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J.C. Penney Forms Holding Company

January 29, 2002|From Bloomberg News

J.C. Penney Co. formed a holding company, adopting a structure that analysts and investors say may help the operator of department stores and Eckerd drugstores provide a clearer picture of the performance of its units.

The new structure, effective Sunday, won't result in any immediate changes to operations, the firm said. The department store division will be called J.C. Penney Corp., and its former shares have been converted into stock for the holding company that will continue to trade under the symbol JCP, the firm said.

The structure may make it easier for J.C. Penney to execute changes such as spinning off Eckerd, analysts said. Eckerd now is combined with the department store business.

A holding company may enable J.C. Penney to establish separate financial reports, they said. J.C. Penney, which has lost money in six of the last 10 quarters, said the holding company format will provide more flexibility as it tries to rebuild. Shares of Plano, Texas-based J.C. Penney rose 60 cents to close at $24.30 on the New York Stock Exchange. They have fallen 9.7% this year.

J.C. Penney shelved plans to issue a tracking stock for Eckerd in August 2000 after the drugstore chain's earnings declined. A tracking stock follows the performance of a subsidiary while representing a stake in the entire corporation. Sales at the drugstore chain have increased the last three quarters.

The new structure comes amid heightened investor sensitivity to accounting issues since Enron Corp. filed the largest U.S. bankruptcy reorganization.

J.C. Penney spokeswoman Stephanie Brown said Monday's announcement isn't related to the company's statement Friday that reports of accounting issues were "unfounded and without merit." The StreetInsider.com Web site reported the same day that the Eckerd drugstore division may have overcharged the government for Medicare billing.

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