Jc Penny

The following analysis presents JC Penny’s results, and sheds some light in conjunction with the accompanying consolidated financial statements and notes, along with the unaudited Five-Year Financial and Operations Summaries, the risk factors and the cautionary statement regarding forward-looking information. The analysis (MD&A) relates specifically to results from continuing operations, all references to earnings per share (EPS) are on a diluted basis and all references to years relate to fiscal years rather than to calendar years.

Annual Reports on Form 10-K, enhanced and shows financial reporting as follows:

  | • |   | Supplemental cash flow information and significant non-cash transactions have been moved from a footnote presentation to be more prominently included directly on the face of the Consolidated Statements of Cash Flows. |

  | • |   | We combined several related footnotes that contained information about common stock and stockholders’ equity into a single footnote titled, “Stockholders’ Equity.” |

  | • |   | We addressed the new disclosure requirements to provide information on recurring or nonrecurring fair value measurements, including significant transfers into and out of level one and level two categories. |

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  | • |   | We revised our definition and calculation of free cash flow (a non-GAAP financial measure) to exclude discretionary pension contributions and any related cash tax an effect, which more appropriately reflects our ability to generate cash flows from operating activities. |

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Despite the continued economic weakness during the year, we began to see some improvement in the retail sector. Our comparable store sales were positive for each quarter of 2010 and grew 2.5% for the year, while total net sales grew 1.2%. Total sales were 130 basis points lower than comparable store sales due to the reduction in sales resulting from discontinuing catalog print media. The gross margin...