<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                               Washington, D. C.
                                     20549

                                _______________

                                   FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                                _______________


For the 13 and 39 week periods                      Commission file number 1-777
ended October 28, 2000

                          J. C. PENNEY COMPANY, INC.
----------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

               Delaware                                     13-5583779
----------------------------------------------------------------------------
    (State or other jurisdiction of                   (I.R.S. Employer
    incorporation or organization)                    Identification No.)

6501 Legacy Drive, Plano, Texas                              75024 - 3698
----------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)


Registrant's telephone number, including area code         (972) 431-1000
                                                   -------------------------

                                _______________

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes    X   .       No        .
    -------           -------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

262,347,498 shares of Common Stock of 50 cents par value, as of October 28,
2000.

<PAGE>

                                      -1-

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS.

The following interim financial information is unaudited but, in the opinion of
the Company, includes all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation. Certain amounts have been
reclassified to conform with the current period presentation. The financial
information should be read in conjunction with the audited consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the 52 weeks ended January 29, 2000.

Statements of Income
(Amounts in millions except per share data)

<TABLE>
<CAPTION>
                                            13 weeks ended           39 weeks ended
                                         --------------------     ---------------------
                                         Oct. 28,    Oct. 30,     Oct. 28,     Oct. 30,
                                           2000        1999          2000        1999
                                         --------   ---------     ---------   ----------
<S>                                      <C>        <C>           <C>         <C>
Retail sales                             $  7,455    $  7,552      $ 22,027     $ 21,844
Direct Marketing revenue                      288         282           869          832
                                         --------    --------      --------     --------
Total revenue                               7,743       7,834        22,896       22,676
                                         --------    --------      --------     --------
Costs and expenses
  Cost of goods sold, occupancy, buying,
    and warehousing costs                   5,633       5,495        16,563       16,065
  Selling, general, and administrative
    expenses                                1,804       1,808         5,228        5,181
  Costs and expenses of Direct Marketing
    operations                                223         218           678          651
  Corporate and other unallocated               3          (7)           19          (27)
  Net interest expense and credit
    operations /(1)/                          112          83           329          180
  Acquisition amortization                     19          18            79           80
  Restructuring and other charges, net         (3)         --           204           --
                                         --------    --------      --------     --------

Total costs and expenses                    7,791       7,615        23,100       22,130
                                         --------    --------      --------     --------
Income/(loss) before income taxes             (48)        219          (204)         546
Income tax/(benefit)                          (18)         77           (79)         198
                                         --------    --------      --------     --------
Net income/(loss)                        $    (30)   $    142      $   (125)    $    348
                                         ========    ========      ========     ========



Earnings/(loss) per common share:

Net income/(loss)                        $    (30)   $    142      $   (125)    $    348
Less: preferred stock dividends                (8)         (9)          (25)         (27)
                                         --------    --------      --------     --------
Earnings/(loss) for basic EPS                 (38)        133          (150)         321
Dilutive convertible preferred stock           --           9            --           --
                                         --------    --------      --------     --------
Earnings/(loss) for diluted EPS          $    (38)   $    142      $   (150)    $    321

Shares
Average shares outstanding (used
  for basic EPS)                              262         260           262          259
Dilutive common stock equivalents              --          16            --           --
                                         --------    --------      --------     --------
Average diluted shares outstanding            262         276           262          259

Earnings/(loss) per share
Basic                                    $  (0.15)   $   0.51      $  (0.57)    $   1.24
Diluted                                     (0.15)       0.51         (0.57)        1.24
</TABLE>

(1) Net interest expense and credit operations for the 39 weeks ended October
30, 1999 includes a $5 million pre-tax gain, or 1 cent per share after tax, on
the early extinguishment of Eckerd Corporation's 9.25 percent Notes due 2004.
<PAGE>

                                       -2-

Balance Sheets
(Amounts in millions)

<TABLE>
<CAPTION>
                                                  Oct. 28,         Oct. 30,         Jan. 29,
                                                    2000             1999             2000
                                                  --------         --------         --------
<S>                                               <C>              <C>              <C>
ASSETS

Current assets

  Cash and short-term investments
    of $177, $392, and $1,233                      $   183          $   392           $ 1,233
  Retained interest in JCP Master
    Credit Card Trust                                   --              461                --
  Receivables, net                                   1,151            4,308             1,138
  Merchandise inventories                            6,842            6,999             5,947
  Prepaid expenses                                     143              152               154
                                                   -------          -------           -------

     Total current assets                            8,319           12,312             8,472

Properties, net of accumulated
     depreciation of $3,211, $3,152,
     and $2,883                                      5,153            5,434             5,312

Investments, principally held by
     Direct Marketing                                1,583            1,812             1,827

Deferred policy acquisition costs                      992              904               929

Goodwill and other intangible assets
      net of accumulated amortization
      of $416, $305, and $340                        2,967            3,181             3,056

Other assets                                         1,399            1,339             1,292
                                                   -------          -------           -------


                                                   $20,413          $24,982           $20,888
                                                   =======          =======           =======

</TABLE>
<PAGE>

                                      -3-

Balance Sheets
(Amounts in millions)

<TABLE>
<CAPTION>
                                                                                   Oct. 28,       Oct. 30,       Jan. 29,
                                                                                     2000           1999           2000
                                                                                   --------       --------       --------
<S>                                                                                <C>            <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable and accrued expenses                                            $  3,840       $  3,762       $  3,351
  Short-term debt                                                                       357          3,223            330
  Current maturities of long-term debt                                                  250            625            625
  Deferred taxes                                                                        166            119            159
                                                                                   --------       --------       --------
    Total current liabilities                                                         4,613          7,729          4,465

Long-term debt                                                                        5,423          6,504          5,844

Deferred taxes                                                                        1,472          1,540          1,461

Insurance policy and claims reserves                                                  1,063            992          1,017

Other liabilities                                                                       968            917            873
                                                                                   --------       --------       --------
    Total liabilities                                                                13,539         17,682         13,660

Stockholders' equity
Capital stock
  Preferred stock, without par value: Authorized, 25 million shares -
    issued and outstanding, 0.7, 0.8, and 0.7 million shares of Series
    B ESOP convertible preferred                                                        407            457            446
  Common stock, par value 50 cents:
    Authorized, 1,250 million shares -
    issued and outstanding, 262, 260, and
    261 million shares                                                                3,288          3,236          3,266
                                                                                   --------       --------       --------
Total capital stock                                                                   3,695          3,693          3,712
                                                                                   --------       --------       --------

Reinvested earnings
  At beginning of year                                                                3,590          3,791          3,791
  Net income/(loss)                                                                    (125)           348            336
  Common stock dividends declared                                                      (184)          (427)          (500)
  Preferred stock dividends
    declared, net of tax                                                                (16)           (18)           (37)
                                                                                   --------       --------       --------
Reinvested earnings at end of
    period                                                                            3,265          3,694          3,590

Accumulated other comprehensive income/(loss)                                           (86)           (87)           (74)
                                                                                   --------       --------       --------


Total stockholders' equity                                                            6,874          7,300          7,228
                                                                                   --------       --------       --------
                                                                                   $ 20,413       $ 24,982       $ 20,888
                                                                                   ========       ========       ========

</TABLE>

The accumulated balances for net unrealized changes in debt and equity
securities were ($10), ($6), and ($11), and for currency translation adjustments
were ($76), ($81), and ($63) as of the respective dates shown. Net unrealized
changes in investment securities are shown net of deferred taxes of ($5), ($3),
and ($5), respectively. A deferred tax asset has not been established for
currency translation adjustments. Total comprehensive income/(loss) was ($39)
and $98 for the 13 weeks ended October 28, 2000 and October 30, 1999,
respectively and ($137) and $275 for the 39 weeks ended October 28, 2000 and
October 30, 1999, respectively.
<PAGE>

                                      -4-


Statements of Cash Flows
(Amounts in millions)

                                                     39 weeks ended
                                               ----------------------------
                                               Oct. 28,            Oct. 30,
                                                 2000                1999
                                               ---------         ----------

Operating activities

Net income/(loss)                                $  (125)          $   348
Restructuring and other charges, net                 204                --
Depreciation and amortization, including
    intangible assets                                510               513
Deferred taxes                                        17                36
Change in cash from:
    Customer receivables                              --               215
    Other receivables                                (13)             (301)
    Inventories, net of trade payables               (28)             (517)
    Current taxes payable                           (117)              (51)
    Other assets and liabilities, net               (289)              107
                                                 -------           -------
                                                     159               350
                                                 -------           -------

Investing activities

Capital expenditures/(1)/                           (464)             (472)
Purchases of investment securities                  (441)             (649)
Proceeds from the sale of assets                      30                22
Proceeds from sales of investment securities         693               681
                                                 -------           -------
                                                    (182)             (418)
                                                 -------           -------

Financing activities

Change in short-term debt                             27             1,243
Change in long-term debt                            (793)             (451)
Common stock issued, net                             (16)               13
Dividends paid, preferred and common                (245)             (441)
                                                 -------           -------
                                                  (1,027)              364
                                                 -------           -------

Net increase/(decrease) in cash and short-term
  investments                                     (1,050)              296

Cash and short-term investments at beginning
  of year                                          1,233                96
                                                 -------           -------

Cash and short-term investments at end of
  third quarter                                  $   183           $   392
                                                 ========          =======

/(1)/ Includes capitalized software costs of $62 million and $43 million
      previously classified as Other Assets.

Non-cash transactions: On March 1, 1999, the Company issued 9.6 million shares
of common stock to complete the acquisition of Genovese Drug Stores, Inc.
(Genovese). The total value of the transaction, including debt assumed and
conversion of options for Genovese common stock to options for the Company's
common stock, was $414 million.
<PAGE>

                                      -5-

Notes to Interim Financial Information

1) Restructuring and Other Charges, net

During the third quarter of 2000, the Company recorded a pre-tax net credit of
$3 million related to restructuring charges and previously established
restructuring reserves. The $3 million was comprised of reductions to reserves
for future lease obligations of units closed in the current ($3 million) and
prior ($1 million) years, reductions to the severance reserve for closed units
($2 million), additional expense for asset write-offs related to closed units
($2 million), and the interest component of lease payments ($1 million) which
are charged to expense with a corresponding increase in the reserve. The reserve
reductions resulted from favorable actual experience. These adjustments had the
effect of reducing first quarter 2000 reserves by $4 million and prior year
reserves by $1 million. In the first quarter of 2000, the Company recorded pre-
tax charges of $232 million associated with the closing of underperforming
department stores ($115 million) and Eckerd drugstores ($106 million), and
workforce adjustments ($11 million).

Department stores and catalog - In the first quarter of 2000, the Company
-----------------------------
finalized a plan to close 45 underperforming stores. These stores generated
sales of approximately $450 million and incurred operating losses of
approximately $20 million in fiscal 1999. The charge was comprised of asset
write-downs ($60 million), an accrual for the present value of future lease
obligations ($45 million), and severance and outplacement ($10 million).
Reserves for future lease obligations are calculated net of assumed sublease
income. Store closing plans anticipated that approximately 1,800 store employees
would be impacted by the store closings. During the third quarter, these
reserves were reduced by $4 million as noted above, and are shown in the table
in Note 2.

Eckerd drugstores - In the first quarter of 2000, the Company finalized a plan
-----------------
to close 289 underperforming drugstores. The number of stores to be closed was
lowered to 279 during the second quarter as a result of restrictive lease terms
on certain stores. The stores identified for closing were generally smaller,
low-volume stores that were former independent stores or parts of chains
acquired over the last several years. These stores generated sales and operating
losses of approximately $650 million and $30 million, respectively, in fiscal
1999. The first quarter charge of $106 million consisted of an accrual for the
present value of future lease obligations ($90 million), severance and
outplacement ($4 million), and other exit costs ($16 million), partially offset
by a $4 million net gain on the disposal of fixed/intangible assets. An asset
impairment charge of $110 million was recorded for these locations in the fourth
quarter of 1999 in accordance with FAS No. 121. Store closing plans were
expected to impact approximately 600 store employees. Through the end of the
third quarter of 2000, these reserves had been reduced by $9 million, and are
shown in the table in Note 2.

In addition to the store closing costs recorded as restructuring and other
charges, net, Eckerd's segment operating results include non-comparable costs of
$73 million for the nine months ended October 28, 2000 for other exit related
activities. These amounts consist of $61 million of non-comparable costs related
to inventory liquidation losses and shrinkage and $12 million of non-comparable
costs for incremental store operating costs incurred during the closing process.
<PAGE>

                                      -6-

Other workforce reductions - During the first quarter of 2000, the Company
--------------------------
finalized a plan to eliminate approximately 430 positions company-wide and
recorded a charge of $11 million for severance and outplacement benefits. All
affected employees were notified by the end of the first quarter.

2) Restructuring Reserves

As described in Note 1, the Company has established reserves for the closing of
underperforming department stores and drugstores, related exit costs, and
workforce adjustment programs over the past few years. The majority of the
remaining reserves represent the present value of future lease obligations for
closed stores that will be paid out over time. The status of the reserves at the
end of the third quarter are shown in the table below:

<TABLE>
<CAPTION>
                                     1999       1/st/ Qtr         3/rd/ Qtr 2000 YTD
                                                           ----------------------------
                                   Year End       2000      Cash     Other     Ending
($ in millions)                    Reserve      Expense    Outlays   Changes   Balance
                                   ----------------------------------------------------
<S>                                <C>          <C>        <C>       <C>       <C>
PRIOR YEAR RESERVES
-------------------

Department stores and catalog
-----------------------------
Future lease obligations           $     8      $     --    $ (2)    $   (1)    $   5

Eckerd drugstores
-----------------
Future lease obligations                78            --      (6)        (3)       69
Allowance for notes receivable          25            --      --        (25)       --

CURRENT YEAR RESERVES
---------------------
Department stores and catalog
-----------------------------
Future lease obligations                --            45      (5)        (1)       39
Severance and outplacement              --            10      (7)        (2)        1

Eckerd drugstores
-----------------
Future lease obligations                --            90     (14)        (3)       73
Severance and outplacement              --             4      (3)        (1)       --
Other exit costs                        --            16      (6)        (5)        5

Workforce Reduction Program
---------------------------
Severance and outplacement              --            11     (11)        --        --
                                    ------       -------   -----     ------    --------

Total                              $   111       $   176   $ (54)    $  (41)   $  192
                                   -------       -------   -----     ------    --------
</TABLE>

Department stores and catalog - During the first nine months of fiscal 2000, the
-----------------------------
Company closed 41 of the underperforming stores identified for closing.
Approximately 1,875 store employees had been terminated as a result of the store
closings as of October 28, 2000. The remaining stores are scheduled to close by
the end of fiscal 2000. Through the end of the third quarter, the reserve for
future department store lease obligations had been reduced by $6 million as a
result of cash payments ($5 million) and reserve adjustments ($1 million), and
the reserve for severance and outplacement benefits had been reduced by
$9 million for actual benefits paid ($7 million) and reserve adjustments
($2 million).
<PAGE>

                                      -7-

Eckerd drugstores - During the first nine months of fiscal 2000, Eckerd had
-----------------
closed 274 of the underperforming drugstores identified for closing. As of
October 28, 2000, approximately 600 employees had been terminated as a result of
the store closings. The remaining stores are scheduled to close by the end of
the first quarter of fiscal 2001.

Through the end of the third quarter, drugstore reserves had been reduced by $29
million as a result of cash payments for lease obligations ($20 million),
severance and outplacement benefits ($3 million), and other incremental exit
costs ($6 million). Reserves have also been reduced by an additional $12 million
($6 million for lease obligations, $1 million for severance and outplacement,
and $5 million for other exit costs) as a result of the assessment of actual
versus expected experience and the elimination of certain stores from the
closing list. Also during the second quarter, the Company sold a note receivable
that was associated with the sale of certain divested drugstore locations. The
sale of the note generated cash proceeds of $16 million; the note had a net book
value of $3 million, resulting in a gain of $13 million.

Other Workforce Reductions - Through the end of the third quarter, the Company
--------------------------
had terminated approximately 300 employees and paid $11 million in severance and
outplacement benefits.

3) Earnings Per Share

The Company had 679 and 762 thousand shares of preferred stock, which were
convertible into 13.6 and 15.2 million common shares, that were issued and
outstanding at October 28, 2000 and October 30, 1999, respectively. These
potential common shares, and the related dividend, were excluded from the
calculation of diluted earnings per share for the 13 and 39 weeks ended October
28, 2000 and the 39 weeks ended October 30, 1999 because their inclusion would
have had an anti-dilutive effect on the calculation.

In addition, 11 million and 5 million option shares were excluded from the
computation of diluted earnings per share for the 13 and 39 weeks ended October
28, 2000 and October 30, 1999, respectively, because the exercise price was
greater than the average market price.

4) Revenue Recognition

Refer to Note 1 in the Company's Annual Report on Form 10-K for the 52 weeks
ended January 29, 2000 for information related to changes made to the Company's
accounting policies, and the related financial statement effects, in
consideration of guidance provided by SEC Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements".
<PAGE>

                                      -8-

5) Segment Reporting

The Company operates in three business segments: department stores and catalog,
Eckerd drugstores, and Direct Marketing. The results of department stores and
catalog are combined because they generally serve the same customer, have
virtually the same mix of merchandise, and the majority of catalog sales are
completed in department stores. Other items are shown in the table below for
purposes of reconciling to total Company amounts.

                                3rd Quarter              3rd Quarter YTD
                              ---------------          -------------------
                                        Operating                  Operating
$ in millions         Year   Revenue      Profit        Revenue      Profit
------------------------------------------------------------------------------

Department Stores
  and Catalog         2000  $  4,319     $    81       $ 12,425     $   322
                      1999     4,541         226         12,810         489

Eckerd Drugstores     2000     3,136         (63)         9,602         (86)
                      1999     3,011          23          9,034         109

Direct Marketing      2000       288          65            869         191
                      1999       282          64            832         181

Total segments        2000     7,743          83         22,896         427
                      1999     7,834         313         22,676         779

Net interest and
  credit operations   2000        --        (112)            --        (329)
                      1999        --         (83)            --        (180)

Corporate and other
  unallocated, and
  acquisition
  amortization        2000        --         (22)            --         (98)
                      1999        --         (11)            --         (53)

Restructuring and
  other charges, net  2000        --           3             --        (204)
                      1999        --          --             --          --

Total Company         2000     7,743         (48)        22,896        (204)
                      1999     7,834         219         22,676         546
<PAGE>

                                      -9-


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Financial Condition
-------------------

Merchandise inventories on a FIFO basis totaled $7,150 million at the end of the
third quarter compared with $7,262 million last year. Inventories for department
stores and catalog totaled $4,667 million at October 28, 2000 as compared with
$4,899 million at the end of last year's third quarter. On a comparable store
basis, inventories declined by approximately 7% from last year levels. The
overall decline in stores and catalog inventory levels is the result of
continued emphasis on reducing the number of weeks of inventory on hand and
improving inventory productivity coupled with store closings. Eckerd drugstore
inventories totaled $2,483 million compared with $2,363 million last year. The
current cost of inventories exceeded the LIFO basis amount carried on the
balance sheet by approximately $308 million at October 28, 2000, $270 million at
January 29, 2000, and $263 million at October 30, 1999.

Properties, net of accumulated depreciation, totaled $5,153 million at October
28, 2000 compared with $5,434 million at the end of last year's third quarter.
Balances reflect $60 million in asset impairment charges related to the closing
of underperforming JCPenney stores, and $110 million to the closing of
underperforming Eckerd drugstores, recorded in the first quarter of 2000 and the
fourth quarter of 1999, respectively.

Goodwill and other intangible assets, net, totaled $2,967 million this year
compared with $3,181 million at the end of 1999's third quarter.

At October 28, 2000 the consolidated balance sheet included reserves related to
restructuring activities totaling $192 million, including $118 million related
to current year activities. These reserves were established in connection with
store closing programs and other restructuring activities recorded in the first
quarter of 2000 as well as in 1997 and 1996. The reserves are related primarily
to future lease obligations, severance and outplacement benefits, and other exit
costs associated with store closings. Reserves were reduced by $95 million
through the third quarter of 2000 as a result of lease and other payments ($54
million) and reserve adjustments ($41 million). See the discussion under the
caption Restructuring and Other Charges, net, in Results of Operations and Note
1 to the interim financial statements for additional discussion about the
charges recorded in 2000.

As previously announced, the Company has initiated an evaluation of all areas of
its operations and currently expects to record charges in the fourth quarter of
2000 related to items such as, but not limited to, the closing of
underperforming JCPenney stores, asset impairments, and higher levels of
markdowns resulting from the migration to a centralized environment associated
with its merchandising process redesign.

During the third quarter, the Company redeemed $300 million principal amount of
6.375 percent notes, due September 2000, at par. Through the end of the third
quarter of 2000, the Company had retired $805 million of long-term debt.

<PAGE>

                                      -10-

Long-term debt is currently rated Baa3 by Moody's Investors Service and BBB- by
Standard and Poor's Corporation as of the end of the third quarter, and the
Company's commercial paper was rated P3 and A3 by the respective rating
agencies.

In the third quarter the Company reduced its quarterly dividend on common stock
from 28.75 cents to 12.5 cents per share, and paid such quarterly dividend on
November 1, 2000, to stockholders of record on October 10, 2000.

Results of Operations
---------------------

Consolidated operating results
($ in millions)

<TABLE>
<CAPTION>
                                           13 weeks ended              39 weeks ended
                                        --------------------       -----------------------
                                        Oct. 28,    Oct. 30,       Oct. 28,       Oct. 30,
                                          2000        1999           2000           1999
                                        --------    --------       ---------    ----------
<S>                                     <C>         <C>            <C>          <C>
Operating profit/(loss) by segment
  Department stores and catalog          $    81     $   226        $    322     $    489
  Eckerd drugstores                          (63)         23             (86)         109
  Direct Marketing                            65          64             191          181
                                        --------    --------       ---------    ---------
  Total segments                              83         313             427          779

  Corporate and other unallocated             (3)          7             (19)          27
  Net interest and credit operations        (112)        (83)           (329)        (180)
  Acquisition amortization                   (19)        (18)            (79)         (80)
  Restructuring and other charges, net         3          --            (204)          --
                                        --------    --------       ---------    ---------
  Income/(loss) before income taxes          (48)        219            (204)         546
  Income taxes                                18         (77)             79         (198)
                                        --------    --------       ---------    ---------
  Net income/(loss)                      $   (30)    $   142        $   (125)    $    348
                                        ========    ========       =========    =========
</TABLE>


Segment profit totaled $83 million in the third quarter compared with $313
million in last year's period. Current period results were principally impacted
by the softness in department store and catalog sales, leading to a more
promotional environment, and sales declines for drugstore general merchandise
categories coupled with a higher proportion of lower-margin managed care
pharmacy sales.

The year over year change in corporate and other unallocated, which consists of
real estate and investment gains and losses as well as other corporate items, is
primarily related to charges in 2000 for the significant process and
organizational changes under the ACT initiative. ACT, which represents a
fundamental rebuilding of the department store and catalog merchandising process
and organization, creating a centralized buying organization, will require
process and organizational restructuring throughout the Company's corporate
structure. The increase in net interest and credit operations this year is
related to the sale of the Company's proprietary credit card portfolio in
December 1999. Interest expense declined $55 million from last year; however,
proprietary credit generated $84 million of income in last year's third quarter.

The Company had a net loss for the quarter of $30 million, or $0.15 per share,
in this year's third quarter compared with income of $142 million, or $0.51 per
share, in last year's period. Before the effects of non-comparable ACT-related
items, the Company had a loss per share of $0.12 for the third quarter. On a
year to date basis, the Company had a net loss of $125 million, or $0.57 per
share, compared with net income of $348 million, or $1.24 per share, last year.
While it is too early to accurately predict results for the balance of the
fiscal year, management believes that fourth quarter earnings per share may be
adversely affected if the current slowdown in the department store sector
continues and it leads to a more promotional holiday season.

<PAGE>


                                      -11-

Segment Operating Results

Department Stores and Catalog
-----------------------------

<TABLE>
<CAPTION>
                                        13 weeks ended           39 weeks ended
                                     --------------------     ---------------------
                                     Oct. 28,    Oct. 30,     Oct. 28,     Oct. 30,
                                       2000        1999        2000          1999
                                     --------    --------     ---------   ---------
<S>                                  <C>         <C>          <C>         <C>
($ in millions)
Retail sales, net                    $  4,319    $  4,541     $  12,425   $  12,810
Cost of goods sold                     (3,042)     (3,065)       (8,643)     (8,783)
SG&A expenses                          (1,196)     (1,250)       (3,460)     (3,538)
                                     --------    --------     ---------   ---------
Operating profit /(1)/               $     81    $    226     $     322   $     489


Sales percent increase/(decrease):
  Total department stores                (4.5)       (2.7)         (3.3)       (1.3)
  Comparable stores                      (3.7)       (3.0)         (2.9)       (0.9)
  Catalog                                (6.1)        0.1          (2.0)        3.1
Ratios as a percent of sales:
Gross margin                             29.6        32.5          30.4        31.4
SG&A expenses                            27.7        27.5          27.8        27.6
Operating profit                          1.9         5.0           2.6         3.8
EBITDA /(2)/                              3.8         8.9           4.8         8.4
</TABLE>

(1) Operating profit represents pre-tax income before net interest expense,
corporate and other unallocated, acquisition amortization, and restructuring and
other charges, net. Operating profit in 1999 is shown before the effects of
credit revenue net of related operating costs.

(2) Earnings before interest, income taxes, depreciation and amortization.
1999's EBITDA includes credit revenue, net of related operating costs. EBITDA is
provided as an alternative assessment of operating performance and is not
intended to be a substitute for GAAP measurements; calculations may be different
for other companies.

Operating profit for department stores and catalog was $81 million in the third
quarter compared with $226 million last year. Sales in department stores
declined by 3.7% for comparable stores, those stores open at least twelve
months. Sales were strongest in women's apparel, but most other merchandise
lines were soft. Despite disappointing sales, merchandise inventories were
controlled, declining approximately 7% on a comparable store basis from last
year. Catalog sales decreased by 6.1% in this year's third quarter. E-commerce
sales, which are included as a component of catalog sales, grew substantially
from last year's levels, totaling $73 million this year compared with $20
million last year.

Gross margin for the segment totaled $1,277 million in the third quarter
compared with $1,476 million last year. Margin in this year's quarter was
negatively impacted by sales declines coupled with higher levels of clearance
and promotional markdowns. As a percent of sales, margins declined by 290 basis
points. SG&A expenses declined on a dollar basis for the quarter despite higher
levels of spending on the expansion of the Company's e-commerce business. SG&A
expenses were not leveraged as a percent of sales.

Operating profit for the nine months ended October 28, 2000 was $322 million
versus $489 million in last year's comparable period. Sales for comparable
department stores declined by 2.9 percent and catalog sales declined by 2.0
percent compared with last year's levels. Gross margin for the nine months
declined by 100 basis points as a percent of sales, primarily as a result of

<PAGE>

                                      -12-

higher levels of markdowns. SG&A expenses decreased from last year but were not
leveraged as a percent of sales.


Eckerd Drugstores
-----------------

<TABLE>
<CAPTION>
                                           13 weeks ended           39 weeks ended
                                       --------------------     ---------------------
                                       Oct. 28,    Oct. 30,     Oct. 28,     Oct. 30,
                                         2000        1999         2000         1999
                                       --------    --------     ---------    --------
<S>                                    <C>         <C>          <C>          <C>
($ in millions)
Retail sales, net                      $  3,136    $  3,011     $   9,602    $  9,034
Cost of goods sold                       (2,591)     (2,430)       (7,920)     (7,282)
SG&A expenses                              (608)       (558)       (1,768)     (1,643)
                                       --------    --------     ---------    --------
Operating profit/(loss) /(1)/          $    (63)   $     23     $     (86)   $    109


Sales percent increase:
  Total                                     4.2        20.9           6.3        20.4
  Comparable stores                         9.1         9.6           8.6        10.8
Ratios as a percent of sales:
FIFO gross margin                          17.8        19.7          17.9        19.8
LIFO gross margin                          17.4        19.3          17.5        19.4
SG&A expenses                              19.4        18.5          18.4        18.2
Operating profit/(loss)                    (2.0)        0.8          (0.9)        1.2
EBITDA /(2)/                               (0.4)        2.4           0.7         2.7

Ratios as a percent of sales, before
  the effects of non-comparable items: /(3)/
FIFO gross margin                          17.8        19.7          18.5        20.6
LIFO gross margin                          17.4        19.3          18.2        20.2
SG&A expenses                              19.4        18.5          18.3        17.7
Operating profit/(loss)                    (2.0)        0.8          (0.1)        2.5
EBITDA /(2)/                               (0.4)        2.4           1.5         4.1
</TABLE>

(1) Operating profit/(loss) represents pre-tax income/(loss) before net interest
expense, corporate and other unallocated, acquisition amortization, and
restructuring and other charges, net.

(2) Earnings before interest, income taxes, depreciation and amortization.
EBITDA is provided as an alternative assessment of operating performance and is
not intended to be a substitute for GAAP measurements; calculations may be
different for other companies.

(3) Non-comparable items consist pricipally of 2000 store closing activities and
1999 inventory adjustments.

Eckerd had an operating loss of $63 million in the third quarter compared with
operating profit of $23 million in last year's period. Sales for the quarter
increased by 9.1 percent for comparable stores. The increase was comprised of a
14.8 percent increase in pharmacy sales and a 1.0 percent decline in general
merchandise sales.

Gross margin declined by 190 basis points as a percent of sales. The decline was
principally related to a reduced level of higher-margin general merchandise
sales, coupled with a higher proportion of lower-margin managed care pharmacy
sales. Managed care pharmacy sales now account for approximately 89 percent of
total pharmacy sales, an increase of approximately 200 basis points from last
year's period. Gross margin includes LIFO charges of $13 million and $12 million
for the third quarter of 2000 and 1999, respectively. SG&A expenses increased by
90 basis points as a percent of sales and were negatively impacted by the
effects of new and relocated stores. These free-standing locations generate
higher sales volumes but carry higher expense ratios until they mature.
<PAGE>

                                      -13-

Eckerd had an operating loss of $86 million for the nine months ended October
28, 2000 versus an operating profit of $109 million in last year's comparable
period. Sales increased by 8.6 percent on a comparable store basis, led by a
13.8 percent increase in comparable store pharmacy sales. Gross margin on a
comparable basis, before the effects of 2000 store closing activities and 1999
inventory adjustments, declined by 200 basis points as a percent of sales. The
decline was primarily related to a higher proportion of managed care pharmacy
sales and higher shrinkage run rates in this year's period. SG&A expenses
increased by 60 basis points as a percent of sales. Eckerd recorded LIFO charges
of $38 million this year compared with $36 million last year.

Direct Marketing
----------------

<TABLE>
<CAPTION>
                                        13 weeks ended             39 weeks ended
                                     --------------------       --------------------
                                     Oct. 28,    Oct. 30,       Oct. 28,    Oct. 30,
                                       2000        1999           2000        1999
                                     --------    --------       ---------   --------
<S>                                  <C>         <C>            <C>         <C>
($ in millions)
Revenue                              $    288    $    282       $     869   $    832
Costs and expenses /(1)/                 (223)       (218)           (678)      (651)
                                     --------    --------        --------   --------
Operating profit /(2)/               $     65    $     64        $    191   $    181

Revenue, percent increase                 2.1        11.9             4.4       11.1
Operating profit as a percent
   of revenue                            22.6        22.7            22.0       21.8
</TABLE>

(1) Includes amortization of deferred acquisition costs of $68 million and $58
million for the third quarter and $189 million and $165 million for the first
nine months of 2000 and 1999, respectively.

(2) Operating profit represents pre-tax income before net interest expense,
corporate and other unallocated, acquisition amortization, and restructuring and
other charges, net.

Operating profit totaled $65 million for the quarter and $191 million year to
date, increases of 1.6 percent and 5.5 percent from last year's comparable
periods. Revenue totaled $288 million in the third quarter, an increase of 2.1
percent compared with a year ago, with the increase principally related to
health insurance premiums, which account for approximately 74 percent of total
insurance premiums and 61 percent of total revenues. For the first nine months,
revenue totaled $869 million, an increase of 4.4 percent versus last year.

Corporate and Other Unallocated
-------------------------------

Corporate and other unallocated consists of real estate activities, investment
transactions, and other items that are related to corporate initiatives or
activities which are not allocated to an operating segment. Third quarter 2000
results include $15 million in pre-tax incremental expenses related to the
Company's ACT initiative.
<PAGE>

                                      -14-

Net Interest Expense and Credit Operations
------------------------------------------

<TABLE>
<CAPTION>
                                        13 weeks ended           39 weeks ended
                                     --------------------     ---------------------
                                     Oct. 28,    Oct. 30,     Oct. 28,     Oct. 30,
                                       2000        1999         2000         1999
                                     --------    --------     --------    ---------
<S>                                  <C>         <C>          <C>         <C>
($ in millions)
Credit revenue, net of
  operating expenses                 $     --    $     84     $     --    $     294
Interest expense, net                    (112)       (167)        (329)        (474)
                                     --------    --------     --------    ---------
Total                                $   (112)   $    (83)    $   (329)   $    (180)
</TABLE>

As a result of the sale of its proprietary credit card portfolio to General
Electric Capital Corporation in December 1999, the Company no longer generates
revenues and expenses for its proprietary credit operation. Accordingly, this
category represents interest expense in the current and all future periods.

Interest charges for the third quarter and for the year have decreased
substantially, declining by $55 million for the quarter and $145 million for the
year, as a result of the decline in outstanding debt balances. The proceeds from
the sale of credit card receivables were used to repay short- and long-term
debt.

Restructuring and Other Charges, net
------------------------------------

During the third quarter of 2000, the Company recorded a pre-tax net credit of
$3 million related to restructuring charges and previously established
restructuring reserves.

Income Taxes
------------

The Company's effective income tax rate, excluding the effects of non-comparable
items, was 32.7 percent through the third quarter compared with 36.8 percent
last year.

New Accounting Rules
--------------------

The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (FAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". As amended by FAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133", and FAS No. 138, "Accounting for Certain Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133", FAS
No. 133 is effective for all fiscal quarters for fiscal years beginning after
June 15, 2000. The Company has reviewed areas impacted by these rules,
principally long-term debt, purchase commitments, and real estate leases, and
has determined that current instruments do not contain terms or conditions that
would be of a derivative nature. Accordingly, the Company does not expect the
adoption of these new rules to have a material impact on results of operations
or financial condition.

The FASB also issued FAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", which is effective for
years beginning after December 15, 2000. The Company has not completed its
review of these new rules but does not believe that it is a party to any
<PAGE>

                                      -15-

transactions that would be impacted by these rules. The Company does, however,
evaluate various financing alternatives and may be impacted in the future.

In addition, the Emerging Issues Task Force has reached a consensus on Issue No.
00-10, "Accounting for Shipping and Handling Fees and Costs", which is effective
for the Company's fourth quarter of 2000. The Company has not completed
assessing the impact of these new rules, which relate primarily to its Catalog
operations. These new rules will not change net income, but will impact
classification of revenues and expenses associated with shipping and handling
activities. Prior period amounts will be reclassified to conform with the
presentation adopted in the fourth quarter.

Seasonality
-----------

The Company's business depends to a great extent on the last quarter of the
year. Historically, sales for that period have averaged approximately one-third
of annual sales. Accordingly, the results of operations for the 13 and 39 weeks
ended October 28, 2000 are not necessarily indicative of the results for the
entire year.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into any transactions using financial derivative
instruments and believes that its exposure to market risk associated with other
financial instruments, such as investments and borrowings, and interest rate
fluctuations is not material.

This release may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, which reflect the Company's current views of future events and
financial performance, involve known and unknown risks and uncertainties that
may cause the Company's actual results to be materially different from planned
or expected results. Those risks and uncertainties include, but are not limited
to, competition, consumer demand, seasonality, economic conditions, and
government activity. Investors should take such risks into account when making
investment decisions.
<PAGE>

                                      -16-

PART II - OTHER INFORMATION


Item 1 - Legal Proceedings.

     The Company has no material legal proceedings pending against it.

Item 2 - Changes in Securities and Use of Proceeds.

     (c)  On September 13, 2000 the Company sold 39,618 shares of Common Stock,
          50 cents par value, to Allen I. Questrom for an aggregate purchase
          price of $589,317.75. The issuance of such shares was exempt from
          registration under the Securities Act of 1933, as amended ("the
          Securities Act"), pursuant to Rule 506 of Regulation D of the
          Securities Act as an offering to a limited number of individuals.

Item 6 - Exhibits and Reports on Form 8-K.

     (a)  Exhibits
          --------

          The following documents are filed as exhibits to this report:

          10(a) J. C. Penney Company, Inc. 2000 New Associate Equity Plan.

          10(b) Employment Agreement dated as of September 25, 2000.

          10(c) Agreement dated as of September 30, 2000.

          12(a) Computation of ratios of available income to combined fixed
                charges and preferred stock dividend requirement.

          12(b) Computation of ratios of available income to fixed charges.

          27(a) Financial Data Schedule for the nine months ended October 28,
                2000.

          27(b) Restated Financial Data Schedule for the nine months ended
                October 30, 1999.

     (b)  Reports on Form 8-K
          -------------------

          The Company filed the following report on Form 8-K during the period
          covered by this report:

          Current Report on Form 8-K dated July 21, 2000 (Item 5 - Other
          Events).
<PAGE>

                                      -17-

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        J. C. PENNEY COMPANY, INC.




                                        By    /s/ W. J. Alcorn
                                           ----------------------------
                                                  W. J. Alcorn
                                           Vice President and Controller
                                           (Principal Accounting Officer)



Date: December 11, 2000