Dallas / Fort Worth Local News

PLANO (AP) ― J.C. Penney Co. said Thursday its third-quarter earnings rose 22.6 percent on solid sales during the back-to-school period, and the department store chain raised its full-year profit forecast.

Penney shares rose $2.15, or 2.8 percent, to $80.35 in afternoon trading on the New York Stock Exchange, after hitting a 52-week high of $81.40 earlier in the day.

Chairman and Chief Executive Myron E. Ullman III said Penney got a boost in September from promotions for Macy's stores, which he said attracted more shoppers to the mall. He also said new private-label brands in women's clothing and home goods were off to a strong start.

For the quarter ended Oct. 28, the company reported net income of $287 million, or $1.26 per share, compared with $234 million, or 94 cents per share, a year earlier.

Revenue rose to $4.78 billion from $4.48 billion a year ago.

Wall Street had forecast profit of $1.23 per share on sales of $4.75 billion, according to a Thomson Financial survey of 16 analysts.

Same-store sales at locations open at least one year -- an important measurement in retailing -- rose 5.2 percent, which Penney said was better than expected. Internet sales climbed 27 percent.

The retailer forecast earnings of $1.94 in current holiday quarter, slightly better than analysts' estimate of $1.91 per share. For the year, Penney said it would earn $4.82 per share, a nickel better than Wall Street was expecting and up from the company's August prediction of $4.55 per share.

Same-store sales in the current quarter are expected to rise in the low single-digit range.

Officials said men's and children's clothes and shoes sold well during the back-to-school season, while furniture and other big home items were weaker because of slowing in the housing market.

They said Penney got a spillover boost from Federated Department Stores Inc.'s effort to promote Macy's. Federated is converting many regional department stores to Macy's, which reported disappointing third-quarter sales.

"We think they're obviously going through some difficulties with their integration, but we want them to be healthy," said Ullman, who added that it helps Penney when Macy's draws people to malls.

Ullman also said the chain's new private-label brands -- a.n.a. and East Fifth women's clothing and Studio home items -- were off to strong starts. Sales of private-label brands grew faster than overall sales, he said

Michelle Clark, an analyst for Morgan Stanley, said Penney's profit and same-store sales gains indicate that the company's run "is nowhere near over." She said Penney's increases in apparel sales should continue into the holidays and 2007.

Michelle Tan, a UBS analyst, said Penney has an opportunity to increase sales with the struggles at former May Department Co. stores that are being converted into Macy's. But she said competitive pressure and the economy are concerns for next year.

Third-quarter earnings per share were helped by an 8.5 percent reduction in shares, as Penney continued to buy back its own stock, making remaining shares more valuable.

For the first nine months of the year, Penney earned $676 million, or $2.90 a share, up from $537 million, or $2.05 a share, a year ago. Revenue rose to $13.24 billion from $12.58 billion.

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