Earnings Preview-J.C. Penney Co.

NEW YORK - Department-store operator J.C. Penney Co. reports earnings for the third quarter on Friday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: J.C. Penney and other department store chains have faced increasing challenges as shoppers worry about job security and tight credit. But business is starting to improve and consumers are beginning to treat themselves to small indulgences.

Still, business remains weak overall. Like other retailers, Penney has been cutting inventory in response to weak spending. It also has been expanding its assortment of exclusive brands. Making their debut in September are "Cindy Crawford Style," an exclusive home furnishing and accessories collection, and JOE Joseph Abboud, a collection of men's sportswear and tailored clothing.

But Penney's biggest coup was a deal struck with Liz Claiborne Inc., announced last month. Penney will be the sole U.S. department store to sell the company's Liz Claiborne and Claiborne lines of women's wear, along with its Liz & Co. and Concepts by Claiborne brands. The deal includes accessories, shoes, household products and men's clothing, as well as women's.

Liz Claiborne is taking its line designed by Isaac Mizrahi to the TV shopping channel QVC.

Under the deal, Penney can at the end of year five or 10 acquire the licensed trademarks and other Liz Claiborne brands for use in the U.S. and Puerto Rico.

Penney said sales at its stores that have been open at least a year fell 4.5 percent in October, hurt in part by Halloween landing on a Saturday.

Wall Street analysts had forecast a 2.3 percent decline, but the performance was slightly better than the retailer expected. Sales at stores opened at least a year are considered a key indicator of a retailer's health.

BY THE NUMBERS: J.C. Penney said last week that it expected to report earning 10 cents to 11 cents per share in the third quarter, including a 3-cent charge related to real estate. That forecast was higher than the company's prior projection of 3 cents to 10 cents per share profit.

Analysts polled by Thomson Reuters, on average, expect the company to report earning 11 cents per share on revenue of $4.18 billion. Penney earned 56 cents per share on revenue of $4.32 billion a year earlier.

The company expects its sales at stores open a year or more to fall 4 percent to 7 percent in November, compared with an 11.9 percent slide last year.

ANALYST TAKE: Wayne Hood, a BMO Capital Market retail analyst, wrote in a report last week that he was concerned that sales and traffic were weak toward the end of October at Penney, but that's not giving him reason to "panic." He added that he think Penney is doing a "good job conveying its value message."

WHAT'S AHEAD: Analysts will want to know about holiday sales and plans for discounting during the holiday season. They also will want to hear how the department store plans to market itself on social Web sites like Twitter and Facebook and how the company's first store in Manhattan is faring.

STOCK PERFORMANCE: Penney's share price rose almost 6 percent in the third quarter, which ended Oct. 31, and soared more than 50 percent from a year ago and from the beginning of the year. The stock closed at $29.87 on Wednesday, in the middle of its 52-week range of $13.71 to $37.21.

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