<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 and 26 week periods         Commission File Number 1-4947-1
     ended August 1, 1998

                          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 August 1, 1998.

     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. 

<PAGE>
     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 53  weeks ended January  31,
     1998.


     Statements of Income and Reinvested Earnings 
     (Dollars in millions)



                                        13 weeks ended        26 weeks ended 
                                    ____________________   ____________________
                                    Aug. 1,     July 26,   Aug. 1,     July 26,
                                     1998         1997      1998         1997 
                                     ____         ____      ____         ____
     Interest earned from
          JCPenney and affiliates   $  33        $  29     $  67       $  111

     Interest expense                  22           19        44           73  
                                     ____         ____      ____         ____

     Income before income taxes        11           10        23           38

     Income taxes                       4            3         8           13 
                                     ____         ____       ___        _____

     Net income                         7            7        15           25

     Reinvested earnings at
          beginning of period       1,015          982     1,007          964 
                                   ______         ____    ______         ____

     Reinvested earnings at
          end of period            $1,022         $989    $1,022         $989
                                   ======         ====    ======         ====

<PAGE>
     Balance Sheets
     (Dollars in millions)


                                                 Aug. 1,    July 26,    Jan.31,
                                                  1998        1997       1998 
                                                 ________    ________   ________
     ASSETS                
     Loans to JCPenney and affiliates            $  2,738   $  2,388   $  2,591
                                                 ________   ________   ________

                                                 $  2,738   $  2,388   $  2,591 
                                                 ________   ________   ________

     LIABILITIES AND EQUITY OF JCPENNEY

     Short-term debt                             $  1,563   $  1,241   $  1,416

     Due to JCPenney                                    8         13         23
                                                   ______     ______     ______

     Total liabilities                           $  1,571   $  1,254   $  1,439

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

     Reinvested earnings                         $  1,022   $    989   $  1,007
                                                 ________   ________   ________

     Total equity of JCPenney                    $  1,167   $  1,134   $  1,152
                                                 ________   ________   ________

                                                 $  2,738   $  2,388   $  2,591
                                                 ========   ========   ========

<PAGE>
     Consolidated Statements of Cash Flows
     (Dollars in millions)





                                                        26 weeks ended 
                                              _______________________________
                                               Aug. 1,               July 26,
                                                1998                   1997 
                                              _________             _________

     Operating Activities          
          Net Income                          $      15             $      25 
          (Increase) Decrease in loans to
          JCPenney                                 (147)                2,674
          (Decrease) Increase in amount due
          to JCPenney                               (15)                   12 
                                                _______                 _____
                                                   (147)                2,711 
                                                _______                 _____

     Financing Activities
          Increase (Decrease) in short-term
          debt                                      147                (2,711) 
                                                _______                _______


     Increase (Decrease) in cash                    -0-                   -0-

     Cash at beginning of year                      -0-                   -0-  
                                                _______                _______

     Cash at end of second quarter              $   -0-                $  -0- 
                                                =======                ======= 

<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.

     For the second quarter of 1998, income, expenses, and provision for taxes
     increased as compared with the second quarter of 1997, as a result of 
     higher average borrowing levels. Borrowing levels averaged $1,586 million 
     during the 1998  second quarter as compared with  $1,388 million during the
     comparable 1997  period. Average interest  rates for the second  quarter of
     1998 increased 15 basis points as compared with the second quarter of 1997.
     For  the six  month  period ended  August 1,  1998,  income, expenses,  and
     provision for  taxes decreased as  compared to the 1997  comparable period.
     These decreases were  a result of lower borrowing  levels. Borrowing levels
     averaged $1,585 million for the first half of 1998 as compared  with $2,663
     million in the comparable 1997 period due to the Eckerd's acquisition.  For
     the six month  period in 1998, average  rates increased 13 basis  points as
     compared with the same period in 1997.  At the end of the second quarter of
     1998 borrowing levels were $1,563 million as compared with  $ 1,241 million
     at the end of the second quarter of 1997. 

     In  October 1996,  JCPenney  formed  a companywide  task  force to  provide
     guidance to  operating and support  departments, including Funding,  and to
     monitor the  progress  of efforts  to  address Year  2000  issues.   It  is
     expected that compliance work will be substantially completed by the end of
     1998. 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  compliance readiness.  However, there can  be no
     guarantee  that the  systems of  these  commercial paper  dealers on  which
     Funding relies will be timely converted, or that a failure to convert would
     not have  a material adverse  effect on Funding's operations.  JCPenney has
     developed contingency  plans to  address potential  Year 2000  disruptions.
     These  plans include business  continuity plans that  address accessibility
     and functionality of JCPenney and  Fundings facilities as well as steps  to
     be taken if an event causes failure of a system. 

<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 six months ended 
                             August 1, 1998.

              (b)     Reports on Form 8-K 
                      ___________________
                      None



                                   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:                                   
                                           ________________________________
                                             W. J. Alcorn
                                             Controller
                                             (Principal Accounting Officer)






     Date: September 15, 1998