<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 week period                           Commission File Number 1-4947-1
 ended May 1, 1999


                       J. C. PENNEY FUNDING CORPORATION
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)



             Delaware                                   51-0101524
--------------------------------------------------------------------------------
  (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.

500,000 shares of Common Stock of $100 par value, as of May 1, 1999.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
         --------------------


The following interim financial information of J. C. Penney Funding Corporation
("Funding"), a wholly owned subsidiary of J. C. Penney Company, Inc.
("JCPenney"), is unaudited; however, in the opinion of Funding, it includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation.  The financial information should be read in conjunction with the
audited financial statements included in Funding's Annual Report on Form 10-K
for the 52 weeks ended January 30, 1999.


Statements of Income and Reinvested Earnings
(Dollars in millions)


                                             13 weeks ended
                                          --------------------
                                           May 1,      May 2,
                                            1999        1998
                                          --------    --------


Interest earned from
 JCPenney and affiliates                  $     47    $     34

Interest expense                                31          22
                                          --------    --------

Income before income taxes                      16          12

Income taxes                                     6           4
                                          --------    --------

Net income                                      10           8

Reinvested earnings at
 beginning of period                         1,042       1,007
                                          --------    --------
Reinvested earnings at
 end of period                               1,052       1,015
                                          ========    ========

                                       2
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Balance Sheets
(Dollars in millions)



<TABLE>
<CAPTION>

                                                           May 1,            May 2,           Jan. 30,
                                                            1999              1998              1999
                                                         ---------         ----------        ---------
<S>                                                      <C>               <C>               <C>
ASSETS
Loans to JCPenney and affiliates                         $   3,217         $    2,663        $   3,129
                                                         ---------         ----------        ---------

                                                         $   3,217         $    2,663        $   3,129
                                                         =========         ==========        =========
LIABILITIES AND EQUITY OF JCPENNEY

Short-term debt                                          $   1,995         $    1,499        $   1,924

Due to JCPenney                                                 25                  4               18
                                                         ---------         ----------        ---------
Total liabilities                                            2,020              1,503            1,942

Equity of JCPenney:

 Common stock (including contributed
  capital), par value $100:
  Authorized, 750,000 shares
  Issued, 500,000 shares                                       145                145              145

Reinvested earnings                                          1,052              1,015            1,042
                                                         ---------         ----------        ---------

Total equity of JCPenney                                     1,197              1,160            1,187
                                                         ---------         ----------        ---------

                                                         $   3,217         $    2,663        $   3,129
                                                         =========         ==========        =========
</TABLE>

                                       3
<PAGE>

Consolidated Statements of Cash Flows

(Dollars in millions)


                                             13 weeks ended
                                          --------------------
                                           May 1,      May 2,
                                            1999        1998
                                          --------    --------

Operating Activities

Net income                                $     10    $      8

(Increase)Decrease in loans to
  JCPenney                                     (88)        (72)

(Decrease)Increase in amount due to
  JCPenney                                       7         (19)
                                          --------    --------
                                               (71)        (83)
                                          --------    --------
Financing Activities

Increase (Decrease) in short-term debt          71          83
                                          --------    --------
Increase in cash                                 0           0

Cash at beginning of year                        0           0
                                          --------    --------
Cash at end of first quarter              $      0    $      0
                                          ========    ========

                                       4
<PAGE>

ITEM 2.   Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

Under the terms of the loan agreement which provides for unsecured loans to be
made by Funding to JCPenney and the receivables agreement pursuant to which
Funding may purchase an undivided interest in certain JCPenney customer
receivables, Funding derives earnings on loans to JCPenney and income from
charges to JCPenney.  The income of Funding is designed to cover Funding's fixed
charges (interest expense) at a coverage ratio mutually agreed upon by Funding
and JCPenney.  The earnings to fixed charges coverage ratio has historically
been at least one and one-half times.

Since 1986, Funding has provided financing to JCPenney in accordance with the
loan agreement and no receivable balances have been purchased.

Funding is not and has not been involved in the administration of JCPenney's
retail credit operation and does not bear any expenses or receive any finance
charge revenue connected therewith.

Funding issues commercial paper through Credit Suisse First Boston Corporation,
J.P. Morgan Securities Inc.,  Merrill Lynch Money Markets Inc., and Morgan
Stanley Dean Witter to corporate and institutional investors in the domestic
market.  The commercial paper is guaranteed by JCPenney on a subordinated basis.
The commercial paper is rated "A2" by Standard & Poor's Corporation, "P2" by
Moody's Investors Service, and "F2" by Fitch Investors Service, Inc.

For the first quarter of 1999, income, expenses, and provision for taxes
increased as compared with the first quarter of 1998, as a result of higher
average borrowing levels. Borrowing levels averaged $2,397 million during the
1999 first quarter as compared with $1,585 million during the comparable 1998
period.  At the end of the first quarter of 1999, borrowing levels were $1,995
million as compared with $1,499 million at the end of the first quarter of 1998.
For the first quarter of 1999, average interest rates decreased 47 basis points
as compared with the same period in 1998.

JCPenney has initiated actions to address the Year 2000 issue relating to
Funding.  Year 2000 readiness work was more than 95 per cent complete as of May
1, 1999.  Since January 1999, JCPenney has been retesting all systems critical
to JCPenney's core businesses.  JCPenney has also focused on the Year 2000
readiness of its suppliers and service providers, both independently and in
conjunction with the National Retail Federation. Total costs associated with
these efforts are not expected to have a material impact on the financial
results of either JCPenney or Funding.  In addition, Funding has communicated
with its commercial paper dealers to determine their Year 2000 readiness.
However, there can be no guarantee that the systems of these commercial paper
dealers on which Funding relies will be converted in a timely manner, or that a
failure to convert would not have a material adverse effect on Funding's
operations.

                                       5
<PAGE>

PART II - OTHER INFORMATION


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

       (a)   Exhibits

             The following document is filed as an exhibit to this report:

             27    Financial Data Schedule for the three months ended May 1,
                    1999.

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

             None

                                       6
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                                  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 FUNDING CORPORATION



                              By: /s/ W. J. Alcorn
                                 --------------------------------------
                                  W. J. Alcorn
                                  Controller
                                  (Principal Accounting Officer)



Date:  June 14, 1999

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