Form 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

For the fiscal year ended January 29, 2005

or

For the transition period from _____________ to_____________

Commission File No. 1-15274

J. C. PENNEY COMPANY, INC.

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

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to section 12(g) of the Act:

None
(Title of class)

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.

     þ Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter (July 31, 2004): $11,539,208,406.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 270,381,480 shares of Common Stock of 50 cents par value, as of April 1, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

PART I

1. Business.

     Business Overview

     Effective January 27, 2002, J. C. Penney Company, Inc. changed its corporate structure to a holding company format. As part of this structure, J. C. Penney Company, Inc. changed its name to J. C. Penney Corporation, Inc. (“JCP”), and became a wholly-owned subsidiary of a newly formed affiliated holding company (“Holding Company”). The new holding company assumed the name J. C. Penney Company, Inc. (“Company”). The Holding Company has no direct subsidiaries other than JCP. The Holding Company has no independent assets or operations. All outstanding shares of common and preferred stock were automatically converted into the identical number of and type of shares in the new holding company. Stockholders’ ownership interests in the business did not change as a result of the new structure. Shares of the Company remain publicly traded under the same symbol (JCP) on the New York Stock Exchange. The Company is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee by the Holding Company of certain of JCP’s outstanding debt securities is full and unconditional. The Holding Company and its consolidated subsidiaries, including JCP, are collectively referred to in this Annual Report on Form 10-K as “Company” or “JCPenney”, unless indicated otherwise.

     JCPenney was founded by James Cash Penney in 1902; JCP was incorporated in Delaware in 1924 and the Company was incorporated in Delaware in January 2002. The Company has grown to be a major retailer, operating 1,017 JCPenney department stores in 49 states and Puerto Rico. In addition, the Company operates 62 Renner department stores in Brazil. The Company’s business consists of providing merchandise and services to consumers through Department Stores and Catalog/Internet. Department Stores and Catalog/Internet generally serve the same customers and have virtually the same mix of merchandise. In addition, department stores accept returns from sales initiated in department stores, catalog or via the Internet. The Company markets family apparel, jewelry, shoes, accessories and home furnishings.

     Discontinued Operations

     Direct Marketing Services

     In 2001, JCP closed on the sale of its J. C. Penney Direct Marketing Services, Inc. (“DMS”) assets, including its J. C. Penney Life Insurance subsidiaries and related businesses to a U.S. subsidiary of AEGON, N.V. (“AEGON”). DMS was reflected as a discontinued operation in the 2000 Annual Report. Concurrent with the 2001 closing, JCP entered into a 15-year strategic licensing and marketing services arrangement with AEGON designed to offer an expanded range of financial and membership services products to JCPenney customers. Over the term of this arrangement, the Company will receive fee income related to the marketing and sale of certain

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financial products and membership services. Such amount will be recognized as earned in the Company’s financial statements.

     Mexico Department Stores

     Effective November 30, 2003, the Company closed on the sale of its six Mexico department stores to Grupo Sanborns S.A. de C.V. of Mexico City. The stock sale transaction, which included the Mexico holding company and operating companies, comprising the Company’s Mexico department store operation, resulted in a loss of $14 million, net of a $27 million tax benefit. The loss was principally related to currency translation losses of $25 million accumulated since operations began in 1995 that were previously reflected as reductions to stockholders’ equity. Additional components of the loss included potential liability on certain real estate and merchandise and transaction costs. In 2004, the Company recognized a gain of $4 million related to additional tax benefits realized.

     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 gross cash proceeds. The figure 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 are expected to 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 debt reduction and common stock repurchases, as announced on August 2, 2004, and more fully discussed in the Company’s 2004 Annual Report to Stockholders (“Capital Structure Repositioning”) (pages 35-36).

     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, and during 2004 the remaining $108 million was 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.

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     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, severance payments to former Eckerd associates, assumption of the Eckerd Pension Plan and various post-employment benefit obligations and environmental indemnifications, which are discussed below. Management reviewed and updated the reserves in the fourth quarter of 2004. While adjustments were made to individual reserves, management believes that, in total, reserves remain adequate at year-end 2004. Cash payments for the Eckerd-related reserves are separately presented in the Company’s consolidated statements of cash flows as cash paid to discontinued operations.

     Management is currently negotiating with both CVS and Coutu regarding the working capital adjustment required in the sale agreements, which could take several months to finalize. The two sale agreements provide for an arbitration process between the respective parties in the event that agreement cannot be reached regarding the proper amount of adjustment.

     As part of the Asset Purchase Agreement with CVS, it was agreed at closing that, with respect to the Colorado and New Mexico locations (CN real estate interests), any of these properties which 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, along with corresponding third-party agreements and liabilities. The Company has engaged a third-party real estate brokerage firm and is working through disposition plans on an individual property basis.

     At the closing of the sale of Eckerd on July 31, 2004, JCP 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 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 agreements, plans or programs and/or settlement of the underlying benefit obligations.

     As further discussed in the Environment subsection below, as part of the Eckerd sale agreements the Company retained responsibility to remediate environmental conditions that existed at the time of the sale.

     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

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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 will receive 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.

     Competition and Seasonality

     The business of marketing merchandise and services is highly competitive. The Company is one of the largest department store retailers in the United States and it has numerous competitors. Many factors enter into the competition for the consumer’s patronage, including price, quality, style, service, product mix, convenience and credit availability. The Company’s annual earnings depend to a significant extent on the results of operations for the last quarter of its fiscal year. Fourth quarter operating profit for the past few years has averaged about half of the full year amount.

     Incorporation by Reference; Website Availability

     Information contained in the Company’s 2004 Annual Report to Stockholders regarding certain aspects of the business of the Company included under the captions of “Discontinued Operations” (pages 33 to 35), and which appears in the section entitled “Notes to the Consolidated Financial Statements”, and “Five-Year Financial and Operations Summary (Unaudited)” (page 49), all as set forth in the

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Company’s 2004 Annual Report to Stockholders on the pages indicated in the parenthetical references, is incorporated herein by reference and filed hereto as Exhibit 13 in response to Item 1 of Form 10-K.

     In addition, information about J. C. Penney Funding Corporation, a wholly-owned consolidated subsidiary of JCP, which appears in Item 1 of its separate Annual Report on Form 10-K for the fiscal year ended January 29, 2005, is incorporated herein by reference and filed hereto as Exhibit 99(a) in response to Item 1 of Form 10-K.

     The Company’s Annual Reports on Form 10-K (since April 13, 1994), quarterly reports on 10-Q (since June 10, 1994), current reports on Form 8-K (since June 22, 1994) and all related amendments are available free of charge by accessing the Company’s website at www.jcpenney.net.

     Suppliers

     The Company purchases its merchandise from approximately 2,776 domestic and foreign suppliers, many of which have done business with the Company for many years. In addition to its Plano, Texas Home Office, the Company, through its international purchasing subsidiary, maintained buying offices in fourteen foreign countries and quality assurance inspection offices in an additional ten foreign countries as of January 29, 2005.

     Employment

     The Company and its consolidated subsidiaries employed approximately 151,000 persons as of January 29, 2005.

     Environment

     Environmental protection requirements did not have a material effect upon the Company’s operations during fiscal 2004. While management believes it unlikely, it is possible that compliance with such requirements will lengthen lead-time in expansion plans and increase construction, and, therefore, operating costs due in part to the expense and time required to conduct environmental and ecological studies and any required remediation.

     As part of the Eckerd sale agreements discussed above, 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.

2. Properties.

     At January 29, 2005, the Company operated 1,079 retail stores, comprised of 1,017 JCPenney department stores throughout the United

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States and Puerto Rico, and 62 Renner department stores in Brazil, of which 217 JCPenney and three Renner department stores were owned. The Company also owned and operated four catalog fulfillment centers. The Company operated thirteen store support centers, and owned and operated three regional warehouses. The Company owned its Home Office facility and Renner’s corporate headquarters in Porto Allegre, Brazil. In addition, the Company owned as part of its Home Office approximately 240 acres of property in Plano, Texas, adjacent to the facility. Information relating to certain of the Company’s facilities included under the caption “Five-Year Financial and Operations Summary (Unaudited)” (page 49) of the Company’s 2004 Annual Report to Stockholders, is incorporated herein by reference and filed hereto as Exhibit 13 in response to Item 2 of Form 10-K.

3. Legal Proceedings.

     Gayle G. Pitts, et al 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, No. 01-03395-F, in the 214^th Judicial District Court of Nueces County, Texas; and Appellant(s): Stonebridge Life Insurance Company f/k/a J. C. Penney Life Insurance Company; J. C. Penney Direct Marketing Services, Inc., J. C. Penney Life Insurance Company n/k/a Stonebridge Insurance Company(“JCPenney Life”), and AEGON Direct Marketing Services, Inc. v. Gayle G. Pitts, et al, No. 13-05-131-CV, in the Court of Appeals for the Thirteenth District of Texas.

     This is a class action lawsuit (“the Lawsuit”) filed against the above named defendants. It involves the sale of J. C. Penney Life Insurance accidental death and dismemberment (“ADD”) insurance over the telephone. The named plaintiffs allege that they did not give permission to defendants to charge their credit cards for ADD insurance premiums. They allege that the scripted questions asked during the telephone sales presentation are inadequate to obtain permission to charge the customer’s credit card, primarily because the customer is not told that the insurance company already has his or her credit card number.

     The Lawsuit originally also included as defendants J. C. Penney Company, Inc., and J. C. Penney International Insurance Group, Inc. The plaintiffs have since dismissed these parties.

     The Lawsuit originally also included named plaintiffs who did not deny giving permission to charge their credit cards for premiums, but who alleged that they had submitted claims that were wrongfully denied. Those former named plaintiffs and their claims were severed into a separate lawsuit captioned York, et al v. J. C. Penney Company, Inc., J. C. Penney Direct Marketing Services, Inc., J. C. Penney Life Insurance Company, J. C. Penney International Group, Inc., AEGON Direct Marketing Services, Inc., AEGON USA, Inc., and Commonwealth General Corporation, No. 02-2651-F, in the 214^th District Court of Nueces County, Texas (“the Severed Lawsuit”).

     The assets of DMS, including the stock of JCPenney Life, were sold to Commonwealth General Corporation (“Commonwealth”), a domestic subsidiary of AEGON, N. V., pursuant to a Stock Purchase Agreement (the “Agreement”) dated as of March 7, 2001, among Commonwealth as

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Purchaser, DMS as Seller, and JCP as Parent corporation of DMS. Thus, as a matter of law, all of the liabilities of JCPenney Life stayed with that company after the sale. Commonwealth is currently providing defense to DMS.

     Under the Agreement, JCP and DMS agreed to indemnify Commonwealth for any liability of JCPenney Life, but only to the extent that such liability arises out of or relates to a breach of a representation and warranty in the Agreement. Commonwealth may claim entitlement to indemnification from JCP and DMS if a final determination in the Lawsuit is adverse to JCPenney Life, and Commonwealth successfully contends that the liability arose out of a breach of a representation or warranty in the Agreement. JCP’s and DMS’s liability for breaches of representations and warranties is subject to both a deductible and a cap.

     In September 2002, the trial court certified the Lawsuit as a national class action. On July 15, 2004, the Court of Appeals for the Thirteenth District of Texas reversed the certification order and remanded the case to the trial court. Plaintiffs filed a second supplemental motion for Class Certification, this time seeking a Texas class only. On January 31, 2005, the trial court granted the motion, certifying a Texas class. Defendants have filed a motion to appeal that order with the Court of Appeals for the Thirteenth District of Texas. The Severed Lawsuit was originally pled as a class action, but the plaintiffs amended their petition and now assert only individual claims.

     On February 3, 2005, Vicente Balderaz filed a complaint in the First Judicial District, State of New Mexico, County of Santa Fe (No. D-0101-CV2005-00249) (“the New Mexico Lawsuit”) against the same defendants as the Lawsuit and asserting essentially the same claims. The New Mexico Lawsuit seeks certification of a nation-wide class.

     The Company denies the allegations against its current and former subsidiaries in the Lawsuit, the Severed Lawsuit, and the New Mexico Lawsuit and, along with the other defendants, is vigorously defending the cases and opposing class certification. Although it is too early to predict the outcome of the Lawsuit, the Severed Lawsuit, and the New Mexico Lawsuit, management is of the opinion that they should not have a material adverse effect on the Company’s consolidated financial position or results of operations.

4. Submission of Matters to a Vote of Security Holders.

     No matter was submitted to a vote of stockholders during the fourth quarter of fiscal 2004.

Executive Officers of the Registrant

     The following is a list, as of April 1, 2005, of the names and ages of the executive officers of J. C. Penney Company, Inc. and of the offices and other positions held by each such person with the Company. These officers hold identical positions with JCP. References to JCPenney positions held during fiscal years 2001 and earlier (prior to the creation of the holding company) are for JCP. There is no family relationship between any of the named persons.

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     Mr. Ullman was elected Chairman of the Board of Directors and Chief Executive Officer of the Company effective December 1, 2004. He was Directeur General, Group Managing Director, LVMH Moet Hennessy Louis Vuitton (luxury goods manufacturer/retailer) from 1999 to 2002. He was President of LVMH Selective Retail Group from 1998 to 1999. From 1995 to 1998 he was Chairman of the Board and Chief Executive Officer, DFS Group Ltd. From 1992 to 1995 he was Chairman of the Board and Chief Executive Officer of R. H. Macy & Company. He has served as Chairman of the Board of Mercy Ships International since 2004. He has served as a director of the Company, and a director of JCP, since December 2004.

     Ms. Bober was elected Senior Vice President, General Counsel and Secretary of the Company effective February 1, 2005. She served as Senior Vice President and General Counsel of The Chubb Corporation from 1999-2005.

     Mr. Cavanaugh was elected Executive Vice President and Chief Financial Officer of the Company effective in 2001. He served as Senior Vice President and Chief Financial Officer of Eckerd Corporation, a former subsidiary of the Company, from 1999 through January 1, 2001. From 1996 to 1999, he served as Vice President and Treasurer of the Company. He has served as a director of JCP since 2002.

     Mr. Davis was elected Executive Vice President, Chief Human Resources and Administration Officer in 1998 and served as Senior Vice President, Director of Human Resources and Administration from 1997 to 1998. From 1996 to 1997, he served as Senior Vice President and Director of Personnel and Administration. He was elected President of the Northwestern Region in 1992 and served in that capacity until 1996.

     Mr. Hicks was elected President and Chief Merchandising Officer of the Company effective January 1, 2005. He served as President and Chief Operating Officer of Stores and Merchandise Operations from July through December 2004. He has served as a director, and President and Chief Merchandising Officer of JCP since January 2005. He served as President and Chief Operating Officer of Stores and Merchandise Operations of JCP from July 2002 to December 2004. From 1999 to 2002 he served as President of Payless ShoeSource, Inc.

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     Mr. Raish was elected Executive Vice President and Chief Information Officer of the Company effective January 2, 2001. In 1999 he was named President of the Accelerating Change Together (ACT) initiative, the Company’s centralized merchandising process in department stores and catalog, and in 1998 he served as President, Home and Leisure Division. He served as Divisional Vice President in 1997, and as Director of Coordination, JCPenney Stores, in 1996.

PART II

5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

     The Company’s Common Stock is traded principally on the New York Stock Exchange, as well as on other exchanges in the United States. In addition, the Company has authorized 25 million shares of Preferred Stock, of which no shares of Series B ESOP Convertible Preferred Stock (“ESOP Stock”) were issued and outstanding at January 29, 2005. Additional information relating to the Common Stock and Preferred Stock, including ESOP Stock (which has been redeemed, as referenced below), of the Company is included under the captions “Consolidated Statements of Stockholders’ Equity” (page 27), “Capital Stock” (page 39), “Common Stock Repurchases” (page 36), “Quarterly Data (Unaudited)” (page 48), and “Series B Convertible Preferred Stock Redemption” (page 36) which appear in the Company’s 2004 Annual Report to Stockholders on the pages indicated in the parenthetical references, is incorporated herein by reference and filed hereto as Exhibit 13 in response to Item 5 of Form 10-K.

     The Company currently is executing a common stock repurchase program of up to $3.0 billion, including the repurchase of up to $650 million of common stock that had been contingent upon the now completed conversion of JCP’s 5.0% Convertible Subordinated Notes Due 2008. Share repurchases have been and will continue to be made in open-market transactions, subject to market conditions, legal requirements and other factors. The Company repurchased and retired 50.1 million shares of common stock during 2004 at a cost of approximately $2.0 billion. This represents approximately two-thirds of the total planned common stock repurchases under the 2004 program. As of January 29, 2005, approximately $1.0 billion remained authorized for share repurchases.

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On March 18, 2005, the Company’s Board of Directors approved a new common stock repurchase program consisting of $750 million of common stock repurchases (not to exceed 25 million shares). These share repurchases are expected to be completed by the end of the fiscal year. Share repurchases will continue to be made periodically in open-market transactions, subject to market conditions, legal requirements and other factors.

6. Selected Financial Data.

     Information for fiscal years 2000-2004 included in the “Five-Year Financial and Operations Summary (Unaudited)” on page 49 of the Company’s 2004 Annual Report to Stockholders is incorporated herein by reference and filed hereto as Exhibit 13 in response to Item 6 of Form 10-K.

7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     The discussion and analysis included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which appears in the Company’s 2004 Annual Report to Stockholders, beginning on page 6 thereof, is incorporated herein by reference and filed hereto as Exhibit 13 in response to Item 7 of Form 10-K.

Forward-Looking Statements.

     This Annual Report on Form 10-K 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 the risks and uncertainties set forth on pages 15-18 in the Company’s 2004 Annual Report to Stockholders, competition, consumer demand, seasonality, economic conditions, including gasoline prices, changes in management, retail industry consolidations, acts of terrorism or war and government activity. In addition, the

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Company typically earns a disproportionate share of its operating income in the fourth quarter due to holiday buying patterns, which are difficult to forecast with certainty. While the Company believes that its assumptions are reasonable, it cautions that it is impossible to predict the impact of such factors that could cause actual results to differ materially from predicted results. The Company intends the forward-looking statements in this Annual Report on Form 10-K to speak only at the time of its release and does not undertake to update or revise these projections as more information becomes available.

7A. Quantitative and Qualitative Disclosures About Market Risk.

     The Company maintains a majority of its cash and short-term investments in financial instruments with original maturities of three months or less. Such investments are subject to interest rate risk and may have a small decline in value if interest rates increase. Since the financial instruments are of short duration, a change of 100 basis points in interest rates would not have a material effect on the Company’s financial condition.

     The Company’s outstanding long-term debt as of January 29, 2005, is at fixed interest rates and would not be affected by interest rate changes. Future borrowings under the Company’s multi-year revolving credit facility, to the extent that fluctuating rate loans were used, would be affected by interest rate changes. As of January 29, 2005, no cash borrowings were outstanding under the facility, and approximately $153 million in letters of credit were supported by this facility. The Company does not believe that a change of 100 basis points in interest rates would have a material effect on the Company’s financial condition.

     See the discussion and analysis under “Fair Value of Financial Instruments” and “Short-Term Debt” which appear in the Company’s 2004 Annual Report to Stockholders on pages 37-38, and which are incorporated herein by reference and filed hereto as Exhibit 13 in response to Item 7A of Form 10-K.

8. Financial Statements and Supplementary Data.

     The Consolidated Balance Sheets of J. C. Penney Company, Inc. and subsidiaries as of January 29, 2005, and January 31, 2004, and the related Consolidated Statements of Operations, Stockholders’ Equity and Cash Flows for each of the years in the three-year period ended January 29, 2005, appearing on pages 25 through 28 of the Company’s 2004 Annual Report to Stockholders, together with the Reports of Independent Registered Public Accounting Firm of KPMG LLP, independent certified public accountants, appearing on page 24 of the Company’s 2004 Annual Report to Stockholders, the Notes to the Consolidated Financial Statements on pages 29 through 47, and the quarterly financial highlights (“Quarterly Data (Unaudited)”) appearing on page 48 thereof, are incorporated by reference and filed hereto as Exhibit 13 in response to Item 8 of Form 10-K.

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9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

     None.

9A. 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 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K, 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 Annual Report on Form 10-K is made known to them by others on a timely basis.

Management’s Report on Internal Control over Financial Reporting

     The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.

     The management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting as of January 29, 2005. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on its assessment, the management of the Company believes that, as of January 29, 2005, the Company’s internal control over financial reporting is effective based on those criteria.

     KPMG LLP, the registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting. This attestation report appears on page 24 of the Company’s 2004 Annual Report to Stockholders.

     There were no changes in the Company’s internal control over financial reporting during the Company’s fourth quarter ended January 29, 2005, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

9B. Other Information.

      On April 7, 2005, J.C. Penney Company, Inc., 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 existing $1.5 billion credit facility that was schedule to expire in May 2005. The 2005 Credit Facility is unsecured, and all collateral securing the 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 for borrowed money ratings by

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Moody’s and Standard & Poor’s. Obligations under the 2005 Credit Facility are guaranteed by J.C. Penney Company, Inc. 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 debt to Consolidated EBITDA (as defined in the 2005 Credit Facility), as measured on a trailing of 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 (as defined in the 2005 Credit Facility) plus consolidated rent expense to consolidated interest expense plus consolidated rent expense of at least 3.2 to 1.0.

PART III*

10. Directors and Executive Officers of the Registrant.*

     Executive Officers of the Registrant

          The section of Item 1 of this Form 10-K entitled “Executive Officers of the Registrant” is incorporated by reference into this Item 10.

     Codes of Ethics, Corporate Governance Guidelines and Committee Charters

          The Company has adopted a code of ethics for directors which is known as the “Code of Business Conduct and Ethics for the Board of Directors”, and a code of ethics for officers and employees, which applies to, among others, the Company’s principal executive officer, principal financial officer, and controller, and which is known as the “Statement of Business Ethics for Associates”. Both codes of ethics are available on the Company’s website at www.jcpenney.net. Additionally, the Company will provide copies of these codes without charge upon request made to:

J. C. Penney Company, Inc.
Office of Investor Relations
P.O. Box 10001
Dallas, TX 75301-4301
(Telephone 972-431-3436)

The Company intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of the Statement of Business Ethics for Associates by posting such information on the Company’s website at www.jcpenney.net.

A copy of the Company’s Corporate Governance Guidelines, and copies of the Company’s Audit, Compensation and Nominating Committee Charters are also available on the Company’s website at www.jcpenney.net. Copies of these will likewise be provided without charge upon request made to the address or telephone number set forth above.

11. Executive Compensation.*

14

12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .*

Equity Compensation Plan(s) Information

The following table shows the number of options and other awards outstanding under the J. C. Penney Company, Inc. 2001 Equity Compensation Plan as of January 29, 2005, as well as the number of shares remaining available for grant under the Plan. Also listed is the number of shares issued outside of a security holder approved plan.

13. Certain Relationships and Related Transactions.*

14. Principal Accountant Fees and Services.*

     * Pursuant to General Instruction G to Form 10-K, the information called for by Items 10 (to the extent not set forth in Part I hereof, or otherwise in Item 10 above), 11, 12 (with the exception of Company equity compensation plan information which is described in Item 12 above), 13 and 14 is incorporated by reference to the Company’s 2005 Proxy Statement, the final copy of which the

15

Company filed with the Securities and Exchange Commission, pursuant to Regulation 14A, on April 7, 2005.

PART IV

15. Exhibits and Financial Statement Schedules.

     (a) 1. All Financial Statements. See Part II, Item 8 of this Annual Report on Form 10-K for financial statements incorporated by reference to the Company’s 2004 Annual Report to Stockholders.

     (a) 2. Financial Statement Schedule. Schedules have been omitted as they are inapplicable or not required under the rules, or the information has been submitted in the consolidated financial statements and related financial information included in the Company’s 2004 Annual Report to Stockholders incorporated herein by reference and filed hereto as Exhibit 13.

     Separate financial statements are filed for J. C. Penney Funding Corporation, a wholly-owned consolidated subsidiary of JCP, in its separate Annual Report on Form 10-K for the 52 weeks ended January 29, 2005, which financial statements, together with the Report of Independent Registered Public Accounting Firm thereon, are incorporated herein by reference and filed hereto as Exhibit 99(b).

     (a) 3. Exhibits. See separate Exhibit Index on pages i through x.

     (b) Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this form is filed as part of the separate Exhibit Index on pages iv through ix and specifically identified as such beginning on page iv.

     (c) Other Financial Statement Schedules.     None

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

17

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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EXHIBIT INDEX

     Exhibit

4. Instruments defining the rights of security holders, including indentures

i

ii

Other instruments evidencing long-term debt have not been filed as exhibits hereto because none of the debt authorized under any such instrument exceeds 10 percent of the total assets of the Registrant and its consolidated subsidiaries. The Registrant agrees to furnish a copy of any of its long-term debt instruments to the Securities and Exchange Commission upon request.

iii

iv

  v

vi

vii

*       SEC file number 1-777

     See presentation of earnings per share on page 25 in the Consolidated Statements of Operations, and calculation of earnings per share from continuing operations in Note 4 to the Consolidated Financial Statements on page 36, in the Company’s 2004 Annual Report to Stockholders.

viii

Excerpt from Company’s 2004 Annual Report to Stockholders.

ix