operations  for  stock-based  compensation  arrangements  was $8
million  and $1 million for the first  quarters of 2005 and 2004,  respectively.
Compensation  cost for the first  quarter  of 2005  includes  $19  million  ($12
million after tax) of costs related to early-adopting SFAS No. 123R.

Stock Options
On April 30, 2005,  options to purchase 13.6 million shares of common stock were
outstanding.  If all options  were  exercised,  common stock  outstanding  would
increase by 5.1%.  As of the end of the first quarter of 2005,  8.5 million,  or
62% of the 13.6 million  outstanding  options,  were exercisable.  Of those, 6.3
million,  or 75%, were "in-the-money" or had an exercise price below the closing
stock price of $47.41 on April 30, 2005.

The following table summarizes stock options outstanding as of April 30, 2005 as
well as activity during the quarter then ended:


                                                                                                    

                                           Shares (in        Weighted-Average       Weighted-Average        Aggregate
                                             thousands)      Exercise Price            Remaining            Intrinsic
                                                                                    Contractual Term       Value ($ in
                                                                                       (in years)            millions)
                                         ----------------    ----------------       ------------------    --------------

Outstanding at January 30, 2005                  13,831               $  33
Granted                                           3,096                  45
Exercised                                        (2,848)                 26
Forfeited or expired                               (514)                 45
                                         ----------------
Outstanding at April 30, 2005                    13,565               $  36                   6.6            $  174
                                         ================    ================       ==================    ==============


Exercisable at April 30, 2005                     8,474               $  35                   5.0            $  133
                                         ================    ================       ==================    ==============



The  weighted-average  grant date fair value of stock options granted during the
quarters  ended  April 30,  2005 and May 1, 2004 was $12.81 and $8.43 per share,
respectively.  The total  intrinsic  value of  options  exercised  during  those
periods was $55 million and $104 million, respectively.

Net cash  proceeds  from the exercise of stock options were $75 million and $130
million for the quarters ended April 30, 2005 and May 1, 2004, respectively. The
actual tax benefit  realized  for tax  deductions  from stock  option  exercises
totaled $22 million and $40 million for those periods.

Stock Awards
As previously  indicated,  the 2001 Plan  provides for grants of restricted  and
non-restricted  stock awards (shares and units) to associates  and  non-employee
members of the Board of Directors.

                                      -15-





The following is a summary of the status of the Company's  associate  restricted
stock awards as of April 30, 2005 and activity during the quarter then ended:

(shares in thousands)
                                        Shares              Weighted-Average
                                                         Grant Date Fair Value
                                 -------------------    ----------------------

Nonvested at January 30, 2005              303                     $  32
Granted                                     37                        44
Vested                                      (1)                       19
Forfeited                                   (1)                       24
                                 -------------------
Nonvested at April 30, 2005                338                     $  33
                                 ===================

As of April 30, 2005,  there was $9 million of total  unrecognized  compensation
expense related to associate  restricted stock awards.  That cost is expected to
be recognized over a weighted-average period of 2.2 years.  Non-restricted stock
awards of 14 thousand  and 15 thousand  shares were  granted to  associates  and
expensed during the first quarters of 2005 and 2004, respectively.

Restricted stock awards for  non-employee  members of the Board of Directors are
expensed  when  granted.  These  awards  are not  transferable  until a director
terminates  services.  No such awards were granted in the first quarters of 2005
or 2004.

The total  compensation  cost for stock awards was $3 million for both the first
quarter of 2005 and the first quarter of 2004.


11)  Retirement Benefit Plans
     --------------------------

Net Periodic Benefit Cost/(Credit)
The  components  of net periodic  benefit  cost/(credit)  for the  qualified and
non-qualified  pension plans and the postretirement plans for the 13 weeks ended
April 30, 2005 and May 1, 2004 follow:




                                                                                             

                                                         Pension Plans
                                     -------------------------------------------------------

                                               Qualified                 Supplemental             Postretirement
                                                                        (Non-Qualified)                 Plans
                                     --------------------------- --------------------------- ---------------------------

($ in millions)                              13 weeks ended             13 weeks ended            13 weeks ended
                                     --------------------------- --------------------------- ---------------------------
                                              Apr. 30,      May 1,      Apr. 30,    May 1,       Apr. 30,      May 1,
                                                2005         2004          2005      2004           2005         2004
                                     --------------------------- --------------------------- ---------------------------
Service cost                                  $  20        $  14          $  1        $  1          $   1       $   1

Interest cost                                    45           33             5           4              2           2

Expected return on plan assets                  (73)         (48)            -           -              -           -
Net amortization                                 23           18             3           1             (5)         (5)
                                     --------------------------- --------------------------- ---------------------------
Net periodic benefit cost/(credit)            $  15        $  17          $  9        $  6          $  (2)      $  (2)
                                     =========================== =========================== ===========================


Employer Contributions
As  previously  disclosed  in the 2004 10-K,  the Company  does not expect to be
required to make a contribution to its qualified plan in 2005 under the Employee
Retirement  Income  Security Act of 1974.

                                      -16-


It may decide to make a discretionary contribution, however, depending on market
conditions and the resulting funded status of the plan.


12)  Real Estate and Other (Income)/Expense
     ---------------------------------------


($ in millions)                                         13 weeks ended
                                                 -----------------------------
                                                 Apr. 30, 2005   May 1, 2004
                                                 --------------  -------------
Real estate activities                                 $  (9)          $ (7)
Net gains from sale of real estate                       (14)            (2)
Asset impairments, PVOL and other unit
closing costs                                              1              1
                                                 --------------  -------------
     Total                                             $ (22)          $ (8)
                                                 ==============  =============


Real estate  activities  consist  primarily  of income from the  Company's  real
estate  subsidiaries.  Net real  estate  gains  were  recorded  from the sale of
facilities that are no longer used in Company operations.  For the first quarter
of 2005,  the gain from the sale of real estate was primarily from the sale of a
vacant merchandise processing facility that was made obsolete by the centralized
network of store distribution centers put in place by mid-2003.

Asset  impairments,  the present value of remaining  operating lease obligations
(PVOL)  and other unit  closing  costs  totaled  $1  million  for both the first
quarter of 2005 and the first quarter of 2004,  consisting primarily of PVOL for
closed stores.


13)  Guarantees
     -----------

As of April  30,  2005,  JCP had  guarantees  totaling  $76  million,  which are
described  in detail in the 2004 10-K.  These  guarantees  include:  $18 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;  $28 million for
certain personal property leases assumed by the purchasers of Eckerd, which were
previously  reported as  operating  leases;  and $10 million  related to certain
leases for stores that were sold in 2003,  which is recorded in Accrued Expenses
and Other.  Subsequent to April 30, 2005, the guarantee  related to the personal
property leases assumed by the purchasers of Eckerd was reduced by $6 million.


14)  Subsequent Events
     -----------------

Common Stock Repurchases
From May 1, 2005 through June 7, 2005, the Company repurchased an additional 3.9
million shares of common stock at a cost of approximately $202 million, bringing
the total repurchases for the capital structure  repositioning  programs to date
up to 61.7  million  shares  at a cost of  approximately  $2,514  million.  This
represents approximately 67% of the total planned common stock repurchases under
the programs.

                                      -17-





Repayment of Debt
In May 2005,  the Company paid the $193 million of JCP's 7.05% Notes Due 2005 at
the scheduled maturity date. This payment marked the completion of the Company's
planned debt reduction under the 2004 capital structure  repositioning  program.
The Company also purchased $21 million  principal amount of its debt on the open
market from May 1, 2005 through  June 7, 2005 under the 2005  capital  structure
repositioning program.

2005 Equity Compensation Plan
At the May 20, 2005 Annual Meeting, the Company's stockholders approved the 2005
Equity  Compensation  Plan (2005 Plan),  which  reserves 14.4 million  shares of
common stock for issuance to certain associates and non-employee directors, plus
up to 2.8 million shares reserved but not subject to awards under the 2001 Plan.
The 2005 Plan provides for grants to  associates of options to purchase  Company
common stock,  restricted and non-restricted stock awards (shares and units) and
stock appreciation  rights. The 2005 Plan also provides for grants of restricted
and  non-restricted  stock  awards  (shares  and  units)  and stock  options  to
non-employee  members of the Board of Directors.  The effective date of the 2005
Plan is June 1, 2005.

Lojas Renner S.A.
On May 9, 2005, the Company  announced  that,  through an indirect  wholly owned
subsidiary,  it has filed with the Brazilian Securities  Commission  preliminary
offering  materials  that  would  allow  the  sale  of all or a  portion  of its
controlling  interest in the  Brazilian  department  store Lojas Renner S.A., as
part of a primary and  secondary  offering of common shares of Lojas Renner S.A.
Any offering would be registered in Brazil.

                                      -18-






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

The following  discussion,  which presents the results of J. C. Penney  Company,
Inc.  and  its  subsidiaries  (the  Company  or  JCPenney),  should  be  read in
conjunction with the Company's  consolidated  financial statements as of January
29, 2005, and the year then ended, and  Management's  Discussion and Analysis of
Financial  Condition and Results of Operations,  both contained in the Company's
Annual  Report on Form  10-K for the year  ended  January  29,  2005 (the  "2004
10-K").

This  discussion  is intended to provide the reader with  information  that will
assist in  understanding  the  Company's  financial  statements,  the changes in
certain key items in those financial  statements from period to period,  and the
primary factors that accounted for those changes,  how operating  results affect
the financial  condition and results of operations of the Company as a whole, as
well  as how  certain  accounting  principles  affect  the  Company's  financial
statements.

Certain debt securities were issued by J. C. Penney Corporation, Inc. (JCP), the
wholly owned  operating  subsidiary of the Company.  The 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 Company of certain of
JCP's outstanding debt securities is full and unconditional.


Key Items
---------

o    Income from continuing  operations  increased to $172 million, or $0.63 per
     share,  compared to $118 million,  or $0.38 per share,  for the  comparable
     2004 period.  This  represents an increase of 66% on a per share basis from
     the first quarter of 2004.  Net income per share  increased to $0.63 in the
     first quarter of 2005, compared to $0.13 in the comparable 2004 period. Net
     income for the first quarter of 2005 reflects the impact of  early-adopting
     Statement  of  Financial  Accounting  Standards  No.  123  (revised  2004),
     "Share-Based  Payment,"  (SFAS No. 123R),  which  resulted in  compensation
     expense of $19 million ($12 million  after tax),  or about $0.05 per share.
     Net income in the first quarter of 2004 reflected  after-tax charges of $77
     million, or $0.25 per share, related to the Eckerd discontinued operations.
     All references to earnings per share (EPS) are on a diluted basis.

o    Comparable  department  store sales increased by 3.0% for the first quarter
     of  2005,  on  top  of a  9.5%  increase  in  last  year's  first  quarter.
     Catalog/Internet  sales  increased 5.4% for the first quarter of 2005, with
     the Internet  channel  increasing  approximately  35%. In last year's first
     quarter,  Catalog/Internet  sales increased 6.5%, with Internet  increasing
     approximately 45%.

o    Operating  profit,  as  defined on page 21,  was $313  million,  or 7.5% of
     sales,  compared  with $229  million,  or 5.7% of sales,  last  year.  This
     represents an increase of nearly 37% on a dollar basis, or 180 basis points
     as a percent of sales.

o    In April 2005,  senior  management  announced  the  Company's new 2005-2009
     Long-Range Plan. The plan builds on the Company's  accomplishments over the
     past four years, and includes strategies,  initiatives and execution points
     focused on the vision of making JCPenney the preferred  shopping choice for
     middle  America,   while  attaining  a  leadership  position  in  financial
     performance  within the  department  store sector.  The four key strategies
     include:  making  an  emotional  connection  with  the  JCPenney  customer,
     creating an easy and exciting  shopping  environment,  becoming a leader in
     performance  and  execution,  and making  JCPenney  a great  place to work.
     Several  long-range  financial  objectives  have  been  established,  which
     include:   having  low  single-digit   comparable  department  store  sales
     increases and low-to-mid single-digit Catalog/Internet sales increases each
     year,  continuing to improve  annual gross margin to more than 39% of sales
     by fiscal 2009 and continuing to reduce and

                                      -19-




     leverage selling,  general and  administrative  expenses to a level that is
     less than 30% of sales by fiscal  2009,  ultimately  achieving a 9% to 9.5%
     operating profit margin in fiscal 2009.

o    During the first quarter of 2005, the Company's Board of Directors approved
     an additional $750 million of common stock  repurchases and $250 million of
     debt reductions.

o    The Company  ended the first  quarter of 2005 with $4.1 billion of cash and
     short-term investments. The Company is progressing on its capital structure
     repositioning  programs and  accomplished  the  following  during the first
     quarter:

     o    The repurchase of 7.7 million shares of common stock for approximately
          $360 million; and

     o    The purchase of $194 million principal amount of the Company's debt on
          the open market.

o    On April 7,  2005,  the  Company  entered  into a  five-year  $1.2  billion
     unsecured  revolving  credit  facility,  which  replaces the Company's $1.5
     billion credit facility that was scheduled to expire in May 2005.

o    On March 8, 2005, Standard & Poor's raised its credit rating outlook on the
     Company from "Stable" to "Positive."  On April 7, 2005,  Moody's raised its
     senior unsecured credit rating for the Company from Ba2 to Ba1, the highest
     non-investment grade rating, citing the Company's new credit facility.


Discontinued Operations
------------------------

As  previously  reported,  on July 31,  2004,  the  Company  and  certain of its
subsidiaries closed on the sale of its Eckerd drugstore  operations and received
gross cash proceeds of approximately $4.7 billion. Net proceeds from the sale of
approximately  $3.5 billion are being used for common stock repurchases and debt
reduction,  as announced in August 2004, and more fully  discussed under Capital
Structure Repositioning on pages 27-28.

The loss on the sale was $713 million pre-tax, or $1,433 million on an after-tax
basis. The relatively high tax cost is a result of the tax basis of Eckerd being
lower than its book basis because the Company's previous drugstore  acquisitions
were largely  tax-free  transactions.  Of the total  after-tax loss on the sale,
$1,325  million was  recorded in 2003 to reflect  Eckerd at its  estimated  fair
value  less  costs to sell.  During  the  first  and  second  quarters  of 2004,
after-tax losses of $77 million and $31 million, respectively,  were recorded to
reflect  revised  estimates of certain  post-closing  adjustments  and resulting
sales proceeds.

The Company  established  reserves at July 31,  2004 for  estimated  transaction
costs  and  post-closing   adjustments.   Certain  of  these  reserves  involved
significant  judgment and actual costs  incurred over time could vary from these
estimates.  The  more  significant  estimates  relate  to  the  working  capital
adjustment, the costs to exit the Colorado and New Mexico markets, assumption of
the Eckerd  Pension Plan and various  post-employment  benefit  obligations  and
environmental  indemnifications.  Management is currently  negotiating with both
CVS and Coutu  regarding  the  working  capital  adjustment  as  required in the
respective  sale  agreements.  Management  continues  to review  and  update the
reserves on a quarterly  basis.  While  adjustments have been made to individual
reserves,  management  believes that, in total,  the reserves remain adequate at
the end of the first  quarter  of 2005.  Cash  payments  for the  Eckerd-related
reserves are included in the Company's Consolidated  Statements of Cash Flows as
Cash Paid to Discontinued Operations.

                                      -20-




Results of Operations
---------------------

The following discussion and analysis,  consistent with all other financial data
throughout  this  report,  focuses on the results of  operations  and  financial
condition from the Company's continuing operations.

($ in millions, except EPS)                               13 weeks ended
                                                  -----------------------------
                                                      Apr. 30,           May 1,
                                                         2005             2004
                                                  -------------  --------------
Retail sales, net                                     $ 4,192          $ 4,033
                                                  -------------  --------------
Gross margin                                            1,729            1,615
SG&A expenses                                           1,416            1,386
                                                  -------------  --------------
Operating profit                                          313              229
Net interest expense                                       53               57
Bond premiums and unamortized costs                        13                -
Real estate and other (income)                            (22)              (8)
                                                  -------------  --------------
Income from continuing operations
    before income taxes                                   269              180
Income tax expense                                         97               62
                                                  -------------  --------------
Income from continuing operations                       $ 172           $  118
                                                  =============  ==============


Diluted EPS from continuing operations                 $ 0.63           $ 0.38

Ratios as a percent of sales:
    Gross margin                                         41.3%            40.1%
    SG&A expenses                                        33.8%            34.4%
    Operating profit                                      7.5%             5.7%

Depreciation and amortization included
in operating profit                                     $  90            $  87

The Company continued to improve its  profitability  during the first quarter of
2005 as reflected in income from continuing operations of $172 million, or $0.63
per share, compared to $118 million, or $0.38 per share, for the comparable 2004
period.  The increase over 2004 reflects improved  operating  profit,  resulting
from  continued  improvement in sales  productivity,  growth in gross margin and
leveraging of selling, general and administrative (SG&A) expenses.  Earnings per
share also  benefited  from the Company's  ongoing stock buyback  programs.  The
Company currently expects second quarter earnings from continuing  operations to
range from $0.25 to $0.30 per share,  and full-year  earnings to be in the range
of $2.96 to $3.08 per share.

Operating Profit
-----------------

Operating profit for the first quarter of 2005 increased 37% to $313 million, or
7.5% of sales,  compared to $229 million,  or 5.7% of sales,  for the comparable
period last year.

Operating profit and its components  (sales,  gross margin and SG&A) are the key
measurements  on which  management  evaluates the financial  performance  of the
retail operations. Real estate activities,  gains and losses on the sale of real
estate  properties,  asset impairments and other charges associated with closing
store and catalog facilities are evaluated  separately from operations,  and are
recorded in Real Estate and Other in the Consolidated Statements of Operations.

                                      -21-




Retail Sales, Net

($ in millions)
                                                       13 weeks ended
                                           ------------------------------------
                                                  Apr. 30,           May 1,
                                                     2005             2004
                                           -------------------   --------------
Retail sales, net                                 $ 4,192          $ 4,033
                                           -------------------   --------------
Sales percent increase:
  Comparable stores (1)                               3.0%             9.5%
  Total department stores                             3.7%             9.2%
  Catalog/Internet                                    5.4%             6.5%

(1)  Comparable  store sales  include sales of stores after having been open for
     12  full  consecutive  fiscal  months.  New  and  relocated  stores  become
     comparable on the first day of the 13th full fiscal month.

Comparable  department store sales increased 3.0% for the quarter,  representing
the eighth  consecutive  quarter with a comparable  store sales increase.  Total
department  store sales increased 3.7% for the quarter.  These increases were on
top of first quarter 2004 increases of 9.5% for comparable  store sales and 9.2%
for total  department store sales.  First quarter sales reflect  improvements in
all  merchandise   divisions  and  across  all  regions  of  the  country,  good
sell-through in both fashion and basic merchandise and strong sales gains in the
Company's key private brands.  Department  store sales have continued to benefit
from  positive  customer  response to the style,  quality,  selection  and value
offered in the Company's merchandise assortments,  compelling marketing programs
and continued  improvement  in the store shopping  experience. 

Catalog/Internet  sales increased 5.4% for the first quarter of 2005,  driven by
an  approximate  35% increase in Internet  sales.  In last year's first quarter,
Catalog/Internet  sales increased 6.5%, with Internet  increasing  approximately
45%.  Sales  continue  to reflect a focus on  targeted  specialty  media and the
expanded  assortments and convenience of the Internet,  which is attracting new,
younger customers.

The Company  continues to edit its merchandise  assortments to help ensure it is
meeting the needs and wants of its targeted moderate customer.  The Chris Madden
for JCPenney Home Collection, originally launched in the second quarter of 2004,
continues to perform well and is being expanded with new furniture,  bedding and
window covering collections.  In the first quarter of 2005, the Company launched
nicole by Nicole  Miller,  and W-work to weekend,  an extension of the Company's
Worthington private brand.  Management is pleased with initial customer response
and early sales results for both of these new dressy casual brands for women.

Gross Margin
Gross  margin  improved  120 basis  points as a percent of sales in this  year's
first quarter to $1,729  million  compared to $1,615  million in the  comparable
2004 period.  The continued  improvement  reflects better inventory  management,
good seasonal transition,  better timing of clearance markdowns,  consistency of
execution and  continuing  benefits from the  centralized  merchandising  model.
Benefits of the centralized  model,  which was substantially in place by the end
of 2004, have included enhanced merchandise  offerings,  an integrated marketing
plan,  leverage  in the  buying and  merchandising  process  and more  efficient
selection and allocation of merchandise to individual  department stores.  Gross
margin  also  reflects   initial  benefits  from  the  Company's  new  planning,
allocation and replenishment  systems,  which were rolled out in the latter part
of 2004.


                                      -22-


SG&A Expenses
SG&A  expenses in this year's  first  quarter  were $1,416  million  compared to
$1,386  million in last year's  first  quarter.  Expenses  continued  to be well
leveraged,  improving by 60 basis points as a percent of sales.  The improvement
reflects  savings in labor  costs,  centralized  store  expense  management  and
planned   savings  from  the  Company's   previously   announced   cost  savings
initiatives,  offset to some extent by the impact of  expensing  employee  stock
options  starting in the first  quarter of 2005.  First  quarter  SG&A  expenses
include  approximately  $19  million,  or about $0.05 per share,  related to the
expensing of employee  stock  options.  The  full-year  2005 impact of expensing
stock-based  awards  is  expected  to  total   approximately  $33  million,   or
approximately $0.08 per share.

The  Company  has  focused  on  consistent  execution  and  sustained  operating
performance in a centralized environment, with improved merchandise offerings, a
more  integrated  and  powerful  marketing  message  and  better  leveraging  of
expenses.  The  Company's  previously  stated  financial  goal  was to  generate
operating  profit of 6% to 8% of sales by 2005.  This goal was  reached in 2004,
when the Company hit the  mid-point  of this range one year ahead of plan.  With
the new 2005-2009 Long-Range Plan announced in April 2005, which is discussed on
pages 19-20, the Company has established a goal to generate  operating profit of
9% to 9.5%  of  sales  in  2009.  The  Company's  financing  strategy  and  risk
management are detailed in its 2004 Annual Report.


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

Net interest  expense was $53 million and $57 million for the first  quarters of
2005 and 2004, respectively.  Net interest expense benefited from an increase in
interest income  resulting from larger average  short-term  investment  balances
coupled with higher  short-term  interest  rates,  as well as the Company's debt
reduction  programs.  In last year's first quarter,  $44 million of net interest
expense  was   attributed  to  Eckerd  that  is  now  attributed  to  continuing
operations.  Since the initiation of the debt reduction  programs in 2004,  $1.9
billion of long-term debt had been retired through the first quarter of 2005.


Bond Premiums and Unamortized Costs
-----------------------------------

During the first  quarter of 2005,  the  Company  incurred  $13  million of bond
premiums,  commissions and unamortized  costs related to the purchase of debt in
the open  market  under  the  capital  structure  repositioning  plan,  which is
discussed on pages  27-28.  Management  currently  expects  full-year  2005 bond
premiums,  commissions and unamortized costs to total approximately $20 million,
the  remaining  $7 million of which is  expected  to be  incurred  in the second
quarter.


Real Estate and Other (Income)
------------------------------

Real Estate and Other  (Income)  consists of real estate  activities,  gains and
losses  on the sale of real  estate  properties,  asset  impairments  and  other
charges  associated with closing store and catalog  facilities.  Real Estate and
Other for the first quarter of 2005  resulted in a credit of $22 million,  which
consisted  of a $9 million  credit for real  estate  operations,  $14 million of
gains on the sale of closed  units,  primarily a vacant  merchandise  processing
facility,  and $1 million of costs  related to asset  impairments,  the  present
value of operating lease obligations (PVOL) and other costs of closed stores.

                                      -23-


For the first  quarter  of 2004,  Real  Estate  and Other was a net credit of $8
million,  which consisted of a $7 million credit for real estate operations,  $2
million of gains on the sale of closed units and $1 million of costs  related to
PVOL for closed stores.


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

The Company's effective income tax rate for continuing  operations was 36.0% for
the first quarter of 2005 compared with 34.5% for the first quarter of 2004. The
rate  increase  is  primarily  due to improved  earnings,  which  decreased  the
favorable  impact  of  permanent  adjustments,  principally  the  deduction  for
dividends paid to the Company's savings plan.  Additionally,  this deduction for
dividends paid  decreased due to the  redemption,  through  conversion to common
stock, of all shares of the Series B ESOP  Convertible  Preferred Stock that had
been held by the savings plan, which occurred in the third quarter of 2004.


Merchandise Inventory
---------------------

Merchandise  inventory  was $3,293  million at April 30, 2005 compared to $3,338
million at May 1, 2004 and $3,169  million at January 29, 2005.  With a decrease
of 1.3% compared to last year, inventory at the end of the first quarter of 2005
was in line with plan,  was well  managed  and  reflected a good  balance  among
seasonal,  basics and key items with less  clearance.  Using new systems and the
network of store distribution  centers, the Company has continued to enhance its
ability to allocate and flow  merchandise  to stores  in-season  by  recognizing
sales trends earlier and accelerating receipts,  replenishing  individual stores
based on rates of sale and consistently providing high in-stock levels in basics
and advertised  items.  This continued  improvement of inventory  management has
helped to drive more profitable sales.


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

The Company ended the first quarter with  approximately $4.1 billion in cash and
short-term  investments  and  approximately  $3.7  billion  of  long-term  debt,
including  current  maturities.   Cash  and  short-term   investments   included
restricted  short-term  investment balances of $64 million as of April 30, 2005,
which are pledged as collateral for a portion of casualty  program  liabilities.
During the  remainder  of 2005,  the  Company  plans to use  approximately  $1.7
billion of cash to complete the capital structure repositioning programs,  which
include  $1,438  million of common  stock  repurchases  and $249 million of debt
retirements.  See pages 27-28 for additional information related to the progress
of the Company's capital structure repositioning programs.

On April 7, 2005,  the  Company,  JCP and J. C.  Penney  Purchasing  Corporation
entered into a five-year  $1.2 billion  revolving  credit  facility (2005 Credit
Facility)  with a  syndicate  of lenders  with  JPMorgan  Chase Bank,  N.A.,  as
administrative  agent.  The 2005 Credit  Facility  replaces the  Company's  $1.5
billion  credit  facility  that was  scheduled  to expire in May 2005.  The 2005
Credit  Facility  is  unsecured,  and all  collateral  securing  the  previously
existing  $1.5  billion  credit  facility  has been  released.  The 2005  Credit
Facility is available for general corporate purposes,  including the issuance of
letters of credit.  Pricing  under the 2005 Credit  Facility is tiered  based on
JCP's senior unsecured  long-term debt ratings by Moody's and Standard & Poor's.
Obligations under the 2005 Credit Facility are guaranteed by the Company.

The 2005 Credit Facility includes a requirement that the Company maintain, as of
the  last  day  of  each  fiscal  quarter,  a  maximum  ratio  of  total  Funded
Indebtedness  to  Consolidated  EBITDA  (Leverage  Ratio, as defined in the 2005
Credit Facility), as measured on a trailing four-quarters basis, of no more than
3.0


                                      -24-



to 1.0.  Additionally,  the 2005  Credit  Facility  requires  that  the  Company
maintain,  for each period of four consecutive fiscal quarters,  a minimum ratio
of Consolidated  EBITDA plus Consolidated Rent Expense to Consolidated  Interest
Expense plus  Consolidated Rent Expense (Fixed Charge Coverage Ratio, as defined
in the 2005 Credit  Facility) of at least 3.2 to 1.0. As of April 30, 2005,  the
Company's  Leverage Ratio was 2.2 to 1.0 and the Fixed Charge Coverage Ratio was
4.2 to 1.0, both in compliance with the requirements.

Cash Flows
The following is a summary of the Company's cash flows from operating, financing
and investing activities:

                                                                                  
($ in millions)
                                                                         13 weeks ended
                                                                 -------------------------------
                                                                      Apr. 30,           May 1,
                                                                         2005             2004
                                                                 -------------     -------------
Net cash provided by/(used in):
  Operating activities                                                  $  12            $ (20)
  Investing activities                                                    (83)             (45)
  Financing activities                                                   (399)             109
  Cash (paid to) discontinued operations                                  (70)             (11)
                                                                 -------------     -------------
Net (decrease)/increase in cash and cash equivalents                   $ (540)           $  33
                                                                 =============     =============



Cash Flow from Operating Activities
The  improvement in net cash provided  by/(used in) operating  activities in the
first  quarter  of 2005  compared  with the same  period  in 2004 was  primarily
attributable to improved operating performance and better inventory management.

Cash Flow from Investing Activities
Capital  expenditures  were $99 million for the first  quarter of 2005  compared
with $64 million for the comparable  2004 period.  Capital  spending was for new
stores,  store  renewals and  modernizations  and initial  costs  related to new
point-of-sale  technology.  During the first quarter of 2005, the Company opened
one new store and two  relocated  stores.  Management  continues to expect total
capital expenditures for the full year to be in the area of $700 million.

Proceeds  from the sale of closed  units were $16  million  for the first  three
months of 2005 compared with $19 million for the comparable 2004 period.

Cash Flow from Financing Activities
During the first  quarter of 2005,  the Company cash settled $125 million of the
$194 million  principal  amount of its outstanding debt purchased in open-market
transactions under the capital structure  repositioning plan, which is discussed
on pages 27-28.  Premiums and  commissions  paid by the Company related to these
purchases  were $11 million.  Due to the customary  practice of cash  settlement
occurring three days after the trade date, $69 million  principal  amount of the
purchases were cash settled in the first week of the second quarter.

The Company  repurchased  7.7 million  shares of common stock for  approximately
$360 million  during the first quarter of 2005, $93 million of which was settled
after the end of the quarter. In addition, approximately $51 million of cash was
paid during the first quarter of 2005 for settlement of 2004 share  repurchases.
Common stock is retired on the same day it is  repurchased  and the related cash
settlements are completed on the third business day following the repurchase. No
common stock repurchases were made

                                      -25-




during the first  quarter  of 2004.  Net  proceeds  from the  exercise  of stock
options were approximately $75 million and $130 million for the first quarter of
2005 and 2004, respectively.

Quarterly dividends of $0.125 per share, or approximately $35 million, were paid
on the Company's outstanding common stock on February 1, 2005 to stockholders of
record on January 10, 2005. The payment of common stock  dividends is subject to
approval by the Company's Board of Directors.

For the remainder of 2005,  management  believes that cash flow  generated  from
operations,  combined  with existing cash and  short-term  investments,  will be
adequate to execute the common stock repurchase and debt reduction  programs and
fund capital expenditures, working capital and dividend payments and, therefore,
no external funding will be required.  At the present time,  management does not
expect  to  access  the  capital  markets  for any  external  financing  for the
remainder  of 2005.  However,  the Company may access the capital  markets on an
opportunistic  basis.  Management believes that the Company's financial position
will  continue to provide the  financial  flexibility  to support its  strategic
plan.  The Company's  cash flows may be impacted by many factors,  including the
competitive  conditions in the retail  industry,  and the effects of the current
economic  environment  and  consumer  confidence.  Based  on the  nature  of the
Company's business, management considers the above factors to be normal business
risks.

On March 8, 2005,  Standard & Poor's  raised  its credit  rating  outlook on the
Company from "Stable" to "Positive." On April 7, 2005, Moody's raised its senior
unsecured   credit  rating  for  the  Company  from  Ba2  to  Ba1,  the  highest
non-investment grade rating, citing the Company's new credit facility.

Additional  liquidity  strengths  include the new $1.2 billion  credit  facility
discussed  previously.  No  borrowings,  other  than the  issuance  of trade and
standby letters of credit, which totaled $149 million as of the end of the first
quarter of 2005, have been, or are expected to be, made under this facility.

Free Cash Flow
In addition to cash flow from operating  activities,  management  also evaluates
free cash flow from continuing  operations,  an important financial measure that
is widely focused upon by investors,  the rating  agencies and banks.  Free cash
flow from  continuing  operations  is  defined  as cash  provided  by  operating
activities  less  dividends and capital  expenditures,  net of proceeds from the
sale of assets. The Company's calculation of free cash flow may differ from that
used by other companies and therefore  comparability may be limited.  While free
cash flow is a non-GAAP financial measure,  it is derived from components of the
Company's  consolidated GAAP cash flow statement.  Management believes free cash
flow from  continuing  operations  is  important  in  evaluating  the  Company's
financial  performance  and  measuring  the  ability to  generate  cash  without
incurring additional external financing.

Through the first quarter of 2005, free cash flow from continuing operations was
a  deficit  of $106  million,  compared  to a  deficit  of $99  million  for the
comparable  2004  period.  The small  decrease  in free cash flow was due to the
planned  increase in capital  expenditures,  partially offset by better earnings
and  inventory  leverage.  The Company  expects to generate  approximately  $100
million of positive free cash flow for the full year of 2005.

                                      -26-





The  following  table  reconciles  net  cash  provided  by/(used  in)  operating
activities  (GAAP)  to free cash flow from  continuing  operations  (a  non-GAAP
measure) for the 13 weeks ended April 30, 2005 and May 1, 2004:


                                                                                              

($ in millions)                                                                  13 weeks ended
                                                                       ------------------------------------
                                                                        Apr. 30, 2005          May 1, 2004
                                                                       ----------------    ----------------
Net cash provided by/(used in) operating activities - (GAAP)                  $  12                 $ (20)
Less:
   Capital expenditures                                                         (99)                  (64)
   Dividends paid                                                               (35)                  (34)
Plus:
   Proceeds from sale of assets                                                  16                    19
                                                                       ----------------    ----------------
Free cash flow from continuing operations                                     $(106)                $ (99)
                                                                       ================    ================


Capital Structure Repositioning
--------------------------------

In August 2004, the Company  initiated a major equity and debt reduction program
focused on enhancing stockholder value,  strengthening the capital structure and
improving the credit rating  profile.  On March 18, 2005,  the JCPenney Board of
Directors  authorized  additional common stock repurchases and debt retirements.
The Company is using the $3.5 billion in net cash  proceeds from the sale of the
Eckerd drugstore operations and existing cash and short-term investment balances
to fund the programs.  The  programs,  which are expected to be completed by the
end of fiscal 2005, consist of the following:

Common Stock Repurchases
------------------------

The  Company  is  executing  common  stock  repurchase  programs  of up to $3.75
billion,  including $3.0 billion  authorized in 2004 and $750 million authorized
in 2005. Share repurchases have been and will continue to be made in open-market
transactions,  subject  to  market  conditions,  legal  requirements  and  other
factors.  During the first quarter of 2005, the Company  repurchased and retired
7.7 million  shares of common  stock at a cost of  approximately  $360  million,
bringing  the total  purchases  up to date under the  programs  to 57.8  million
shares of common stock at a cost of approximately $2.3 billion.  This represents
approximately   60%  of  the  planned   repurchases.   As  of  April  30,  2005,
approximately  $1.4  billion  remained  authorized  under the programs for share
repurchases.

From May 1, 2005 through June 7, 2005, the Company repurchased an additional 3.9
million shares of common stock at a cost of approximately $202 million, bringing
the total repurchases for the capital structure  repositioning  programs to date
up to 61.7 million shares at a cost of approximately $2,514 million.

Debt Reduction
---------------

The  Company's  debt  reduction  programs  currently  consist  of  planned  debt
retirements of $2.13 billion,  including  approximately $1.88 billion authorized
in 2004 and $250 million  authorized in 2005. JCP's $400 million 7.4% Debentures
Due 2037,  which were subject to  redemption  at the option of the holders,  had
initially  been  included in the 2004  program,  but upon  expiration of the put
option on March 1, 2005,  virtually all of the holders extended their debentures
to the stated 2037 maturity date.

By the end of the  first  quarter  of 2005,  the  Company  had  reduced  debt by
approximately   $1.9  billion,   including  $194  million  of  open-market  debt
repurchases completed in the first quarter, and 2004 transactions that consisted
of $650 million of debt converted to common stock, $822 million of cash

                                      -27-



payments and the termination of the $221 million Eckerd securitized  receivables
program.  The  Company  incurred  pre-tax  charges  of $13  million in the first
quarter  related  to these  early debt  retirements.  As of the end of the first
quarter, $56 million of authorized open-market debt purchases remained under the
2005 program.  The Company expects to incur pre-tax charges of  approximately $7
million  in  the  second  quarter  of  2005  related  to the  remaining  planned
open-market debt retirements.  During the third and fourth quarters of 2004, the
Company  incurred  total  pre-tax  charges of $47 million  related to early debt
retirements.

Subsequent to the end of the first quarter,  the Company retired $193 million of
long-term  debt in May 2005 at the  scheduled  maturity  date and  purchased  an
additional $21 million principal amount of its debt on the open market.

Series B Convertible Preferred Stock Redemption
-----------------------------------------------

On August 26, 2004, the Company  redeemed,  through  conversion to common stock,
all of its  outstanding  shares of  Series B ESOP  Convertible  Preferred  Stock
(Preferred   Stock),   all  of  which  were  held  by  the  Company's   Savings,
Profit-Sharing  and Stock  Ownership Plan, a 401(k) savings plan. Each holder of
Preferred Stock received 20 equivalent  shares of JCPenney common stock for each
one share of Preferred  Stock in their Savings Plan account in  accordance  with
the original terms of the Preferred  Stock.  Preferred Stock shares,  which were
included in the diluted  earnings per share  calculation  as  appropriate,  were
converted into approximately  nine million common stock shares.  Annual dividend
savings will approximate $11 million after tax.

Common Stock Outstanding
During the first three months of 2005,  common stock  outstanding  decreased 4.8
million  shares  to 266.6  million  shares  from  271.4  million  shares  at the
beginning of the year.  The decline in  outstanding  shares is  attributable  to
approximately  eight million shares  repurchased and retired partially offset by
approximately three million shares issued due to the exercise of stock options.


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

As discussed in the 2004 10-K,  prior to fiscal year 2005, the Company  followed
Accounting  Principles Board Opinion (APB) No. 25,  "Accounting for Stock Issued
to Employees," which did not require expense  recognition for stock options when
the exercise price of an option equaled,  or exceeded,  the fair market value of
the common stock on the date of grant.  Effective  January 30, 2005, the Company
early-adopted SFAS No. 123R, which requires the use of the fair value method for
accounting  for stock  options.  The  statement  was adopted  using the modified
prospective method of application.  Under this method, in addition to reflecting
compensation  expense for new share-based awards,  expense is also recognized to
reflect  the  remaining  vesting  period of  awards  that had been  included  in
pro-forma  disclosures  in prior periods.  Accordingly,  in the first quarter of
2005,  the Company  recorded  compensation  expense of $19 million  ($12 million
after  tax),  reflecting  the  requirements  of the  final  accounting  rules to
recognize compensation expense over the employee service period, which is to the
earlier of the retirement  eligibility  date or the normal vesting period.  This
resulted  in a  reduction  in diluted  earnings  per share of about  $0.05.  The
Company  currently expects total  compensation  expense related to stock options
for  full-year  2005 of  approximately  $33 million ($21 million  after tax), or
approximately $0.08 per share.

Prior to fiscal year 2005,  the Company  used the  Black-Scholes  option-pricing
model to  estimate  the grant date fair value of its stock  option  awards.  For
grants  subsequent to the adoption of SFAS No. 123R,  the Company  estimates the
fair value of stock option awards on the date of grant using a binomial  lattice
model.  The Company  believes that the binomial lattice model is a more accurate
model for valuing  employee stock options since it better reflects the impact of
stock price changes on option exercise behavior.

                                      -28-



The  expected  volatility  used in the  binomial  lattice  model  is based on an
analysis of  historical  prices of  JCPenney's  stock and open market  exchanged
options,  and was developed in consultation with an outside valuation specialist
and the  Company's  financial  advisors.  The expected  volatility  reflects the
volatility  implied  from a price quoted for a  hypothetical  call option with a
duration  consistent  with the expected life of the options,  and the volatility
implied by the trading of options to purchase the Company's stock on open-market
exchanges.  As a result of the Company's turnaround over the past four years and
the disposition of the Eckerd drugstore operations, a significant portion of the
historical  volatility  is not  considered  to be a  good  indicator  of  future
volatility.  The  expected  term  of  options  granted  is  based  primarily  on
historical exercise patterns, but also incorporates an early exercise assumption
in the event of a significant  increase in stock price.  The  risk-free  rate is
based on zero-coupon  U.S.  Treasury  yields in effect at the date of grant with
the same period as the expected  option life.  The dividend  yield is assumed to
increase  ratably  to the  Company's  expected  dividend  yield  level  based on
targeted  payout  ratios  over the  expected  life of the  options.  The  option
cancellation  assumption,  which impacts the total expense recognized as opposed
to the fair value of the award, takes into account historical patterns, adjusted
to reflect the Company's turnaround efforts.

The Company has not adjusted prior year financial  statements under the optional
modified  retrospective  method of adoption,  but has  disclosed  the  pro-forma
impact of expensing  stock options on the first quarter of 2004 in Note 1 to the
Unaudited Interim Consolidated Financial Statements.


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;  valuation of  long-lived  assets;  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 2004 10-K includes  detailed  descriptions of
certain  judgments that management makes in applying its accounting  policies in
these areas.


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 2005, the Audit  Committee of the Company's Board of
Directors  approved  estimated  fees for the  remainder  of 2005  related to the
performance  of both audit,  including  Sarbanes-Oxley  Section 404  attestation
work,  as  well  as  allowable  non-audit  services  by the  Company's  external
auditors, KPMG LLP.

                                      -29-




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

The results of  operations  and cash flows for the 13 weeks ended April 30, 2005
are not necessarily indicative of the results for the entire year. The Company's
business depends to a great extent on the last quarter of the year. Historically
for the  fourth  quarter,  Department  Stores  and  Catalog/Internet  sales have
averaged  approximately  one-third  of annual  sales and income from  continuing
operations has averaged about 60% of the full-year total.

                                      -30-




Item 3 - Quantitative and Qualitative Disclosures 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 April 30, 2005 are similar to those disclosed
in the  Company's  2004 10-K.  For the 13 weeks ended April 30, 2005,  the other
comprehensive  loss on foreign currency  translation was $1 million.  Due to the
limited nature 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-15 and 15d-15  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 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 were
no changes in the Company's internal control over financial reporting during the
Company's first quarter ended April 30, 2005, 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, which reflect the Company's
current view of future events and financial performance. The words expect, plan,
anticipate,  believe,  intent,  should,  will and similar  expressions  identify
forward-looking  statements.  Any such forward-looking statements are subject to
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,   including  gasoline  prices,  changes  in
management,  retail  industry  consolidations,  acts  of  terrorism  or war  and
government  activity.  Please refer to the Company's  2004 Annual Report on Form
10-K and subsequent filings for a further discussion of risks and uncertainties.
The Company intends the  forward-looking  statements in this Report on Form 10-Q
to speak only at the time of its  release  and does not  undertake  to update or
revise these forward-looking statements as more information becomes available.


                                      -31-




PART II - OTHER INFORMATION


Item 1 - Legal Proceedings

The Company has no material legal proceedings pending against it.

In the matter of Vicente  Balderaz v. J. C. Penney  Direct  Marketing  Services,
Inc.,  ("DMS"),  AEGON Direct  Marketing  Services,  Inc., and J. C. Penney Life
Insurance Company n/k/a/ Stonebridge  Insurance  Company,  in the First Judicial
District,  State of New  Mexico,  County  of Santa Fe (No.  D-0101-CV2005-00249)
("the New Mexico  Lawsuit"),  first  reported in the Company's  Annual Report on
Form 10-K for the fiscal year ended  January 29,  2005,  DMS has been  dismissed
without prejudice.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

          (c)  Issuer Purchases of Securities

The table below sets forth the information  with respect to purchases made by or
on behalf of the Company of the Company's  common stock during the quarter ended
April 30, 2005:

                                                                                            
                Period                       Total           Average         Cumulative Number        Maximum
                                             Number of       Price             of Shares             Approximate
                                             Shares          Paid Per         Purchased as          Dollar Value
                                             Purchased       Share            Part of Publicly     of Shares that
                                             During                             Announced            May Yet Be
                                             Period                             Plans or             Purchased
                                                                             Programs (1)(2)          Under the
                                                                                                      Plans or
                                                                                                    Programs (in
                                                                                                       millions)
     -----------------------------        -------------    ------------    -------------------     ----------------

     January 30, 2005 through
     March 5, 2005                             423,900         $ 44.23             50,516,400          $1,029(1)

     March 6, 2005 through
     April 2, 2005                           3,409,100         $ 47.14             53,925,500         $1,618(1)(2)

     April 3, 2005 through
     April 30, 2005                          3,837,000         $ 47.05             57,762,500         $1,438(1)(2)
                                          -------------                    -------------------

       Total                                 7,670,000                             57,762,500
                                          =============                    ===================


(1)  In  2004,  the  Company's  Board  of  Directors  approved  a  common  stock
     repurchase  program of up to $3.0 billion for common stock repurchases (not
     to exceed 133 million  shares),  including up to $650 million that had been
     contingent   upon  the  conversion  of  the  Company's   5.0%   Convertible
     Subordinated  Notes Due 2008, which occurred from October 26, 2004, through
     November 16, 2004. This repurchase program,  which the Company announced on
     August 2, 2004, has no expiration  date, but is expected to be completed by
     the end of the second quarter of 2005.

(2)  In 2005, the Board of Directors  approved a common stock repurchase program
     of up to $750 million.  This program,  which the Company announced on March
     18, 2005,  has no expiration  date,  but is expected to be completed by the
     end of fiscal year 2005.

                                      -32-






Item 6 - Exhibits

          Exhibit Nos.
          ------------

               10.1 J. C. Penney  Company,  Inc. 2005 Equity  Compensation  Plan
                    (incorporated   by   reference   to  Annex  A  to  Company's
                    definitive  Notice of Annual Meeting and Proxy Statement for
                    its Annual Meeting of Stockholders held on May 20, 2005, SEC
                    File No. 1-15274).

               10.2 Terms of Agreement  between M. T. Theilmann and J. C. Penney
                    Company, Inc.  (incorporated by reference to Exhibit 10.1 to
                    Company's Form 8-K dated May 9, 2005, SEC File No. 1-15274).

               10.3 Form of  Restricted  Stock Unit  Award - 2005  Non-Associate
                    Director Annual Grant  (incorporated by reference to Exhibit
                    10.1 to Company's  Form 8-K dated May 24, 2005, SEC File No.
                    1-15274).

               10.4 Form of Grant of Stock Option(s), Special Stock Option Grant
                    (incorporated by reference to Exhibit 10.1 to Company's Form
                    8-K dated May 31, 2005, SEC File No. 1-15274).

               10.5 Form of Notice of Restricted  Stock Award  (incorporated  by
                    reference to Exhibit  10.2 to  Company's  Form 8-K dated May
                    31, 2005, SEC File No. 1-15274).

               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




                                      -33-





                                   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: June 8, 2005



                                      -34-




                                                                    Exhibit 31.1

CERTIFICATION

I, Myron E. Ullman, III, 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))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) 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)  Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     (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
                                      

                                      -35-


     (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:  June 8, 2005.
                                           /s/ Myron E. Ullman, III
                                           ---------------------------
                                           Myron E. Ullman, III
                                           Chairman and Chief Executive Officer
                                           J. C. Penney Company, Inc.

                                      -36-




                                                                    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))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) 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)  Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     (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


                                      -37-


     (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:  June 8, 2005.
                                           /s/ Robert B. Cavanaugh
                                           ---------------------------
                                           Robert B. Cavanaugh
                                           Executive Vice President and
                                           Chief Financial Officer
                                           J. C. Penney Company, Inc.

                                      -38-




                                                                    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 April 30, 2005 (the "Report"),  I,
Myron E.  Ullman,  III,  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 June 2005.

                                           /s/ Myron E. Ullman, III
                                           -----------------------------
                                           Myron E. Ullman, III
                                           Chairman and Chief Executive Officer

                                      -39-




                                                                    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 April 30, 2005 (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 June 2005.

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





                                      -40-