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J.C. Penney Posts Major Loss

Charges at its Eckerd chain gut the bottom line.
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J.C. Penney

(JCP) - Get J. C. Penney Company, Inc. Report

swung to a billion-dollar loss in the fourth quarter because of charges and writedowns in its discontinued Eckerd drugstore operation.

Backing out Eckerd, earnings rose 43%, surpassing analysts' estimates.

J.C. Penney lost $1.07 billion, or $3.42 a share, in the latest quarter compared with earnings of $202 million, or 68 cents a share, last year. The most recent quarter included a charge of $450 million to write down Eckerd, which the parent is trying to sell, and another $875 million charge reflecting a deferred tax liability at the drugstore unit.

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On a continuing-operations basis, J.C. Penney earned $253 million, or 83 cents a share, in the quarter, while sales rose 6.2% to $6.10 billion. Analysts had been forecasting earnings of 80 cents a share, according to Thomson One Analytics. The discontinuation of Eckerd made a top-line comparison to analysts' estimates impossible.

Comparable department-store sales rose 3.2% in the fourth quarter from a year ago, while catalog and Internet sales rose 8.7%.

In the first quarter, J.C. Penney expects to earn 9 cents to 12 cents a share from continuing operations, well short of the 23 cents a share forecast by analysts, though it was unclear if the numbers were comparable.

"We anticipate a much better consumer environment this year, and the first half is expected to be especially strong," the company said. "In 2004, higher refunds and lower withholding rates from the president's tax package, together with the current low-interest rate environment, will benefit the moderate customer."

J.C. Penney said it is in "active negotiations with interested parties and continue to make progress on a sale transaction" for Eckerd.