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Profit Plunges at J.C. Penney

The Eckerd unit hurts third-quarter results.

Updated from 9:12 a.m. EST

J.C. Penney

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

posted a 35% drop in third-quarter profit, hurt in part by the company's struggling Eckerd drugstore chain, whose fate is expected to be decided by the end of the year.

Still, the company forecast in-line fourth-quarter earnings and full-year earnings a penny ahead of analysts' estimates.

Net income was $80 million, or 27 cents a share, in the quarter ended Oct. 25, down from $123 million, or 42 cents a share, in the previous-year quarter.

Income from continuing operations was $80 million, or 27 cents a share, compared with $89 million, or 30 cents a share, a year ago, but in line with the company's prior guidance. On this basis, the company beat analysts' estimates of 25 cents a share.

Plano, Texas-based J.C. Penney said results at its department stores, catalog sales and Internet sales exceeded expectations. But the company cited soft sales trends at its drugstore chain and reiterated that it is "in the process of evaluating strategic alternatives for Eckerd, and a decision is expected by the end of the year."

Total sales were $7.99 billion, up from $7.87 billion a year ago. Total catalog/Internet sales were up 4.1% at $4.34 billion. Eckerd total sales were $3.64 billion, from last year's $3.56 billion.

The company said comparable department-store sales rose 1.7% in the quarter, while Eckerd same-store sales declined 1%.

Moving into the holiday season, the company expects "favorable trends" in consumer spending and sees a performance improvement from a year ago at its three major business units. Again, however, the Eckerd chain is seen having operating performance and sales weaknesses.

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The company expects fourth-quarter earnings of 80 cents a share and a profit of $1.25 a share for the full year. Analysts are also calling for 80 cents a share in the fourth quarter, and the consensus is for $1.24 per share for the full year.

Shares of J.C. Penney closed at $23.28 Monday on the

New York Stock Exchange



May Department Stores


, which operates the Lord & Taylor, Filene's and David's Bridal department store chains, said third-quarter profit surged from a year ago, beating analysts' estimates, excluding items.

The company earned $47 million, or 15 cents a share, compared with $16 million, or 5 cents a share, a year ago. Results included an asset impairment charge related to store divestitures. Excluding items, the company had a profit of $51 million, or 16 cents a share, from $22 million, or 7 cents a share, in last year's period. Analysts had been expecting 11 cents a share.

Total sales were $2.98 billion, down 0.5%, from $2.99 billion last year. Also, same-store sales fell 2.4%.

Shares of May closed at $29.40 in Monday trading.