10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 30, 2016

or

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

For the transition period from to

Commission File Number: 1-15274

J. C. PENNEY COMPANY, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-0037077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6501 Legacy Drive, Plano, Texas	75024 - 3698
(Address of principal executive offices)	(Zip Code)

(972) 431-1000

(Registrant’s telephone number, including area code)

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 by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x	Accelerated filer   ¨	Non-accelerated filer   ¨	Smaller reporting company  ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.307,729,570 shares of Common Stock of 50 cents par value, as of August 26, 2016.

J. C. PENNEY COMPANY, INC.

FORM 10-Q

For the Quarterly Period Ended July 30, 2016

INDEX

	Page
Part I. Financial Information
Item 1. Unaudited Interim Consolidated Financial Statements
Consolidated Statements of Operations	2
Consolidated Statements of Comprehensive Income/(Loss)	3
Consolidated Balance Sheets	4
Consolidated Statements of Cash Flows	5
Notes to Unaudited Interim Consolidated Financial Statements
1. Basis of Presentation and Consolidation	6
2. Change in Accounting for Retirement-Related Benefits	7
3. Effect of New Accounting Standards	8
4. Earnings/(Loss) per Share	8
5. Long-Term Debt	9
6. Derivative Financial Instruments	10
7. Fair Value Disclosures	11
8. Stockholders’ Equity	11
9. Retirement Benefit Plans	12
10. Restructuring and Management Transition	13
11. Real Estate and Other, Net	13
12. Income Taxes	14
13. Litigation and Other Contingencies	14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	30
Part II. Other Information
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 6. Exhibits	43
SIGNATURES	45

1

Part I. Financial Information

Item 1. Unaudited Interim Consolidated Financial Statements

J. C. PENNEY COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
(In millions, except per share data)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
				As Adjusted						As Adjusted
Total net sales	$	2,918		$	2,875		$	5,729		$	5,732
Cost of goods sold	1,834			1,810			3,627			3,626
Gross margin	1,084			1,065			2,102			2,106
Operating expenses/(income):
Selling, general and administrative (SG&A)	853			901			1,725			1,866
Pension	2			(16		)	4			(35		)
Depreciation and amortization	153			153			307			307
Real estate and other, net	(9		)	19			(47		)	(16		)
Restructuring and management transition	9			17			15			39
Total operating expenses	1,008			1,074			2,004			2,161
Operating income/(loss)	76			(9		)	98			(55		)
(Gain)/loss on extinguishment of debt	34			—			30			—
Net interest expense	93			103			188			201
Income/(loss) before income taxes	(51		)	(112		)	(120		)	(256		)
Income tax expense/(benefit)	5			5			4			11
Net income/(loss)	$	(56	)	$	(117	)	$	(124	)	$	(267	)
Earnings/(loss) per share:
Basic	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)
Diluted	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)
Weighted average shares – basic	308.0			305.9			307.6			305.7
Weighted average shares – diluted	308.0			305.9			307.6			305.7

See the accompanying notes to the unaudited Interim Consolidated Financial Statements.

2

J. C. PENNEY COMPANY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
				As Adjusted						As Adjusted
Net income/(loss)	$	(56	)	$	(117	)	$	(124	)	$	(267	)
Other comprehensive income/(loss), net of tax:
Retirement benefit plans
Prior service credit/(cost) arising during the period (1)	—			—			5			—
Reclassification for net actuarial (gain)/loss (2)	(1		)	—			(2		)	—
Reclassification for amortization of prior service (credit)/cost (3)	—			—			—			—
Cash flow hedges
Gain/(loss) on interest rate swaps (4)	(6		)	(7		)	(9		)	(7		)
Reclassification for periodic settlements (5)	2			1			4			1
Deferred tax valuation allowance	(1		)	(3		)	(1		)	(3		)
Total other comprehensive income/(loss), net of tax	(6		)	(9		)	(3		)	(9		)
Total comprehensive income/(loss), net of tax	$	(62	)	$	(126	)	$	(127	)	$	(276	)

See the accompanying notes to the unaudited Interim Consolidated Financial Statements.

(1) Net of $(3) million in tax in 2016.                    

(2) Net of $1 million and $2 million in tax in the three and six months ended July 30, 2016, respectively. Pre-tax amounts of $(2) million and $(4) million in the three and six months ended July 30, 2016, respectively, were recognized in SG&A in the Consolidated Statements of Operations.

(3) Pre-tax amounts of $2 million and $4 million in the three and six months ended July 30, 2016, respectively, were recognized in Pension in the Consolidated Statements of Operations. Pre-tax amounts of $(2) million and $(4) million in the three and six months ended July 30, 2016 were recognized in SG&A in the Consolidated Statements of Operations.

(4) Net of $3 million and $4 million of tax in the three and six months ended July 30, 2016, respectively. Net of $3 million of tax in the three and six months ended August 1, 2015, respectively.

(5) Net of $(1) million and $(2) million of tax in the three and six months ended July 30, 2016, respectively, and $3 million and $6 million in pre-tax amounts for the three and six months ended July 30, 2016, respectively, were recognized in Net interest expense in the Consolidated Statements of Operations. Net of $(1) million of tax in the three and six months ended August 1, 2015, respectively, and $2 million in pre-tax amounts for the three and six months ended August 1, 2015, respectively, were recognized in Net interest expense in the Consolidated Statements of Operations.

3

J. C. PENNEY COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

	July 30, 2016			August 1, 2015			January 30, 2016
(In millions, except per share data)	(Unaudited)			(Unaudited)
				As Adjusted
Assets
Current assets:
Cash in banks and in transit	$	171		$	178		$	119
Cash short-term investments	258			795			781
Cash and cash equivalents	429			973			900
Merchandise inventory	2,981			3,005			2,721
Deferred taxes	231			184			231
Prepaid expenses and other	235			200			166
Total current assets	3,876			4,362			4,018
Property and equipment (net of accumulated depreciation of $3,742, $3,586 and $3,757)	4,686			4,989			4,816
Prepaid pension	—			266			—
Other assets	604			615			608
Total Assets	$	9,166		$	10,232		$	9,442
Liabilities and Stockholders’ Equity
Current liabilities:
Merchandise accounts payable	$	1,094		$	1,122		$	925
Other accounts payable and accrued expenses	1,121			1,170			1,360
Current portion of capital leases and note payable	18			27			26
Current maturities of long-term debt	341			28			101
Total current liabilities	2,574			2,347			2,412
Long-term capital leases and note payable	10			18			10
Long-term debt	4,356			5,225			4,668
Deferred taxes	425			378			425
Other liabilities	604			604			618
Total Liabilities	7,969			8,572			8,133
Stockholders’ Equity
Common stock(1)	154			153			153
Additional paid-in capital	4,668			4,627			4,654
Reinvested earnings/(accumulated deficit)	(3,131		)	(2,761		)	(3,007		)
Accumulated other comprehensive income/(loss)	(494		)	(359		)	(491		)
Total Stockholders’ Equity	1,197			1,660			1,309
Total Liabilities and Stockholders’ Equity	$	9,166		$	10,232		$	9,442

(1) 1,250 million shares of common stock are authorized with a par value of $0.50 per share. The total shares issued and outstanding were 307.6 million, 305.5 million and 306.1 million as of July 30, 2016, August 1, 2015 and January 30, 2016, respectively.

See the accompanying notes to the unaudited Interim Consolidated Financial Statements.

4

J. C. PENNEY COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
				As Adjusted						As Adjusted
Cash flows from operating activities
Net income/(loss)	$	(56	)	$	(117	)	$	(124	)	$	(267	)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Restructuring and management transition	—			1			(1		)	4
Asset impairments and other charges	1			1			2			2
Net gain on sale of non-operating assets	—			(6		)	(5		)	(8		)
Net gain on sale of operating assets	(2		)	—			(10		)	(8		)
(Gain)/loss on extinguishment of debt	34			—			30			—
Depreciation and amortization	153			153			307			307
Benefit plans	(15		)	(23		)	(27		)	(48		)
Stock-based compensation	10			11			20			21
Deferred taxes	3			2			—			3
Change in cash from:
Inventory	(56		)	(194		)	(260		)	(353		)
Prepaid expenses and other	(9		)	26			(68		)	(11		)
Merchandise accounts payable	99			59			169			125
Current income taxes	(3		)	2			(4		)	6
Accrued expenses and other	27			127			(237		)	43
Net cash provided by/(used in) operating activities	186			42			(208		)	(184		)
Cash flows from investing activities
Capital expenditures	(121		)	(95		)	(160		)	(141		)
Net proceeds from sale of non-operating assets	—			7			2			13
Net proceeds from sale of operating assets	4			—			16			5
Joint venture return of investment	1			—			15			—
Net cash provided by/(used in) investing activities	(116		)	(88		)	(127		)	(123		)
Cash flows from financing activities
Proceeds from issuance of long-term debt	2,188			—			2,188			—
Payments of capital leases and note payable	(5		)	(18		)	(19		)	(23		)
Payments of long-term debt	(2,188		)	(7		)	(2,250		)	(13		)
Financing costs	(49		)	—			(49		)	—
Proceeds from stock options exercised	—			—			1			—
Tax withholding payments for vested restricted stock	(2		)	—			(7		)	(2		)
Net cash provided by/(used in) financing activities	(56		)	(25		)	(136		)	(38		)
Net increase/(decrease) in cash and cash equivalents	14			(71		)	(471		)	(345		)
Cash and cash equivalents at beginning of period	415			1,044			900			1,318
Cash and cash equivalents at end of period	$	429		$	973		$	429		$	973
Supplemental cash flow information
Income taxes received/(paid), net	$	(5	)	$	(2	)	$	(8	)	$	(2	)
Interest received/(paid), net	(62		)	(58		)	(184		)	(184		)
Supplemental non-cash investing and financing activity
Increase/(decrease) in other accounts payable related to purchases of property and equipment and software	(9		)	18			32			29

See the accompanying notes to the unaudited Interim Consolidated Financial Statements.

5

J. C. PENNEY COMPANY, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Consolidation

Basis of Presentation

J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The holding company has no independent assets or operations, and no direct subsidiaries other than JCP. The holding company and its consolidated subsidiaries, including JCP, are collectively referred to in this quarterly report as “we,” “us,” “our,” “ourselves” or the “Company,” unless otherwise indicated.

J. C. Penney Company, Inc. is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee of certain of JCP’s outstanding debt securities by J. C. Penney Company, Inc. is full and unconditional.

These unaudited Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying unaudited Interim Consolidated Financial Statements, in our opinion, include all material adjustments necessary for a fair presentation and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (2015 Form 10-K). We follow substantially the same accounting policies to prepare quarterly financial statements as are followed in preparing annual financial statements. A description of such significant accounting policies is included in the 2015 Form 10-K. The January 30, 2016 financial information was derived from the audited Consolidated Financial Statements, with related footnotes, included in the 2015 Form 10-K. Because of the seasonal nature of the retail business, operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31. As used herein, “three months ended July 30, 2016” and “three months ended August 1, 2015” refer to the 13-week periods ended July 30, 2016 and August 1, 2015, respectively. “Six months ended July 30, 2016” and “six months ended August 1, 2015” refer to the 26-week periods ended July 30, 2016 and August 1, 2015, respectively. Fiscal years 2016 and 2015 contain 52 weeks.

Basis of Consolidation

All significant inter-company transactions and balances have been eliminated in consolidation.

6

2. Change in Accounting for Retirement-Related Benefits

In 2015, the Company elected to change its method of recognizing pension expense. Previously, for the primary and supplemental pension plans, net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) were recognized over the remaining service period of plan participants (eight years for the primary pension plan). Under the Company’s new accounting method, the Company recognizes changes in net actuarial gains or losses in excess of the corridor annually in the fourth quarter each year (Mark-to-market Adjustment). The remaining components of pension expense, primarily service and interest costs and assumed return on plan assets, will be recorded on a quarterly basis. While the historical policy of recognizing pension expense was considered acceptable, the Company believes that the new policy is preferable as it eliminates the delay in recognition of actuarial gains and losses outside the corridor.

This change has been reported through retrospective application of the new policy to all periods presented. The impacts of all adjustments made to the financial statements are summarized below:

Consolidated Statements of Operations

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions, except per share data)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Pension	$	13		$	(16	)	$	(29	)	$	23		$	(35	)	$	(58	)
Income/(loss) before income taxes	(141		)	(112		)	29			(314		)	(256		)	58
Income tax expense/(benefit)	(3		)	5			8			(9		)	11			20
Net income/(loss)	$	(138	)	(117		)	$	21		$	(305	)	(267		)	$	38
Basic earnings/(loss) per common share	$	(0.45	)	$	(0.38	)	$	0.07		$	(1.00	)	$	(0.87	)	$	0.13
Diluted earnings/(loss) per common share	$	(0.45	)	$	(0.38	)	$	0.07		$	(1.00	)	$	(0.87	)	$	0.13

Consolidated Statements of Comprehensive Income/(Loss)

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Net income/(loss)	$	(138	)	$	(117	)	$	21		$	(305	)	$	(267	)	$	38
Reclassifications for amortization of net actuarial (gain)/loss	18			—			(18		)	35			—			(35		)
Deferred tax valuation allowance	—			(3		)	(3		)	—			(3		)	(3		)
Total other comprehensive income/(loss), net of tax	12			(9		)	(21		)	29			(9		)	(38		)
Total comprehensive income/(loss), net of tax	$	(126	)	$	(126	)	$	—		$	(276	)	$	(276	)	$	—

Consolidated Balance Sheets

	August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change
Reinvested earnings/(accumulated deficit)	$	(2,084	)	$	(2,761	)	$	(677	)
Accumulated other comprehensive income/(loss)	(1,036		)	(359		)	677

7

Consolidated Statements of Cash Flows

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Cash flows from operating activities:
Net income/(loss)	$	(138	)	$	(117	)	$	21		$	(305	)	$	(267	)	$	38
Benefit plans	6			(23		)	(29		)	10			(48		)	(58		)
Deferred taxes	$	(6	)	$	2		$	8		$	(17	)	$	3		$	20

3. Effect of New Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled (i.e., additional paid-in capital or APIC pools will be eliminated). The guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is changing. The ASU also provides a practical expedient for public companies that will allow the use of a simplified method to estimate the expected term for certain awards. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effect that adopting this new accounting guidance will have on our financial condition, results of operations or cash flows.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the FASB Emerging Issues Task Force) (ASU 2016-05). Under the ASU, the novation of a derivative contract (i.e., a change in the counterparty) in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. The hedge accounting relationship could continue uninterrupted if all of the other hedge accounting criteria are met, including the expectation that the hedge will be highly effective when the creditworthiness of the new counterparty to the derivative contract is considered. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods therein. Early adoption is permitted. Entities may apply the guidance prospectively or on a modified retrospective basis. We are currently evaluating the effect that adopting this new accounting guidance will have on our financial condition, results of operations or cash flows.

4. Earnings/(Loss) per Share

Net income/(loss) and shares used to compute basic and diluted earnings/(loss) per share (EPS) are reconciled below:

	Three Months Ended						Six Months Ended
(in millions, except per share data)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Earnings/(loss)
Net income/(loss)	$	(56	)	$	(117	)	$	(124	)	$	(267	)
Shares
Weighted average common shares outstanding (basic shares)	308.0			305.9			307.6			305.7
Adjustment for assumed dilution:
Stock options, restricted stock awards and warrant	—			—			—			—
Weighted average shares assuming dilution (diluted shares)	308.0			305.9			307.6			305.7
EPS
Basic	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)
Diluted	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)

8

The following average potential shares of common stock were excluded from the diluted EPS calculation because their effect would have been anti-dilutive:

	Three Months Ended		Six Months Ended
(Shares in millions)	July 30, 2016	August 1, 2015	July 30, 2016	August 1, 2015
Stock options, restricted stock awards and warrant	34.8	34.6	35.0	33.2

5. Long-Term Debt

($ in millions)	July 30, 2016			August 1, 2015			January 30, 2016
Issue:
5.65% Senior Notes Due 2020 (1)	$	400		$	400		$	400
5.75% Senior Notes Due 2018 (1)	265			300			300
5.875% Senior Secured Notes Due 2023 (1)	500			—			—
6.375% Senior Notes Due 2036 (1)	388			400			400
6.9% Notes Due 2026	2			2			2
7.125% Debentures Due 2023	10			10			10
7.4% Debentures Due 2037	313			326			326
7.625% Notes Due 2097	500			500			500
7.65% Debentures Due 2016	78			78			78
7.95% Debentures Due 2017	220			220			220
8.125% Senior Notes Due 2019	400			400			400
2016 Term Loan Facility	1,688			—			—
2013 Term Loan Facility	—			2,205			2,194
2014 Term Loan	—			495			—
Total debt, excluding unamortized debt issuance costs, capital leases and note payable	4,764			5,336			4,830
Unamortized debt issuance costs	(67		)	(83		)	(61		)
Total debt, excluding capital leases and note payable	4,697			5,253			4,769
Less: current maturities	341			28			101
Total long-term debt, excluding capital leases and note payable	$	4,356		$	5,225		$	4,668

(1) These debt issuances contain a change of control provision that would obligate us, at the holders’ option, to repurchase the debt at a price of 101%.

During the first quarter of 2016, we repurchased and retired $60 million aggregate principal amount of our outstanding debt resulting in a gain on extinguishment of debt of $4 million.

During the second quarter of 2016, we completed the refinancing of our $2.25 billion five-year senior secured term loan facility entered into in 2013 (2013 Term Loan Facility) with an amended and restated $1.688 billion seven-year senior secured term loan credit facility (2016 Term Loan Facility) and the issuance of $500 million of 5.875% Senior Secured Notes due 2023 (Senior Secured Notes), resulting in a loss on extinguishment of debt of $34 million.

The 2016 Term Loan Facility bears interest at a rate of LIBOR plus 4.25% and matures on June 23, 2023. We are required to make quarterly repayments in a principal amount equal to $10.55 million during the seven-year term, subject to certain reductions for mandatory and optional prepayments. Proceeds from the 2016 Term Loan Facility and the Senior Secured Notes were used to repay the entire outstanding principal balance of the 2013 Term Loan Facility. The 2016 Term Loan facility and the Senior Secured Notes are guaranteed by the Company and certain subsidiaries of JCP and are secured by mortgages on certain real estate of JCP and the guarantors.

9

6. Derivative Financial Instruments

We use derivative financial instruments for hedging and non-trading purposes to manage our exposure to changes in interest rates. Use of derivative financial instruments in hedging programs subjects us to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative instrument will change. In a hedging relationship, the change in the value of the derivative is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to derivatives represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of our derivative financial instruments is used to measure interest to be paid or received and does not represent our exposure due to credit risk. Credit risk is monitored through established approval procedures, including setting concentration limits by counterparty, reviewing credit ratings and requiring collateral (generally cash) from the counterparty when appropriate.

When we use derivative financial instruments for the purpose of hedging our exposure to interest rates, the contract terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria are recorded using hedge accounting. If a derivative instrument is a hedge, depending on the nature of the hedge, changes in the fair value of the instrument will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or be recognized in accumulated other comprehensive income/(loss) until the hedged item is recognized in earnings. The ineffective portion of an instrument’s change in fair value will be immediately recognized in earnings during the period. Instruments that do not meet the criteria for hedge accounting, or contracts for which we have not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of change.

We have entered into interest rate swap agreements with notional amounts totaling $1,250 million to fix a portion of our variable LIBOR-based interest payments. The interest rate swap agreements have a weighted-average fixed rate of 2.04%, mature on May 7, 2020 and have been designated as cash flow hedges.

The fair value of our interest rate swaps are recorded on the unaudited Interim Consolidated Balance Sheets as an asset or a liability (see Note 7). The effective portion of the interest rate swaps' changes in fair values is reported in Accumulated other comprehensive income/(loss) (see Note 8), and the ineffective portion is reported in Net income/(loss). Amounts in Accumulated other comprehensive income/(loss) are reclassified into net income/(loss) when the related interest payments affect earnings. For the periods presented, all of the interest rate swaps were 100% effective.

Information regarding the gross amounts of our derivative instruments in the unaudited Interim Consolidated Balance Sheets is as follows:

	Asset Derivatives at Fair Value							Liability Derivatives at Fair Value
($ in millions)	Balance Sheet Location	July 30, 2016		August 1, 2015		January 30, 2016		Balance Sheet Location	July 30, 2016		August 1, 2015		January 30, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	N/A	$	—	$	—	$	—	Other accounts payable and accrued expenses	$	2	$	2	$	2
Interest rate swaps	N/A	—		—		—		Other liabilities	35		9		28
Total derivatives designated as hedging instruments		$	—	$	—	$	—		$	37	$	11	$	30

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7. Fair Value Disclosures

In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value, as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Significant unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.

Cash Flow Hedges Measured on a Recurring Basis

The $37 million, $11 million and $30 million fair value of our cash flow hedges as of July 30, 2016, August 1, 2015 and January 30, 2016, respectively, are valued in the market using discounted cash flow techniques which use quoted market interest rates in discounted cash flow calculations which consider the instrument's term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.

Other Financial Instruments

Carrying values and fair values of financial instruments that are not carried at fair value in the unaudited Interim Consolidated Balance Sheets are as follows:

	July 30, 2016				August 1, 2015				January 30, 2016
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Total debt, excluding unamortized debt issuance costs, capital leases and note payable	$	4,764	$	4,530	$	5,336	$	5,002	$	4,830	$	4,248

The fair value of long-term debt was estimated by obtaining quotes from brokers or was based on current rates offered for similar debt. As of July 30, 2016, August 1, 2015 and January 30, 2016, the fair values of cash and cash equivalents and accounts payable approximated their carrying values due to the short-term nature of these instruments. In addition, the fair values of capital lease commitments and the note payable approximated their carrying values. These items have been excluded from the table above.

Concentrations of Credit Risk

We have no significant concentrations of credit risk.

8. Stockholders’ Equity

The following table shows the change in the components of stockholders’ equity for the six months ended July 30, 2016:

(in millions)	Number of Common Shares	Common Stock		Additional Paid-in Capital		Reinvested Earnings/ (Accumulated Deficit)			Accumulated Other Comprehensive Income/(Loss)			Total Stockholders’ Equity
January 30, 2016	306.1	$	153	$	4,654	$	(3,007	)	$	(491	)	$	1,309
Net income/(loss)	—	—		—		(124		)	—			(124		)
Other comprehensive income/(loss)	—	—		—		—			(3		)	(3		)
Stock-based compensation and other	1.5	1		14		—			—			15
July 30, 2016	307.6	$	154	$	4,668	$	(3,131	)	$	(494	)	$	1,197

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Accumulated Other Comprehensive Income/(Loss)

The following table shows the changes in accumulated other comprehensive income/(loss) balances for the six months ended July 30, 2016:

($ in millions)	Net  Actuarial Gain/(Loss)			Prior Service Credit/(Cost)			Foreign Currency Translation			Gain/(Loss) on Cash Flow Hedges			Accumulated Other Comprehensive Income/(Loss)
January 30, 2016	$	(423	)	$	(38	)	$	(2	)	$	(28	)	$	(491	)
Other comprehensive income/(loss) before reclassifications	—			8			—			(13		)	(5		)
Amounts reclassified from accumulated other comprehensive income	(4		)	—			—			6			2
July 30, 2016	$	(427	)	$	(30	)	$	(2	)	$	(35	)	$	(494	)

9. Retirement Benefit Plans

The components of net periodic benefit expense/(income) for our non-contributory qualified defined benefit pension plan (Primary Pension Plan) and non-contributory supplemental pension plans were as follows:

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Primary Pension Plan
Service cost	$	14		$	18		$	28		$	35
Interest cost	38			49			76			98
Other cost	—			3			—			3
Expected return on plan assets	(54		)	(89		)	(108		)	(178		)
Amortization of prior service cost/(credit)	2			2			4			4
Net periodic benefit expense/(income)	$	—		$	(17	)	$	—		$	(38	)
Supplemental Pension Plans
Interest cost	2			1			4			3
Net periodic benefit expense/(income)	$	2		$	1		$	4		$	3
Primary and Supplemental Pension Plans Total
Service cost	$	14		$	18		$	28		$	35
Interest cost	40			50			80			101
Other cost	—			3			—			3
Expected return on plan assets	(54		)	(89		)	(108		)	(178		)
Amortization of prior service cost/(credit)	2			2			4			4
Net periodic benefit expense/(income)	$	2		$	(16	)	$	4		$	(35	)

Additionally, the Company had net periodic postretirement income of $4 million and $2 million, respectively, in the three months ended July 30, 2016 and August 1, 2015 and net periodic postretirement income of $8 million and $4 million, respectively, in the six months ended July 30, 2016 and August 1, 2015. These amounts are related to the Company's noncontributory postretirement health and welfare plan and are included in SG&A expense in the unaudited Interim Consolidated Statements of Operations. The Company communicated to plan participants that the postretirement health and welfare plan will terminate by December 2016 and this resulted in a reduction of the accumulated plan benefit obligation from $8 million at January 30, 2016 to $1 million at July 30, 2016.

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10. Restructuring and Management Transition

The components of Restructuring and management transition include:

• Home office and stores -- charges for actions to reduce our store and home office expenses including employee termination benefits, store lease termination and impairment charges;

• Management transition -- charges related to implementing changes within our management leadership team for both incoming and outgoing members of management; and

• Other -- charges related primarily to contract termination costs and other costs associated with our previous shops strategy and costs related to the closure of certain supply chain locations.

The composition of restructuring and management transition charges was as follows:

	Three Months Ended				Six Months Ended				Cumulative Amount From Program Inception Through July 30, 2016
($ in millions)	July 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Home office and stores	$	—	$	15	$	4	$	29	$	293
Management transition	1		1		3		7		255
Other	8		1		8		3		171
Total	$	9	$	17	$	15	$	39	$	719

Activity for the restructuring and management transition liability for the six months ended July 30, 2016 was as follows:

($ in millions)	Home Office and Stores			Management Transition			Other			Total
January 30, 2016	$	18		$	10		$	23		$	51
Charges	4			3			8			15
Cash payments	(15		)	(12		)	(8		)	(35		)
Non-cash	1			—			—			1
July 30, 2016	$	8		$	1		$	23		$	32

Non-cash amounts represent charges that do not result in cash outflows.

11. Real Estate and Other, Net

Real estate and other consists of ongoing operating income from our real estate subsidiaries. Real estate and other also includes net gains from the sale of facilities and equipment that are no longer used in operations, asset impairments, accruals for certain litigation and other non-operating charges and credits. In addition, during the first quarter of 2014, we entered into a joint venture in which we contributed approximately 220 acres of excess property adjacent to our home office facility in Plano, Texas (Home Office Land Joint Venture). The joint venture was formed to develop the contributed property and our proportional share of the joint venture's activities is recorded in Real estate and other, net.

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The composition of Real estate and other, net was as follows:  

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Net gain from sale of non-operating assets	$	—		$	(6	)	$	(5	)	$	(8	)
Investment income from Home Office Land Joint Venture	(5		)	—			(29		)	(22		)
Net gain from sale of operating assets	(2		)	—			(10		)	(8		)
Other	(2		)	25			(3		)	22
Total expense/(income)	$	(9	)	$	19		$	(47	)	$	(16	)

Investment Income from Joint Ventures

During the second quarter and first six months of 2016, the Company had $5 million and $29 million, respectively, in income related to its proportional share of the net income in the Home Office Land Joint Venture and received an aggregate cash distribution of $6 million and $44 million, respectively. During the second quarter of 2015, no investment income was generated from the Home Office Land Joint Venture. During the first half of 2015, the Company had $22 million in income related to its proportional share of the net income in the Home Office Land Joint Venture and received an aggregate cash distribution of $22 million.

12. Income Taxes

The net tax expense of $5 million for the three months ended July 30, 2016 consisted of state and foreign tax expenses of $4 million, $1 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets and $2 million of expense relating to other comprehensive income, offset by a $2 million benefit for state audit settlements.

The net tax expense of $4 million for the six months ended July 30, 2016 consisted of state and foreign tax expenses of $7 million and $3 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets, offset by net tax benefits of $4 million to adjust the valuation allowance and $2 million for state audit settlements.

As of July 30, 2016, we have approximately $2.6 billion of net operating losses (NOLs) available for U.S. federal income tax purposes, which expire in 2032 through 2034 and $62 million of tax credit carryforwards that expire at various dates through 2035. For these NOL and tax credit carryforwards a net deferred tax asset of $78 million has been recorded, net of a valuation allowance of $818 million. A valuation allowance of $239 million fully offsets the deferred tax assets resulting from the state NOL carryforwards that expire at various dates through 2034. In assessing the need for the valuation allowance, we considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As a result of our periodic assessment, our estimate of the realization of deferred tax assets is solely based on the future reversals of existing taxable temporary differences and tax planning strategies that we would make use of to accelerate taxable income to utilize expiring NOL and tax credit carryforwards. Accordingly, in the second quarter and first six months of 2016, the valuation allowance was increased by $19 million and $32 million, respectively, to offset the net deferred tax assets created in those periods relating primarily to the increase in NOL carryforwards.

13. Litigation and Other Contingencies

Litigation

Macy’s Litigation

On August 16, 2012, Macy’s, Inc. and Macy’s Merchandising Group, Inc. (together the Plaintiffs) filed suit against JCP in the Supreme Court of the State of New York, County of New York, alleging that the Company tortiously interfered with, and engaged in unfair competition relating to, a 2006 agreement between Macy’s and Martha Stewart Living Omnimedia, Inc. (MSLO) by entering into a partnership agreement with MSLO in December 2011. The Plaintiffs sought primarily to prevent the Company from implementing our partnership agreement with MSLO as it related to products in the bedding, bath, kitchen and cookware categories. The suit was consolidated with an already-existing breach of contract lawsuit by the Plaintiffs against MSLO, and a bench trial commenced on February 20, 2013. On October 21, 2013, the Company and MSLO entered into an amendment of the partnership agreement, providing in part that the Company will not sell MSLO-designed merchandise in the bedding, bath, kitchen and cookware categories. On January 2, 2014, MSLO and Macy's announced that they had settled the case as to each other, and MSLO was subsequently dismissed as a defendant. On June 16, 2014, the court issued a ruling

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against the Company on the remaining claim of intentional interference, and held that Macy’s is not entitled to punitive damages. The court referred other issues related to damages to a Judicial Hearing Officer. On June 30, 2014, the Company appealed the court’s decision, and Macy’s cross-appealed a portion of the decision. On February 26, 2015, the appellate court affirmed the trial court's rulings concerning the claim of intentional interference and lack of punitive damages, and reinstated Macy's claims for intentional interference and unfair competition that had been dismissed during trial. On June 17, 2015, Macy’s appealed the court’s order that the Judicial Hearing Officer proceed with the damages phase of the proceedings on the tortious interference claim. On November 24, 2015, the Judicial Hearing Officer issued a recommendation on the amount of damages to be awarded to Macy’s. On December 1, 2015, the appellate court heard oral argument on Macy's appeal of the trial court's order referring issues related to damages to the Judicial Hearing Officer and the parties are awaiting a decision. On June 6, 2016, the court adopted the Judicial Hearing Officer's recommendation on the amount of damages to be awarded to Macy's. Both parties have filed a notice of appeal. While no assurance can be given as to the ultimate outcome of this matter, we believe that the final resolution of this action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Ozenne Derivative Lawsuit

On January 19, 2012, a purported shareholder of the Company, Everett Ozenne, filed a shareholder derivative lawsuit in the 193^rd District Court of Dallas County, Texas, against certain of the Company’s Board of Directors and executives. The Company is a nominal defendant in the suit. The lawsuit alleged breaches of fiduciary duties, corporate waste and unjust enrichment involving decisions regarding executive compensation, specifically that compensation paid to certain executive officers from 2008 to 2011 was too high in light of the Company’s financial performance. The suit sought damages including unspecified compensatory damages, disgorgement by the former officers of allegedly excessive compensation, and equitable relief to reform the Company’s compensation practices. The Company and the named individuals filed an Answer and Special Exceptions to the lawsuit, arguing primarily that the plaintiff could not proceed with his suit because he failed to make demand on the Company’s Board of Directors, and that because demand on the Board would not be futile, demand was not excused. The trial court heard arguments on the Special Exceptions on June 25, 2012 and denied them. The Company and named individuals filed a mandamus proceeding in the Fifth District Court of Appeals challenging the trial court’s decision. The parties then settled the litigation and the appellate court stayed the appeal so that the trial court could review the proposed settlement. The trial court approved the settlement at a hearing on October 28, 2013 and, despite objection, awarded the plaintiff $3.1 million in attorneys’ fees and costs. The Fifth District Court of Appeals affirmed the award on December 19, 2014. The Company filed a Petition for Review with the Texas Supreme Court, which was denied on May 27, 2016.

Class Action Securities Litigation

The Company, Myron E. Ullman, III and Kenneth H. Hannah are parties to the Marcus consolidated purported class action lawsuit in the U.S. District Court, Eastern District of Texas, Tyler Division. The Marcus consolidated complaint is purportedly brought on behalf of persons who acquired our common stock during the period from August 20, 2013 through September 26, 2013, and alleges claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Plaintiff claims that the defendants made false and misleading statements and/or omissions regarding the Company’s financial condition and business prospects that caused our common stock to trade at artificially inflated prices.  The consolidated complaint seeks class certification, unspecified compensatory damages, including interest, reasonable costs and expenses, and other relief as the court may deem just and proper. Defendants filed a motion to dismiss the consolidated complaint which was denied by the court on September 29, 2015. Defendants filed an answer to the consolidated complaint on November 12, 2015. Plaintiff filed a motion for class certification on January 25, 2016, and defendants submitted a response to the motion on April 15, 2016. The motion was heard by the court on June 29, 2016.

Also, on August 26, 2014, plaintiff Nathan Johnson filed a purported class action lawsuit against the Company, Myron E. Ullman, III and Kenneth H. Hannah in the U.S. District Court, Eastern District of Texas, Tyler Division. The suit is purportedly brought on behalf of persons who acquired our securities other than common stock during the period from August 20, 2013 through September 26, 2013, generally mirrors the allegations contained in the Marcus lawsuit discussed above, and seeks similar relief. On June 8, 2015, plaintiff in the Marcus lawsuit amended the consolidated complaint to include the members of the purported class in the Johnson lawsuit, and on June 10, 2015, the Johnson lawsuit was consolidated into the Marcus lawsuit.

We believe these lawsuits are without merit and we intend to vigorously defend them. While no assurance can be given as to the ultimate outcome of these matters, we believe that the final resolution of these actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Shareholder Derivative Litigation

In October, 2013, two purported shareholder derivative actions were filed against certain present and former members of the Company’s Board of Directors and executives by the following parties in the U.S. District Court, Eastern District of Texas, Sherman Division: Weitzman (filed October 2, 2013) and Zauderer (filed October 3, 2013). The Company is named as a

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nominal defendant in both suits. The lawsuits assert claims for breaches of fiduciary duties and unjust enrichment based upon alleged false and misleading statements and/or omissions regarding the Company’s financial condition. The lawsuits seek unspecified compensatory damages, restitution, disgorgement by the defendants of all profits, benefits and other compensation, equitable relief to reform the Company’s corporate governance and internal procedures, reasonable costs and expenses, and other relief as the court may deem just and proper. On October 28, 2013, the Court consolidated the two cases into the Weitzman lawsuit. On January 15, 2014, the Court entered an order staying the derivative suits pending certain events in the class action securities litigation described above.

Also, in March 2016, plaintiff Frank Lipsius filed a purported shareholder derivative action against certain present and former members of the Company's Board of Directors and executives in the District Court of Collin County in the State of Texas. The Company is named as a nominal defendant in the suit. The suit generally mirrors the allegations contained in the Weitzman and Zauderer suits discussed above, and seeks similar relief.

While no assurance can be given as to the ultimate outcome of these matters, we believe that the final resolution of these actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

ERISA Class Action Litigation

JCP and certain present and former members of JCP's Board of Directors have been sued in a purported class action complaint by plaintiffs Roberto Ramirez and Thomas Ihle, individually and on behalf of all others similarly situated, which was filed on July 8, 2014 in the U.S. District Court, Eastern District of Texas, Tyler Division. The suit alleges that the defendants violated Section 502 of the Employee Retirement Income Security Act (ERISA) by breaching fiduciary duties relating to the J. C. Penney Corporation, Inc. Savings, Profit-Sharing and Stock Ownership Plan (the Plan). The class period is alleged to be between November 1, 2011 and September 27, 2013. Plaintiffs allege that they and others who invested in or held Company stock in the Plan during this period were injured because defendants allegedly made false and misleading statements and/or omissions regarding the Company’s financial condition and business prospects that caused the Company’s common stock to trade at artificially inflated prices. The complaint seeks class certification, declaratory relief, a constructive trust, reimbursement of alleged losses to the Plan, actual damages, attorneys’ fees and costs, and other relief. Defendants filed a motion to dismiss the complaint which was granted in part and denied in part by the court on September 29, 2015. The parties have reached a settlement agreement, subject to court approval, pursuant to which JCP would make available $4.5 million to settle class members’ claims. While no assurance can be given as to the ultimate outcome of this matter, we believe that the final resolution of this action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Employment Class Action Litigation

JCP is a defendant in a class action proceeding entitled Tschudy v. JCPenney Corporation filed on April 15, 2011 in the U.S. District Court, Southern District of California. The lawsuit alleges that JCP violated the California Labor Code in connection with the alleged forfeiture of accrued and vested vacation time under its “My Time Off” policy. The class consists of all JCP employees who worked in California from April 5, 2007 to the present. Plaintiffs amended the complaint to assert additional claims under the Illinois Wage Payment and Collection Act on behalf of all JCP employees who worked in Illinois from January 1, 2004 to the present. After the court granted JCP’s motion to transfer the Illinois claims, those claims are now pending in a separate action in the U.S. District Court, Northern District of Illinois, entitled Garcia v. JCPenney Corporation. The lawsuits seek compensatory damages, penalties, interest, disgorgement, declaratory and injunctive relief, and attorney’s fees and costs. Plaintiffs in both lawsuits filed motions, which the Company opposed, to certify these actions on behalf of all employees in California and Illinois based on the specific claims at issue. On December 17, 2014, the California court granted plaintiffs’ motion for class certification. Pursuant to a motion by the Company, the California court decertified the class on December 9, 2015. On March 30, 2016, the California court granted JCP’s motion for summary judgment, and on May 4, 2016, entered judgment for JCP on all plaintiffs’ claims. The Illinois court denied without prejudice plaintiffs' motion for class certification pending the filing of an amended complaint. Plaintiffs filed their amended complaint in the Illinois lawsuit on April 14, 2015 and the Company has answered. On July 2, 2015, the Illinois plaintiffs renewed their motion for class certification, which the Illinois court granted on March 8, 2016. We believe these lawsuits are without merit and we intend to continue to vigorously defend these lawsuits. While no assurance can be given as to the ultimate outcome of these matters, we believe that the final resolution of these actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Pricing Class Action Litigation

JCP is a defendant in a class action proceeding entitled Spann v. J. C. Penney Corporation, Inc. filed on February 8, 2012 in the U.S. District Court, Central District of California. The lawsuit alleges that JCP violated California’s Unfair Competition Law and related state statutes in connection with its advertising of sale prices for private label apparel and accessories. The lawsuit seeks restitution, damages, injunctive relief, and attorney’s fees and costs. On May 18, 2015, the court granted plaintiff's

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request for certification of a class consisting of all people who, between November 5, 2010 and January 31, 2012, made purchases in California of JCP private or exclusive label apparel or accessories advertised at a discount of at least 30% off the stated original or regular price (excluding those who only received such discount by using coupon(s)), and who have not received a refund or credit for their purchases. The parties have reached a settlement agreement, subject to court approval, and in accordance with the term of the settlement, we have established a $50 million reserve to settle class members' claims. The court has granted preliminary approval of the settlement. A final approval hearing was held on August 25, 2016 and the parties are awaiting the court's decision.

Other Legal Proceedings

We are subject to various other legal and governmental proceedings involving routine litigation incidental to our business. Accruals have been established based on our best estimates of our potential liability in certain of these matters, including certain matters discussed above, all of which we believe aggregate to an amount that is not material to the Consolidated Financial Statements. These estimates were developed in consultation with in-house and outside counsel. While no assurance can be given as to the ultimate outcome of these matters, we currently believe that the final resolution of these actions, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Contingencies

As of July 30, 2016, we estimated our total potential environmental liabilities to range from $19 million to $25 million and recorded our best estimate of $23 million in Other accounts payable and accrued expenses and Other liabilities in the unaudited Interim Consolidated Balance Sheet as of that date. This estimate covered potential liabilities primarily related to underground storage tanks, remediation of environmental conditions involving our former drugstore locations and asbestos removal in connection with approved plans to renovate or dispose of our facilities. We continue to assess required remediation and the adequacy of environmental reserves as new information becomes available and known conditions are further delineated. If we were to incur losses at the upper end of the estimated range, we do not believe that such losses would have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The holding company has no independent assets or operations and no direct subsidiaries other than JCP. The holding company and its consolidated subsidiaries, including JCP, are collectively referred to in this quarterly report as “we,” “us,” “our,” “ourselves” or the “Company,” unless otherwise indicated.

The holding company is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee of certain of JCP’s outstanding debt securities by the holding company is full and unconditional.

This discussion is intended to provide information that will assist the reader in understanding our financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, how operating results affect the financial condition and results of operations of our Company as a whole, as well as how certain accounting principles affect the financial statements. It should be read in conjunction with our consolidated financial statements as of January 30, 2016, and for the year then ended, and related Notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), all contained in the Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (2015 Form 10-K). Unless otherwise indicated, all references to earnings/(loss) per share (EPS) are on a diluted basis and all references to years relate to fiscal years rather than to calendar years.

Strategic Framework

Our strategic framework is built upon the three pillars of private brands, omnichannel and revenue per customer.

Product differentiation, affordable style and quality and enhanced profitability are critical to the success of our private brands. With our team of designers and our proprietary designs, we believe we can differentiate our private and exclusive brands from our competitors and the overall marketplace. Through our private brand selection, we believe we can provide value to our customers by offering products with style and quality at an attractive price point. Lastly, with our global sourcing infrastructure, we believe we are uniquely positioned to enhance our merchandise margins by managing product development costs and maintaining flexibility with our price offerings. During the second quarter of 2016, private brand merchandise comprised 46% of total merchandise sales as compared to 45% in the corresponding prior year quarter. For the first half of 2016, private brand merchandise comprised 45% of total merchandise sales as compared to 44% in the corresponding prior year period. During the second quarters of 2016 and 2015, exclusive brand merchandise comprised 8% and 9%, respectively, of total merchandise sales. For the first six months of 2016 and 2015, exclusive brand merchandise comprised 9% and 10%, respectively, of total merchandise sales. During the second quarter of 2016, we launched the exclusive athleisure brand MSX by Michael Strahan in approximately 500 stores.

Our second strategic area of focus is omnichannel. With our heritage of being a catalog retailer, we believe we have the right foundation in place to enhance our omnichannel capabilities. Today’s customer wants to decide when and how she wants to shop, whether in store or online using multiple personal devices. Improving the omnichannel experience for our customers involves further development of our mobile apps, providing more fulfillment choices to the customer and expanding our merchandise assortment. In the second quarter of 2016, we completed our roll out of “buy online and pick up in store same day” (BOPIS) to all stores. We also launched our new mobile app to take better advantage of the traffic growth in the mobile channel.

Our final strategic priority is revenue per customer. For 2016, we are focused on the following initiatives to increase the frequency of customer visits and the amount they spend on every transaction. First, we plan to accelerate our growth of Sephora inside JCPenney locations. We plan to add approximately 60 new Sephora locations in 2016. During the first half of 2016, we opened 56 additional Sephora locations, bringing our total number of locations to 574, and we launched several new brands in our Sephora shops. Second, we continue to enhance our salon environment through our rebranding initiative in partnership with InStyle magazine. Third, for 2016 we plan to redesign the center core area, which includes fashion and fine jewelry, handbags, footwear, sunglasses, and accessories, in approximately one-third of our stores. We have rolled out our center core concept in approximately 350 stores as of the end of the first half of 2016. Fourth is our new home initiative. With the current trend of consumer investment in new and existing homes, we believe there is an opportunity for us to add to our offerings a compelling assortment within major appliances, window treatments, furniture and flooring. We are expanding our

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major appliance initiatives to over 500 stores and online at jcpenney.com this year, and continue to enhance our window coverings presentation and test new initiatives with Ashley Furniture and Empire Today.

SecondQuarter Highlights

▪ Sales were $2,918 million with a comparable store sales increase of 2.2%.

▪ Gross margin as a percentage of sales increased to 37.1% compared to 37.0% in the same period last year.

▪ Selling, general and administrative (SG&A) expenses decreased$48 million, or 5.3%, for the second quarter of 2016 as compared to the same period last year. These savings were primarily driven by lower corporate overhead, incentive compensation, store controllable costs and more efficient advertising spend.

▪ Our net loss was $56 million, or $0.18 per share, compared to a net loss of $117 million, or $0.38 per share, for the corresponding prior year quarter. Results for this quarter included the following amounts that are not directly related to our ongoing core business operations:

▪ $9 million, or $0.03 per share, of restructuring and management transition charges;

▪ $34 million, or $0.11 per share, for the loss on extinguishment of debt;

▪ $5 million, or $0.02 per share, for our proportional share of net income from our joint venture formed to develop the excess property adjacent to our home office facility in Plano, Texas (Home Office Land Joint Venture); and

▪ $2 million, or $0.01 per share, of tax expense that resulted from our other comprehensive income allocation between our Operating loss and Accumulated other comprehensive income for the amortization of prior service credits related to our qualified defined benefit pension plan (Primary Pension Plan) and the tax effect for the loss on our interest rate swaps.

▪ Earnings before interest expense, income tax (benefit)/expense and depreciation and amortization (EBITDA) (non-GAAP) was $229 million, an $85 millionimprovement from the same period last year.

▪ We completed the refinancing of our $2.25 billion five-year senior secured term loan facility entered into in 2013 (2013 Term Loan Facility) with an amended and restated $1.688 billion seven-year senior secured term loan facility (2016 Term Loan Facility) and the issuance of $500 million of 5.875% Senior Secured Notes due 2023, resulting in a loss on extinguishment of debt of $34 million. The 2016 Term Loan Facility has a lower interest rate than the 2013 Term Loan Facility, representing a 75 basis point reduction and an extended maturity from 2018 to 2023.

• On July 21, 2016, the Company announced that the Company's Board of Directors (Board) appointed Marvin R. Ellison as Chairman of the Board, effective August 1, 2016, in addition to his position of Chief Executive Officer. Mr. Ellison succeeds Myron E. Ullman, III who retired from the Company on August 1, 2016 in accordance with the transition plan previously outlined by the Company.

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Results of Operations

	Three Months Ended							Six Months Ended
($ in millions, except EPS)	July 30, 2016			August 1, 2015			(1)	July 30, 2016			August 1, 2015			(1)
Total net sales	$	2,918		$	2,875			$	5,729		$	5,732
Percent increase/(decrease) from prior year	1.5		%	2.7		%		(0.1		)%	2.4		%
Comparable store sales increase/(decrease)(2)	2.2		%	4.1		%		0.9		%	3.7		%
Gross margin	1,084			1,065				2,102			2,106
Operating expenses/(income):
Selling, general and administrative	853			901				1,725			1,866
Primary pension plan	—			(17		)		—			(38		)
Supplemental pension plans	2			1				4			3
Total pension	2			(16		)		4			(35		)
Depreciation and amortization	153			153				307			307
Real estate and other, net	(9		)	19				(47		)	(16		)
Restructuring and management transition	9			17				15			39
Total operating expenses	1,008			1,074				2,004			2,161
Operating income/(loss)	76			(9		)		98			(55		)
(Gain)/loss on extinguishment of debt	34			—				30			—
Net interest expense	93			103				188			201
Income/(loss) before income taxes	(51		)	(112		)		(120		)	(256		)
Income tax expense/(benefit)	5			5				4			11
Net income/(loss)	$	(56	)	$	(117	)		$	(124	)	$	(267	)
EBITDA (non-GAAP) (3)	$	229		$	144			$	405		$	252
Adjusted EBITDA (non-GAAP) (3)	$	233		$	138			$	386		$	223
Adjusted net income/(loss) (non-GAAP) (3)	$	(16	)	$	(123	)		$	(113	)	$	(296	)
Diluted EPS	$	(0.18	)	$	(0.38	)		$	(0.40	)	$	(0.87	)
Adjusted diluted EPS (non-GAAP) (3)	$	(0.05	)	$	(0.40	)		$	(0.37	)	$	(0.97	)
Ratios as a percent of sales:
Gross margin	37.1		%	37.0		%		36.7		%	36.7		%
SG&A	29.2		%	31.3		%		30.1		%	32.6		%
Total operating expenses	34.5		%	37.4		%		35.0		%	37.7		%
Operating income/(loss)	2.6		%	(0.3		)%		1.7		%	(1.0		)%

(1) Reflects the retrospective application of the change in our method of recognizing pension expense. See Note 2 of Notes to unaudited Interim Consolidated Financial Statements for a discussion of the change and related impacts.

(2) Comparable store sales include sales from all stores, including sales from services and commissions earned from our in-store licensed departments, that have been open for 12 consecutive full fiscal months and Internet sales. Stores closed for an extended period are not included in comparable store sales calculations, while stores remodeled and minor expansions not requiring store closure remain in thecalculations. Certain items, such as sales return estimates and store liquidation sales, are excluded from the Company’s calculation. Our definition and calculation of comparable store sales may differ from other companies in the retail industry.

(3) See “Non-GAAP Financial Measures” below for a discussion of this non-GAAP measure and reconciliation to its most directly comparable GAAP financial measure and further information on its uses and limitations.

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Total Net Sales

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Total net sales	$	2,918		$	2,875		$	5,729		$	5,732
Sales percent increase/(decrease):
Total net sales	1.5		%	2.7		%	(0.1		)%	2.4		%
Comparable store sales	2.2		%	4.1		%	0.9		%	3.7		%

Total net sales increased$43 million in the second quarter of 2016 compared to the second quarter of 2015. For the first six months of 2016, total net sales decreased$3 million from the same period last year.

The following table provides the components of the net sales increase/(decrease):

	Three Months Ended			Six Months Ended
($ in millions)	July 30, 2016			July 30, 2016
Comparable store sales increase/(decrease)	$	62		$	52
Closed stores, net	(18		)	(54		)
Other revenues and sales adjustments	(1		)	(1		)
Total net sales increase/(decrease)	$	43		$	(3	)

As our omnichannel strategy continues to mature, it is increasingly difficult to distinguish between a store sale and an Internet sale. Because we no longer have a clear distinction between store sales and Internet sales, we do not separately report Internet sales. Below is a list of some of our omnichannel activities:

• Stores increase Internet sales by providing customers opportunities to view, touch and/or try on physical merchandise before ordering online.

• Our website increases store sales as in-store customers have often pre-shopped online before shopping in the store, including verification of which stores have online merchandise in stock.

• Most Internet purchases are easily returned in our stores.

• JCP Rewards can be earned and redeemed online or in stores.

• In-store customers can order from our website with the assistance of associates in our stores or they can shop our website from the JCPenney app while inside the store.

• Customers who utilize our mobile application can receive mobile coupons to use when they check out both online or in our stores.

• Internet orders can be shipped from a dedicated jcpenney.com fulfillment center, a store, a store merchandise distribution center, a regional warehouse, directly from vendors or any combination of the above.

• Certain categories of store inventory can be accessed and purchased by jcpenney.com customers and shipped directly to the customer's home from the store.

• Internet orders can be shipped to stores for customer pick up.

• "Buy online and pick up in store same day" is now available in all of our stores.

For the three months ended July 30, 2016, comparable store sales increased2.2%, while total net sales increased1.5% to $2,918 million compared with $2,875 million for the three months ended August 1, 2015. For the six months ended July 30, 2016, comparable store sales increased0.9%, while total net sales decreased0.1% to $5,729 million compared with $5,732 million for the six months ended August 1, 2015.

For the second quarter of 2016, conversion rate, units per transaction and transaction counts all increased while average unit retail decreased as compared to the prior year. For the first six months of 2016, conversion rate and units per transaction increased while transaction counts and average unit retail decreased as compared to the prior year.

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For the second quarter of 2016, Sephora, Home and Footwear and Handbags were our top-performing merchandise divisions all experiencing sales gains on a comparable store basis. For the first half of 2016, our top-performing merchandise divisions were Sephora and Footwear and Handbags. Geographically, the Ohio Valley and Pacific were the best performing regions of the country during the second quarter of 2016. The Northeast and Ohio Valley regions performed the best during the first half of 2016.

Store Count

The following table compares the number of stores for the three and six months ended July 30, 2016 and August 1, 2015:

	Three Months Ended			Six Months Ended
	July 30, 2016	August 1, 2015		July 30, 2016		August 1, 2015
JCPenney department stores
Beginning of period	1,014	1,027		1,021		1,062
Closed stores	—	(4	)	(7	)	(39	)
End of period(1)	1,014	1,023		1,014		1,023

(1) Gross selling space, including selling space allocated to services and licensed departments, was 104 million square feet as of July 30, 2016 and 105 million square feet as of August 1, 2015.

Gross Margin

Gross margin for the three months ended July 30, 2016 was $1,084 million, an increase of $19 million compared to $1,065 million for the three months ended August 1, 2015. Gross margin as a percentage of sales for the three months ended July 30, 2016 was 37.1% compared to 37.0% for the three months ended August 1, 2015, positively impacted primarily by an improvement in brick-and-mortar selling margins partially offset by lower Internet selling margins.

Gross margin for the six months ended July 30, 2016 was $2,102 million, a decrease of $4 million compared to $2,106 million for the six months ended August 1, 2015. Gross margin as a percentage of sales was 36.7% for both the six months ended July 30, 2016 and August 1, 2015.

SG&A Expenses

For the three months ended July 30, 2016, SG&A expenses were $48 millionlower than the corresponding period of 2015. As a percent of sales, SG&A expenses decreased to 29.2% compared to 31.3% in the second quarter of 2015. Through the first six months of 2016, SG&A expenses were $141 millionlower than the corresponding period of 2015. Through the first six months of 2016, as a percent of sales, SG&A expenses decreased to 30.1% compared to 32.6% in the corresponding period of 2015, reflecting how we effectively managed SG&A expenses. The net decrease in SG&A expenses for the second quarter and first half of 2016 as compared to the corresponding prior year periods was primarily driven by lower store controllable costs and corporate overhead, reduced incentive compensation, more efficient advertising spend and improved private label credit card income.

Our private label credit card and co-branded MasterCard® programs are owned and serviced by Synchrony Financial (Synchrony).  Under our agreement with Synchrony, we receive cash payments from Synchrony based upon the performance of the credit card portfolio.  We participate in the programs by providing marketing promotions designed to increase the use of each card, including enhanced marketing offers for cardholders. Additionally, we accept payments in our stores from cardholders who prefer to pay in person when they are shopping in our locations. The income we earn under our agreement with Synchrony is included as an offset to SG&A expenses. For the second quarters of 2016 and 2015, we recognized income of $75 million and $71 million, respectively, pursuant to our private label credit card program. Through the first halves of 2016 and 2015, we recognized income of $154 million and $141 million, respectively.

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Pension Expense

Pension expense/(income) provided below reflects the retrospective application of the change in our method of recognizing pension expense. See Note 2 of Notes to unaudited Interim Consolidated Financial Statements for a discussion of this change and related impacts.

	Three Months Ended					Six Months Ended
($ in millions)	July 30, 2016		August 1, 2015			July 30, 2016		August 1, 2015
Primary Pension Plan	$	—	$	(17	)	$	—	$	(38	)
Supplemental pension plans	2		1			4		3
Total pension expense	$	2	$	(16	)	$	4	$	(35	)

Total pension expense, which consists of expense/(income) from our Primary Pension Plan and our supplemental pension plans, is based on our 2015 year-end measurement of pension plan assets and benefit obligations. For the second quarter of 2016, our Primary Pension Plan had income of $0 million compared to income of $17 million in the second quarter of 2015. For the first six months of 2016, our Primary Pension Plan had income of $0 million compared to income of $38 million in the prior year corresponding period. The year-over-year decrease in income for our Primary Pension Plan was primarily driven by the lower expected return on assets estimated to cover the pension costs to be incurred.

Depreciation and Amortization Expense

Depreciation and amortization expense was $153 million and $307 million for the three months and six months ended July 30, 2016 and August 1, 2015, respectively.

Restructuring and Management Transition

The composition of restructuring and management transition charges was as follows:

	Three Months Ended				Six Months Ended
($ in millions)	July 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Home office and stores	$	—	$	15	$	4	$	29
Management transition	1		1		3		7
Other	8		1		8		3
Total	$	9	$	17	$	15	$	39

During the six months ended July 30, 2016 and August 1, 2015, we recorded $4 million and $29 million, respectively, of coststo reduce our store and home office expenses. The first half 2016 costs primarily include employee termination benefits in connection with the elimination of positions in our home office. During the first half of 2015, we incurred charges of $29 million related to employee termination benefits and lease termination costs associated with the closure of 39 stores.

We also implemented changes within our management leadership team during the six months ended July 30, 2016 and August 1, 2015 that resulted in management transition costs of $3 million and $7 million, respectively, for both incoming and outgoing members of management.

Other miscellaneous restructuring charges of $8 million and $3 million, primarily related to contract termination and other costs associated with our previous shops strategy and costs related to the closure of certain supply chain locations, were recorded during the six months ended July 30, 2016 and August 1, 2015, respectively.

Real Estate and Other, Net

Real estate and other consists of ongoing operating income from our real estate subsidiaries. Real estate and other also includes net gains from the sale of facilities and equipment that are no longer used in operations, asset impairments, accruals for certain litigation and other non-operating charges and credits. In addition, during the first quarter of 2014, we entered into the Home Office Land Joint Venture in which we contributed approximately 220 acres of excess property adjacent to our home office facility in Plano, Texas. The joint venture was formed to develop the contributed property and our proportional share of the joint venture's activities is recorded in Real estate and other, net.

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The composition of Real estate and other, net was as follows:  

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Net gain from sale of non-operating assets	$	—		$	(6	)	$	(5	)	$	(8	)
Investment income from Home Office Land Joint Venture	(5		)	—			(29		)	(22		)
Net gain from sale of operating assets	(2		)	—			(10		)	(8		)
Other	(2		)	25			(3		)	22
Total expense/(income)	$	(9	)	$	19		$	(47	)	$	(16	)

During the first halves of 2016 and 2015, we sold non-operating assets for a net gain of $5 million and $8 million, respectively. Investment income from the Home Office Land Joint Venture represents our proportional share of net income of the joint venture.

During the first half of 2016, the net gain from the sale of operating assets related primarily tothe sale of land adjacent to our home office not contributed to the Home Office Land Joint Venture.During the first half of 2015, the net gain from the sale of operating assets related tothe sale of a former furniture store location and payments received from landlords to terminate two leases prior to the original expiration date.

Operating Income/(Loss)

For the second quarter of 2016, we reported operating income of $76 million compared to an operating loss of $9 million in the second quarter of 2015. For the six months ended July 30, 2016, we reported operating income of $98 million compared to an operating loss of $55 million in the prior year corresponding period, reflecting better operating performance achieved by the Company.

(Gain)/Loss on Extinguishment of Debt

During the first quarter of 2016, we repurchased and retired $60 million aggregate principal amount of our outstanding debt resulting in a gain on extinguishment of debt of $4 million.

During the second quarter of 2016, we completed the refinancing of our 2013 Term Loan Facility with the amended and restated 2016 Term Loan Facility and the issuance of $500 million of 5.875% Senior Secured Notes due 2023, resulting in a loss on extinguishment of debt of $34 million.

Net Interest Expense

Net interest expense for the second quarters of 2016 and 2015 was $93 million and $103 million, respectively. For the six months ended July 30, 2016, net interest expense was $188 million compared to $201 million in the prior year corresponding period. The reduction in net interest expense is due to lower debt levels in 2016 compared to 2015.

Income Taxes

The net tax expense of $5 million for the three months ended July 30, 2016 consisted of state and foreign tax expenses of $4 million, $1 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets and $2 million of expense relating to other comprehensive income, offset by a $2 million benefit for state audit settlements.

The net tax expense of $4 million for the six months ended July 30, 2016 consisted of state and foreign tax expenses of $7 million and $3 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets, offset by net tax benefits of $4 million to adjust the valuation allowance and $2 million for state audit settlements.

As of July 30, 2016, we have approximately $2.6 billion of net operating losses (NOLs) available for U.S. federal income tax purposes, which expire in 2032 through 2034 and $62 million of tax credit carryforwards that expire at various dates through 2035. For these NOL and tax credit carryforwards a net deferred tax asset of $78 million has been recorded, net of a valuation allowance of $818 million. A valuation allowance of $239 million fully offsets the deferred tax assets resulting from the state NOL carryforwards that expire at various dates through 2034. In assessing the need for the valuation allowance, we considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As a result of our periodic assessment, our estimate of the realization of deferred tax assets is solely based on the future reversals of existing taxable temporary differences and tax planning strategies that we would make use of to accelerate taxable income to utilize expiring

24

NOL and tax credit carryforwards. Accordingly, in the second quarter and first six months of 2016, the valuation allowance was increased by $19 million and $32 million, respectively, to offset the net deferred tax assets created in those periods relating primarily to the increase in NOL carryforwards.

Non-GAAP Financial Measures

We report our financial information in accordance with generally accepted accounting principles in the United States (GAAP). However, we present certain financial measures identified as non-GAAP under the rules of the Securities and Exchange Commission (SEC) to assess our results. We believe the presentation of these non-GAAP financial measures is useful in order to better understand our financial performance as well as to facilitate the comparison of our results to the results of our peer companies. In addition, management uses these non-GAAP financial measures to assess the results of our operations. It is important to view non-GAAP financial measures in addition to, rather than as a substitute for, those measures prepared in accordance with GAAP. We have provided reconciliations of the most directly comparable GAAP measures to our non-GAAP financial measures presented.

The following non-GAAP financial measures are adjusted to exclude restructuring and management transition charges, the impact of our Primary Pension Plan, the (gain)/loss on extinguishment of debt, the net gain on the sale of non-operating assets, the proportional share of net income from our Home Office Land Joint Venture and the tax impact for the allocation of income taxes to other comprehensive income. Unlike other operating expenses, restructuring and management transition charges, the (gain)/loss on extinguishment of debt, the net gain on the sale of non-operating assets, the proportional share of net income from our Home Office Land Joint Venture and the tax impact for the allocation of income taxes to other comprehensive income are not directly related to our ongoing core business operations. Primary Pension Plan expense/(income) is determined using numerous complex assumptions about changes in pension assets and liabilities that are subject to factors beyond our control, such as market volatility.  Accordingly, we eliminate our Primary Pension Plan expense/(income) in its entirety as we view all components of net periodic benefit expense/(income) as a single, net amount, consistent with its presentation in our Consolidated Financial Statements.  We believe it is useful for investors to understand the impact of restructuring and management transition charges, Primary Pension Plan expense/(income), the (gain)/loss on extinguishment of debt, the net gain on the sale of non-operating assets, the proportional share of net income from the Home Office Land Joint Venture and the tax impact for the allocation of income taxes to other comprehensive income on our financial results and therefore are presenting the following non-GAAP financial measures: (1) adjusted EBITDA; (2) adjusted net income/(loss); and (3) adjusted earnings/(loss) per share-diluted.

In addition, we believe that EBITDA is a useful measure in assessing our operating performance and are therefore presenting this non-GAAP financial measure in addition to the non-GAAP financial measures listed above.

EBITDA and Adjusted EBITDA.The following table reconciles net income/(loss), the most directly comparable GAAP measure, to EBITDA and adjusted EBITDA, which are non-GAAP financial measures:

	Three Months Ended							Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			(1)	July 30, 2016			August 1, 2015			(1)
Net income/(loss)	$	(56	)	$	(117	)		$	(124	)	$	(267	)
Add: Net interest expense	93			103				188			201
Add: (Gain)/loss on extinguishment of debt	34			—				30			—
Total interest expense	127			103				218			201
Add: Income tax expense/(benefit)	5			5				4			11
Add: Depreciation and amortization	153			153				307			307
EBITDA (non-GAAP)	229			144				405			252
Add: Restructuring and management transition charges	9			17				15			39
Add: Primary Pension Plan expense/(income)	—			(17		)		—			(38		)
Less: Net gain on the sale of non-operating assets	—			(6		)		(5		)	(8		)
Less: Proportional share of net income from joint venture	(5		)	—				(29		)	(22		)
Adjusted EBITDA (non-GAAP)	$	233		$	138			$	386		$	223

(1) Reflects the retrospective application of the change in our method of recognizing pension expense. See Note 2 of Notes to unaudited Interim Consolidated Financial Statements for a discussion of the change and related impacts. For the three months ended August 1,

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2015, the retrospective application of the change in recognizing pension expense increased EBITDA (non-GAAP) by $29 million and Adjusted EBITDA (non-GAAP) by $4 million. For the six months ended August 1, 2015, the retrospective application of the change in recognizing pension expense increased EBITDA (non-GAAP) by $58 million and Adjusted EBITDA (non-GAAP) by $7 million.

For the three months ended July 30, 2016, EBITDA was $229 million, an improvement of $85 million compared to EBITDA of $144 million in the prior year corresponding period. Excluding restructuring and management transition charges, the impact of our Primary Pension Plan expense/(income), the net gain on the sale of non-operating assets, and the proportional share of net income from the Home Office Land Joint Venture, adjusted EBITDA improved $95 million to $233 million for the three months ended July 30, 2016 compared to $138 million for the prior year corresponding period.

For the six months ended July 30, 2016, EBITDA was $405 million, an improvement of $153 million compared to $252 million in the prior year corresponding period. Excluding restructuring and management transition charges, the impact of our Primary Pension Plan expense/(income), the net gain on the sale of non-operating assets, and the proportional share of net income from the Home Office Land Joint Venture, adjusted EBITDA improved $163 million to $386 million for the six months ended July 30, 2016 compared to $223 million for the prior year corresponding period.

Overall, EBITDA and adjusted EBITDA improved significantly for the three and six months ended July 30, 2016 as compared to the corresponding prior year periods as we recorded positive comparable store sales, maintained our gross margin performance as a percentage of sales and effectively managed our controllable expenses.

Adjusted Net Income/(Loss) and Adjusted Diluted EPS. The following table reconciles net income/(loss) and diluted EPS, the most directly comparable GAAP financial measures, to adjusted net income/(loss) and adjusted diluted EPS, which are non-GAAP financial measures:

	Three Months Ended							Six Months Ended
($ in millions, except per share data)	July 30, 2016			August 1, 2015			(1)	July 30, 2016			August 1, 2015			(1)
Net income/(loss)	$	(56	)	$	(117	)		$	(124	)	$	(267	)
Diluted EPS	$	(0.18	)	$	(0.38	)		$	(0.40	)	$	(0.87	)
Add: Restructuring and management transition charges (2)	9			17				15			39
Add: Primary Pension Plan expense/(income) (2)	—			(17		)		—			(38		)
Add: (Gain)/loss on extinguishment of debt (2)	34			—				30			—
Less: Net gain on sale of non-operating assets (2)	—			(6		)		(5		)	(8		)
Less: Proportional share of net income from joint venture (2)	(5		)	—				(29		)	(22		)
Less: Tax impact resulting from other comprehensive income allocation (3)	2			—				—			—
Adjusted net income/(loss) (non-GAAP)	$	(16	)	$	(123	)		$	(113	)	$	(296	)
Adjusted diluted EPS (non-GAAP)	$	(0.05	)	$	(0.40	)		$	(0.37	)	$	(0.97	)

(1) Reflects the retrospective application of the change in our method of recognizing pension expense. See Note 2 of Notes to unaudited Interim Consolidated Financial Statements for a discussion of the change and related impacts. For the three months ended August 1, 2015, the retrospective application of the change in recognizing pension expenseincreased Adjusted net income/(loss) (non-GAAP) by $3 million. For the six months ended August 1, 2015, the retrospective application of the change in recognizing pension expense increased Adjusted net income/(loss) (non-GAAP) by $5 million.

(2) Reflects no tax effect due to the impact of the Company's tax valuation allowance.

(3) Represents the net tax expense that resulted from our other comprehensive income allocation between our Operating loss and Accumulated other comprehensive income.

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Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our revolving credit facility. Our cash flows may be impacted by many factors including the economic environment, consumer confidence, competitive conditions in the retail industry and the success of our strategies. We ended the second quarter of 2016 with $429 million of cash and cash equivalents. As of the end of the second quarter of 2016, based on our borrowing base and amounts reserved for outstanding standby and import letters of credit, we had $1,944 million available for future borrowings under our revolving credit facility, providing a total available liquidity of $2,373 million.

The following table provides a summary of our key components and ratios of financial condition and liquidity:

	Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015
Cash and cash equivalents	$	429		$	973
Merchandise inventory	2,981			3,005
Property and equipment, net	4,686			4,989
Total debt(1)	4,725			5,298
Stockholders’ equity	1,197			1,660
Total capitalization	5,922			6,958
Maximum capacity under our credit agreement	2,350			1,850
Cash flow from operating activities	(208		)	(184		)
Free cash flow (non-GAAP)(2)	(352		)	(320		)
Capital expenditures(3)	160			141
Ratios:
Total debt-to-total capitalization(4)	80		%	76		%
Cash-to-total debt(5)	9		%	18		%

(1) Total debt includes long-term debt, net of unamortized debt issuance costs, including current maturities, capital leases, note payable and any borrowings under our revolving credit facility.

(2) See “Free Cash Flow” below for a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure and further information on its uses and limitations.

(3) As of the end of the second quarters of 2016 and 2015, we had accrued capital expenditures of $45 million and $40 million, respectively.

(4) Total debt divided by total capitalization.

(5) Cash and cash equivalents divided by total debt.

Free Cash Flow (Non-GAAP)

Free cash flow is a key financial measure of our ability to generate additional cash from operating our business and in evaluating our financial performance. We define free cash flow as cash flow from operating activities, less capital expenditures plus the proceeds from the sale of operating assets. Free cash flow is a relevant indicator of our ability to repay maturing debt, revise our dividend policy or fund other uses of capital that we believe will enhance stockholder value. Free cash flow is considered a non-GAAP financial measure under the rules of the SEC. Free cash flow is limited and does not represent remaining cash flow available for discretionary expenditures due to the fact that the measure does not deduct payments required for debt maturities, pay-down of pension debt, and other obligations or payments made for business acquisitions. Therefore, it is important to view free cash flow in addition to, rather than as a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.

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The following table sets forth a reconciliation of net cash provided by/(used in) operating activities, the most directly comparable GAAP financial measure, to free cash flow, a non-GAAP financial measure, as well as information regarding net cash provided by/(used in) investing activities and net cash provided by/(used in) financing activities:

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Net cash provided by/(used in) operating activities (GAAP)	$	186		$	42		$	(208	)	$	(184	)
Add:
Proceeds from sale of operating assets	4			—			16			5
Less:
Capital expenditures(1)	(121		)	(95		)	(160		)	(141		)
Free cash flow (non-GAAP)	$	69		$	(53	)	$	(352	)	$	(320	)
Net cash provided by/(used in) investing activities(2)	$	(116	)	$	(88	)	$	(127	)	$	(123	)
Net cash provided by/(used in) financing activities	$	(56	)	$	(25	)	$	(136	)	$	(38	)

(1) As of the end of the second quarters of 2016 and 2015, we had accrued capital expenditures of $45 million and $40 million, respectively.

(2) Net cash provided by investing activities includes capital expenditures and proceeds from sale of operating assets, which are also included in our computation of free cash flow.

Operating Activities

While a significant portion of our sales, profit and operating cash flows have historically been realized in the fourth quarter, our quarterly results of operations may fluctuate significantly as a result of many factors, including seasonal fluctuations in customer demand, product offerings, inventory levels and promotional activity.

Cash flow from operating activities for the three months ended July 30, 2016improved$144 million to an inflow of $186 million compared to an inflow of $42 million for the same period in 2015. Cash flow from operating activities for the six months ended July 30, 2016declined$24 million to an outflow of $208 million compared to an outflow of $184 million for the same period in 2015. Our net loss of $124 million for the six months ended July 30, 2016 includes significant income and expense items that do not impact operating cash flow including depreciation and amortization, the gain on the sale of assets and stock-based compensation. The overall increase in cash used in operations was primarily due to higher incentive compensation payments that were offset by our positive operating performance and successful inventory management.

Cash flows from operating activities for the first six months of 2016 also included construction allowances from landlords of $6 million, which funded a portion of our capital expenditures in investing activities.

Merchandise inventory decreased$24 million to $2,981 million, or 0.8%, as of the end of the second quarter of 2016 compared to $3,005 million as of the end of the second quarter last year and increased $260 million from year-end 2015. Merchandise accounts payable decreased $28 million as of the end of the second quarter of 2016 compared to the corresponding prior year period and increased $169 million from year end.

Investing Activities

Investing activities for the three months ended July 30, 2016 resulted in cash outflows of $116 million compared to outflows of $88 million for the same three month period of 2015. Investing activities through the first six months of 2016 resulted in cash outflows of $127 million compared to outflows of $123 million for the same six month period of 2015.

Cash capital expenditures were $160 million for the six months ended July 30, 2016 and were $141 million for the six months ended August 1, 2015. In addition, as of the end of the second quarters of 2016 and 2015, we had $45 million and $40 million, respectively, of accrued capital expenditures. Through the first six months of 2016, capital expenditures related primarily to the roll out of our center core concept in 350 locations, the opening of 56 Sephora inside JCPenney stores, other investments in our store environment and store facility improvements and investments in information technology in both our home office and stores. We received construction allowances from landlords of $6 million in the first six months of 2016 to fund a portion of the capital expenditures related to store leasehold improvements. These funds are classified as operating activities and have been recorded as deferred rent credits in the Consolidated Balance Sheets and are amortized as an offset to rent expense.

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For the six months ended August 1, 2015 capital expenditures related primarily to the opening of 23 Sephora inside JCPenney stores, investments in information technology in both our home office and stores and investments in our store environment. We also received construction allowances from landlords of $4 million in the first half of 2015.

Full year 2016 capital expenditures are expected to be approximately $375 million net of construction allowances from landlords. Capital expenditures for the remainder of 2016 include accrued expenditures of $45 million at the end of the second quarter.

Financing Activities

Financing activities for the six months ended July 30, 2016 resulted in an outflow of $136 million compared to an outflow of $38 million for the same period last year.

During the first six months of 2016, we completed the refinancing of the 2013 Term Loan Facility with the amended and restated $1.688 billion 2016 Term Loan Facility and the issuance of $500 million of 5.875% Senior Secured Notes due 2023. Additionally, we repurchased and retired $60 million aggregate principal amount of our outstanding debt and repaid $19 million on our capital leases and note payable.

Free Cash Flow

Free cash flow for the three months ended July 30, 2016increased$122 million to an inflow of $69 million compared to an outflow of $53 million in the same period last year. Free cash flow for the six months ended July 30, 2016decreased$32 million to an outflow of $352 million compared to an outflow of $320 million in the same period last year. The year-over-year decrease was primarily due to higher incentive compensation payments that were offset by our positive operating performance and successful inventory management.

Cash Flow Outlook

For the remainder of 2016, we believe that our existing liquidity will be adequate to fund our capital expenditures and working capital needs; however, in accordance with our long-term financing strategy, we may access the capital markets opportunistically. We believe that our current financial position will provide us the financial flexibility to support our growth initiatives.

Credit Ratings

Our credit ratings and outlook as of August 26, 2016 were as follows:

	Corporate	Outlook
Fitch Ratings	B+	Stable
Moody’s Investors Service, Inc.	B3	Positive
Standard & Poor’s Ratings Services	B	Positive

Credit rating agencies periodically review our capital structure and the quality and stability of our earnings. Rating agencies consider, among other things, changes in operating performance, comparable store sales, the economic environment, conditions in the retail industry, financial leverage and changes in our business strategy in their rating decisions. Downgrades to our long-term credit ratings could result in reduced access to the credit and capital markets and higher interest costs on future financings.

Contractual Obligations and Commitments

Aggregate information about our obligations and commitments to make future payments under contractual or contingent arrangements was disclosed in the 2015 Form 10-K.

Impact of Inflation, Deflation and Changing Prices

We have experienced inflation and deflation related to our purchase of certain commodity products. We do not believe that changing prices for commodities have had a material effect on our Net Sales or results of operations. Although we cannot precisely determine the overall effect of inflation and deflation on operations, we do not believe inflation and deflation have had a material effect on our financial condition or results of operations.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations is based upon our unaudited Interim Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and use judgments

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that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, we evaluate estimates used, including those related to inventory valuation under the retail method, valuation of long-lived assets, estimation of reserves and valuation allowances specifically related to closed stores, insurance, income taxes, litigation and environmental contingencies and pension accounting. While actual results could differ from these estimates, we do not expect the differences, if any, to have a material effect on the unaudited Interim Consolidated Financial Statements.

There were no changes to our critical accounting policies during the six months ended July 30, 2016. For a further discussion of the judgments we make in applying our accounting policies, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our 2015 Form 10-K.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are discussed in Note 3 to the unaudited Interim Consolidated Financial Statements.

Seasonality

While a significant portion of our sales, profit and operating cash flows have historically been realized in the fiscal fourth quarter, our quarterly results of operations may fluctuate significantly as a result of many factors, including seasonal fluctuations in customer demand, product offerings, inventory levels and our promotional activity. The results of operations and cash flows for the six months ended July 30, 2016 are not necessarily indicative of the results for future quarters or the entire year.

Cautionary Statement Regarding Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect our current view of future events and financial performance. Words such as "expect" and similar expressions identify forward-looking statements, which include, but are not limited to, statements regarding sales, gross margin, selling, general and administrative expenses, earnings, cash flows and liquidity. Forward-looking statements are based only on the Company's current assumptions and views of future events and financial performance. They are subject to known and unknown risks and uncertainties, many of which are outside of the Company's control, 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, general economic conditions, including inflation, recession, unemployment levels, consumer confidence and spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, more stringent or costly payment terms and/or the decision by a significant number of vendors not to sell us merchandise on a timely basis or at all, trade restrictions, the ability to monetize non-core assets on acceptable terms, the ability to implement our strategic plan including our omnichannel initiatives, customer acceptance of our strategies, our ability to attract, motivate and retain key executives and other associates, the impact of cost reduction initiatives, our ability to generate or maintain liquidity, implementation of new systems and platforms including EMV chip technology, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, disruptions and congestion at ports through which we import goods, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, the impact of weather conditions, risks associated with war, an act of terrorism or pandemic, the ability of the federal government to fund and conduct its operations, a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, legal and regulatory proceedings and the Company’s ability to access the debt or equity markets on favorable terms or at all. There can be no assurances that the Company will achieve expected results, and actual results may be materially less than expectations. While we believe that our assumptions are reasonable, we caution that it is impossible to predict the degree to which any such factors could cause actual results to differ materially from predicted results. We intend the forward-looking statements in this Quarterly Report on Form 10-Q to speak only as of the date of this report and do not undertake to update or revise these projections as more information becomes available.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the normal course of business due to changes in interest rates. Our market risks related to interest rates at July 30, 2016 are similar to those disclosed in the 2015 Form 10-K.

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Item 4. Controls and Procedures

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer concluded our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting during the second quarter ended July 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

The matters under the caption "Litigation" in Note 13 of the Notes to Unaudited Interim Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q are incorporated herein by reference.

Item 1A. Risk Factors

The risk factors listed below update and supersede the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 30, 2016.

Our ability to return to profitable growth is subject to both the risks affecting our business generally and the inherent difficulties associated with implementing our strategic plan.

As we position the Company for long-term growth, it may take longer than expected to achieve our objectives, and actual results may be materially less than planned. Our ability to improve our operating results depends upon a significant number of factors, some of which are beyond our control, including:

• customer response to our marketing and merchandise strategies;

• our ability to achieve profitable sales and to make adjustments in response to changing conditions;

• our ability to respond to competitive pressures in our industry;

• our ability to effectively manage inventory;

• the success of our omnichannel strategy;

• our ability to benefit from capital improvements made to our store environment;

• our ability to respond to any unanticipated changes in expected cash flows, liquidity and cash needs, including our ability to obtain any additional financing or other liquidity enhancing transactions, if and when needed;

• our ability to achieve positive cash flow;

• our ability to access an adequate and uninterrupted supply of merchandise from suppliers at expected levels and on acceptable terms;

• changes to the regulatory environment in which our business operates; and

• general economic conditions.

There is no assurance that our marketing, merchandising and omnichannel strategies, or any future adjustments to our strategies, will improve our operating results.

We operate in a highly competitive industry, which could adversely impact our sales and profitability.

The retail industry is highly competitive, with few barriers to entry. We compete with many other local, regional and national retailers for customers, employees, locations, merchandise, services and other important aspects of our business. Those competitors include other department stores, discounters, home furnishing stores, specialty retailers, wholesale clubs, direct-to-consumer businesses, including those on the Internet, and other forms of retail commerce. Some competitors are larger than JCPenney, and/or have greater financial resources available to them, and, as a result, may be able to devote greater resources to sourcing, promoting, selling their products, updating their store environment and updating their technology. Competition is characterized by many factors, including merchandise assortment, advertising, price, quality, service, location, reputation, credit availability and customer loyalty. We have experienced, and anticipate that we will continue to experience for at least the foreseeable future, significant competition from our competitors. The performance of competitors as well as changes in their pricing and promotional policies, marketing activities, customer loyalty programs, new store openings, store renovations, launches of Internet websites or mobile platforms, brand launches and other merchandise and operational strategies could cause

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us to have lower sales, lower gross margin and/or higher operating expenses such as marketing costs and other selling, general and administrative expenses, which in turn could have an adverse impact on our profitability.

Our sales and operating results depend on our ability to develop merchandise offerings that resonate with our existing customers and help to attract new customers.

Our sales and operating results depend in part on our ability to predict and respond to changes in fashion trends and customer preferences in a timely manner by consistently offering stylish, quality merchandise assortments at competitive prices. We continuously assess emerging styles and trends and focus on developing a merchandise assortment to meet customer preferences. There is no assurance that these efforts will be successful or that we will be able to satisfy constantly changing customer demands. To the extent our decisions regarding our merchandise differ from our customers’ preferences, we may be faced with reduced sales and excess inventories for some products and/or missed opportunities for others. Any sustained failure to identify and respond to emerging trends in lifestyle and customer preferences and buying trends could have an adverse impact on our business. In addition, merchandise misjudgments may adversely impact the perception or reputation of our Company, which could result in declines in customer loyalty and vendor relationship issues, and ultimately have a material adverse effect on our business, financial condition and results of operations.

We may also seek to expand into new lines of business from time to time, such as offering large appliances for sale in our stores and online. There is no assurance that these efforts will be successful. Further, if we devote time and resources to new lines of business and those businesses are not as successful as we planned, then we risk damaging our overall business results. We also may not be able to develop new lines of business in a manner that improves our overall business and operating results and may therefore be forced to close the new lines of business, which may damage our reputation and negatively impact our operating results.

Our results may be negatively impacted if customers do not maintain their favorable perception of our Company and our private brand merchandise.

Maintaining and continually enhancing the value of our Company and our private brand merchandise is important to the success of our business. The value of our private brands is based in large part on the degree to which customers perceive and react to them.  The value of our private brands could diminish significantly due to a number of factors, including customer perception that we have acted in an irresponsible manner in sourcing our private brand merchandise, adverse publicity about our private brand merchandise, our failure to maintain the quality of our private brand products, or the failure of our private brand merchandise to deliver consistently good value to the customer.  The growing use of social and digital media by customers, us, and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our private brands, or any of our merchandise on social or digital media could seriously damage our reputation. If we do not maintain the favorable perception of our Company and our private brand merchandise, our business results could be negatively impacted.

Our ability to increase sales and store productivity is largely dependent upon our ability to increase customer traffic and conversion.

Customer traffic depends upon our ability to successfully market compelling merchandise assortments as well as present an appealing shopping environment and experience to customers. Our strategies focus on increasing customer traffic and improving conversion in our stores and online; however, there can be no assurance that our efforts will be successful or will result in increased sales. In addition, external events outside of our control, including pandemics, terrorist threats, domestic conflicts and civil unrest, may influence customers' decisions to visit malls or might otherwise cause customers to avoid public places. There is no assurance that we will be able to reverse any decline in traffic or that increases in Internet sales will offset any decline in store traffic. We may need to respond to any declines in customer traffic or conversion rates by increasing markdowns or promotions to attract customers, which could adversely impact our gross margins, operating results and cash flows from operating activities.

If we are unable to manage our inventory effectively, our gross margins could be adversely affected.

Our profitability depends upon our ability to manage appropriate inventory levels and respond quickly to shifts in consumer demand patterns. We must properly execute our inventory management strategies by appropriately allocating merchandise among our stores and online, timely and efficiently distributing inventory to stores, maintaining an appropriate mix and level of inventory in stores and online, adjusting our merchandise mix between our private and exclusive brands and national brands, appropriately changing the allocation of floor space of stores among product categories to respond to customer demand and effectively managing pricing and markdowns. If we overestimate customer demand for our merchandise, we will likely need to

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record inventory markdowns and sell the excess inventory at clearance prices which would negatively impact our gross margins and operating results. If we underestimate customer demand for our merchandise, we may experience inventory shortages which may result in missed sales opportunities and have a negative impact on customer loyalty.

We must protect against security breaches or other unauthorized disclosures of confidential data about our customers as well as about our employees and other third parties.

As part of our normal operations, we and third-party service providers with whom we contract receive and maintain information about our customers (including credit/debit card information), our employees and other third parties. Confidential data must at all times be protected against security breaches or other unauthorized disclosure. We have, and require our third-party service providers to have, administrative, physical and technical safeguards and procedures in place to protect the security, confidentiality, integrity and availability of such information and to protect such information against unauthorized access, disclosure or acquisition. Despite our safeguards and security processes and procedures, there is no assurance that all of our systems and processes, or those of our third-party service providers, are free from vulnerability to security breaches or inadvertent data disclosure or acquisition by third parties or us. Further, because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate these methods or promptly implement safeguards. Any failure to protect confidential data about our business or our customers, employees or other third parties could materially damage our brand and reputation as well as result in significant expenses and disruptions to our operations, and loss of customer confidence, any of which could have a material adverse impact on our business and results of operations. We could also be subject to government enforcement actions and private litigation as a result of any such failure.

The failure to retain, attract and motivate our employees, including employees in key positions, could have an adverse impact on our results of operations.

Our results depend on the contributions of our employees, including our senior management team and other key employees. This depends to a great extent on our ability to retain, attract and motivate talented employees throughout the organization, many of whom, particularly in the stores, are in entry level or part-time positions, which have historically had high rates of turnover. We currently operate with significantly fewer individuals than we have in the past who have assumed additional duties and responsibilities, which could have an adverse impact on our operating performance and efficiency. Negative media reports regarding the Company or the retail industry in general could also have an adverse impact on our ability to attract, retain and motivate our employees. If we are unable to retain, attract and motivate talented employees with the appropriate skill sets, we may not achieve our objectives and our results of operations could be adversely impacted. Our ability to meet our changing labor needs while controlling our costs is also subject to external factors such as unemployment levels, competing wages, potential union organizing efforts and increased government regulation. An inability to provide wages and/or benefits that are competitive within the markets in which we operate could adversely affect our ability to retain and attract employees. In addition, the loss of one or more of our key personnel or the inability to effectively identify a suitable successor to a key role in our senior management could have a material adverse effect on our business.

If we are unable to successfully develop and maintain a relevant and reliable omnichannel experience for our customers, our sales, results of operations and reputation could be adversely affected.

One of the pillars of our strategic framework is to deliver a superior omnichannel shopping experience for our customers through the integration of our store and digital shopping channels. Omnichannel retailing is rapidly evolving and we must anticipate and meet changing customer expectations. Our omnichannel initiatives include our ship-from-store and pickup-in-store programs and expansion of our SKU count online. In addition, we continue to explore ways to enhance our customers’ omnichannel shopping experience. These initiatives involve significant investments in IT systems and significant operational changes. In addition, our competitors are also investing in omnichannel initiatives, some of which may be more successful than our initiatives. If the implementation of our omnichannel initiatives is not successful or does not meet customer expectations, or we do not realize a return on our omnichannel investments, our reputation and operating results may be adversely affected.

Disruptions in our Internet website or mobile applications, or our inability to successfully execute our online strategies, could have an adverse impact on our sales and results of operations.

We sell merchandise over the Internet through our website, www.jcpenney.com, and through mobile applications for smart phones and tablets. Our Internet operations are subject to numerous risks, including rapid technological change and the implementation of new systems and platforms; liability for online and mobile content; violations of state or federal laws, including those relating to online and mobile privacy and intellectual property rights; credit card fraud; problems associated with the operation and security of our website, mobile applications and related support systems; computer viruses; telecommunications failures; electronic break-ins and similar disruptions; and the allocation of inventory between our online

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operations and department stores. The failure of our website or mobile applications to perform as expected could result in disruptions and costs to our operations and make it more difficult for customers to purchase merchandise online. In addition, our inability to successfully develop and maintain the necessary technological interfaces for our customers to purchase merchandise through our website and mobile applications, including user friendly software applications for smart phones and tablets, could result in the loss of Internet sales and have an adverse impact on our results of operations.

Our operations are dependent on information technology systems; disruptions in those systems or increased costs relating to their implementation could have an adverse impact on our results of operations.

Our operations are dependent upon the integrity, security and consistent operation of various systems and data centers, including the point-of-sale systems in the stores, our Internet website and mobile applications, data centers that process transactions, communication systems and various software applications used throughout our Company to track inventory flow, process transactions, generate performance and financial reports and administer payroll and benefit plans.

We have implemented several applications and systems from third party vendors, providers and licensors to simplify our processes and reduce our use of customized existing legacy systems and expect to place additional applications and systems into operation in the future. Implementing new applications and systems carries substantial risk, including implementation delays, cost overruns, disruption of operations, potential loss of data or information, lower customer satisfaction resulting in lost customers or sales, inability to deliver merchandise to our stores or our customers, the potential inability to meet reporting requirements and unintentional security vulnerabilities. There can be no assurances that we will successfully launch the new applications and systems as planned, that the new applications and systems will perform as expected or that the new applications and systems will be implemented without disruptions to our operations, any of which may cause critical information upon which we rely to be delayed, unreliable, corrupted, insufficient or inaccessible.

We also outsource various information technology functions to third party service providers and may outsource other functions in the future. We rely on those third party service providers to provide services on a timely and effective basis and their failure to perform as expected or as required by contract could result in disruptions and costs to our operations.

Our vendors are also highly dependent on the use of information technology systems. Major disruptions in their information technology systems could result in their inability to communicate with us or otherwise to process our transactions or information, their inability to perform required functions, or in the loss or corruption of our information, any and all of which could result in disruptions to our operations. Our vendors are responsible for having safeguards and procedures in place to protect the confidentiality, integrity and security of our information, and to protect our information and systems against unauthorized access, disclosure or acquisition. Any failure in their systems to operate or in their ability to protect our information or systems could have a material adverse impact on our business and results of operations.

We are in the process of insourcing certain business functions from third party vendors and may seek to relocate certain business functions to international locations in an attempt to achieve additional efficiencies, both of which subject us to risks, including disruptions in our business.

We are in the process of insourcing certain business functions and may also need to continue to insource other aspects of our business in the future in order to effectively manage our costs and stay competitive. We may also seek from time to time to relocate certain business functions to countries other than the United States to access highly skilled labor markets and further control costs. There is no assurance that these efforts will be successful. Further, these actions may cause disruptions that negatively impact our business. If we are ultimately unable to perform insourced functions better than, or at least as well as, our current third party providers, our operating results could be adversely impacted.

Changes in our credit ratings may limit our access to capital markets and adversely affect our liquidity.

The credit rating agencies periodically review our capital structure and the quality and stability of our earnings. Any future downgrades to our long-term credit ratings could result in reduced access to the credit and capital markets and higher interest costs on future financings. The future availability of financing will depend on a variety of factors such as economic and market conditions, the availability of credit and our credit ratings, as well as the possibility that lenders could develop a negative perception of us. There is no assurance that we will be able to obtain additional financing on favorable terms or at all.

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Our profitability depends on our ability to source merchandise and deliver it to our customers in a timely and cost-effective manner.

Our merchandise is sourced from a wide variety of suppliers, and our business depends on being able to find qualified suppliers and access products in a timely and efficient manner. Inflationary pressures on commodity prices and other input costs could increase our cost of goods, and an inability to pass such cost increases on to our customers or a change in our merchandise mix as a result of such cost increases could have an adverse impact on our profitability. Additionally, the impact of economic conditions on our suppliers cannot be predicted and our suppliers may be unable to access financing or become insolvent and thus become unable to supply us with products.

Our arrangements with our suppliers and vendors may be impacted by our financial results or financial position.

Substantially all of our merchandise suppliers and vendors sell to us on open account purchase terms. There is a risk that our key suppliers and vendors could respond to any actual or apparent decrease in or any concern with our financial results or liquidity by requiring or conditioning their sale of merchandise to us on more stringent or more costly payment terms, such as by requiring standby letters of credit, earlier or advance payment of invoices, payment upon delivery or other assurances or credit support or by choosing not to sell merchandise to us on a timely basis or at all. Our arrangements with our suppliers and vendors may also be impacted by media reports regarding our financial position. Our need for additional liquidity could significantly increase and our supply of merchandise could be materially disrupted if a significant portion of our key suppliers and vendors took one or more of the actions described above, which could have a material adverse effect on our sales, customer satisfaction, cash flows, liquidity and financial position.

Our senior secured real estate term loan credit facility and senior secured notes are secured by certain of our real property and substantially all of our personal property, and such property may be subject to foreclosure or other remedies in the event of our default. In addition, the real estate term loan credit facility and the indenture governing the senior secured notes contain provisions that could restrict our operations and our ability to obtain additional financing.

We are (i) party to a $1.688 billion senior secured term loan credit facility and (ii) the issuer of $500 million aggregate principal amount of senior secured notes that are secured by mortgages on certain real property of the Company, in addition to liens on substantially all personal property of the Company, subject to certain exclusions set forth in the security documents relating to the term loan credit facility and the senior secured notes. The real property subject to mortgages under the term loan credit facility and the indenture governing the senior secured notes includes our distribution centers and certain of our stores.

The credit and guaranty agreement governing the term loan credit facility and the indenture governing the senior secured notes contain operating restrictions which may impact our future alternatives by limiting, without lender consent, our ability to borrow additional funds, execute certain equity financings or enter into dispositions or other liquidity enhancing or strategic transactions regarding certain of our assets, including our real property. Our ability to obtain additional or other financing or to dispose of certain assets could also be negatively impacted because a substantial portion of our owned assets have been pledged as collateral for repayment of our indebtedness under the term loan credit facility and the senior secured notes.

If an event of default occurs and is continuing, our outstanding obligations under the term loan credit facility and the senior secured notes could be declared immediately due and payable or the lenders could foreclose on or exercise other remedies with respect to the assets securing the term loan credit facility and the senior secured notes, including our distribution centers and certain of our stores. If an event of default occurs, there is no assurance that we would have the cash resources available to repay such accelerated obligations or refinance such indebtedness on commercially reasonable terms, or at all. The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations and liquidity.

Our senior secured asset-based revolving credit facility limits our borrowing capacity to the value of certain of our assets. In addition, our senior secured asset-based revolving credit facility is secured by certain of our personal property, and lenders may exercise remedies against the collateral in the event of our default.

We are party to a $2.35 billion senior secured asset-based revolving credit facility. Our borrowing capacity under our revolving credit facility varies according to the Company’s inventory levels, accounts receivable and credit card receivables, net of certain reserves. In the event of any material decrease in the amount of or appraised value of these assets, our borrowing capacity would similarly decrease, which could adversely impact our business and liquidity.

Our revolving credit facility contains customary affirmative and negative covenants and certain restrictions on operations become applicable if our availability falls below certain thresholds. These covenants could impose significant operating and

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financial limitations and restrictions on us, including restrictions on our ability to enter into particular transactions and to engage in other actions that we may believe are advisable or necessary for our business.

Our obligations under the revolving credit facility are secured by liens with respect to inventory, accounts receivable, deposit accounts and certain related collateral. In the event of a default that is not cured or waived within any applicable cure periods, the lenders’ commitment to extend further credit under our revolving credit facility could be terminated, our outstanding obligations could become immediately due and payable, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral, which generally consists of the Company’s inventory, accounts receivable and deposit accounts and cash credited thereto. If we are unable to borrow under our revolving credit facility, we may not have the necessary cash resources for our operations and, if any event of default occurs, there is no assurance that we would have the cash resources available to repay such accelerated obligations, refinance such indebtedness on commercially reasonable terms, or at all, or cash collateralize our letters of credit, which would have a material adverse effect on our business, financial condition, results of operations and liquidity.

Our level of indebtedness may adversely affect our business and results of operations and may require the use of our available cash resources to meet repayment obligations, which could reduce the cash available for other purposes.

As of July 30, 2016, we have $4.725 billion in total indebtedness and we are highly leveraged. Our level of indebtedness may limit our ability to obtain additional financing, if needed, to fund additional projects, working capital requirements, capital expenditures, debt service, and other general corporate or other obligations, as well as increase the risks to our business associated with general adverse economic and industry conditions. Our level of indebtedness may also place us at a competitive disadvantage to our competitors that are not as highly leveraged.

We are required to make quarterly repayments in a principal amount equal to $10.55 million during the seven-year term of the real estate term loan credit facility, subject to certain reductions for mandatory and optional prepayments. In addition, we are required to make prepayments of the real estate term loan credit facility with the proceeds of certain asset sales, insurance proceeds and excess cash flow, which will reduce the cash available for other purposes, including capital expenditures for store improvements, and could impact our ability to reinvest in other areas of our business.

There is no assurance that our internal and external sources of liquidity will at all times be sufficient for our cash requirements.

We must have sufficient sources of liquidity to fund our working capital requirements, capital improvement plans, service our outstanding indebtedness and finance investment opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash and cash equivalents, borrowings under our credit facilities, other debt financings, equity financings and sales of non-operating assets. We expect our ability to generate cash through the sale of non-operating assets to diminish as our portfolio of non-operating assets decreases. In addition, our recent operating losses have limited our capital resources. Our ability to achieve our business and cash flow plans is based on a number of assumptions which involve significant judgments and estimates of future performance, borrowing capacity and credit availability, which cannot at all times be assured. Accordingly, there is no assurance that cash flows from operations and other internal and external sources of liquidity will at all times be sufficient for our cash requirements. If necessary, we may need to consider actions and steps to improve our cash position and mitigate any potential liquidity shortfall, such as modifying our business plan, pursuing additional financing to the extent available, reducing capital expenditures, pursuing and evaluating other alternatives and opportunities to obtain additional sources of liquidity and other potential actions to reduce costs. There can be no assurance that any of these actions would be successful, sufficient or available on favorable terms. Any inability to generate or obtain sufficient levels of liquidity to meet our cash requirements at the level and times needed could have a material adverse impact on our business and financial position.

Our ability to obtain any additional financing or any refinancing of our debt, if needed at any time, depends upon many factors, including our existing level of indebtedness and restrictions in our debt facilities, historical business performance, financial projections, prospects and creditworthiness and external economic conditions and general liquidity in the credit and capital markets. Any additional debt, equity or equity-linked financing may require modification of our existing debt agreements, which there is no assurance would be obtainable. Any additional financing or refinancing could also be extended only at higher costs and require us to satisfy more restrictive covenants, which could further limit or restrict our business and results of operations, or be dilutive to our stockholders.

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Our use of interest rate hedging transactions could expose us to risks and financial losses that may adversely affect our financial condition, liquidity and results of operations.

To reduce our exposure to interest rate fluctuations, we have entered into, and in the future may enter into, interest rate swaps with various financial counterparties. The interest rate swap agreements effectively convert a portion of our variable rate interest payments to a fixed price. There can be no assurances, however, that our hedging activity will be effective in insulating us from the risks associated with changes in interest rates. In addition, our hedging transactions may expose us to certain risks and financial losses, including, among other things:

• counterparty credit risk;

• the risk that the duration or amount of the hedge may not match the duration or amount of the related liability;

• the hedging transactions may be adjusted from time to time in accordance with accounting rules to reflect changes in fair values, downward adjustments or “mark-to-market losses,” which would affect our stockholders’ equity; and

• the risk that we may not be able to meet the terms and conditions of the hedging instruments, in which case we may be required to settle the instruments prior to maturity with cash payments that could significantly affect our liquidity.

Further, we have designated the swaps as cash flow hedges in accordance with Accounting Standards Codification Topic 815, Derivatives and Hedging. However, in the future, we may fail to qualify for hedge accounting treatment under these standards for a number of reasons, including if we fail to satisfy hedge documentation and hedge effectiveness assessment requirements or if the swaps are not highly effective. If we fail to qualify for hedge accounting treatment, losses on the swaps caused by the change in their fair value will be recognized as part of net income, rather than being recognized as part of other comprehensive income.

Operating results and cash flows may cause us to incur asset impairment charges.

Long-lived assets, primarily property and equipment, are reviewed at the store level at least annually for impairment, or whenever changes in circumstances indicate that a full recovery of net asset values through future cash flows is in question.  We also assess the recoverability of indefinite-lived intangible assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Our impairment review requires us to make estimates and projections regarding, but not limited to, sales, operating profit and future cash flows.  If our operating performance reflects a sustained decline, we may be exposed to significant asset impairment charges in future periods, which could be material to our results of operations.

Reductions in income and cash flow from our marketing and servicing arrangement related to our private label and co-branded credit cards could adversely affect our operating results and cash flows.

Synchrony Financial (“Synchrony”) owns and services our private label credit card and co-branded MasterCard® programs. Our agreement with Synchrony provides for certain payments to be made by Synchrony to the Company, including a share of revenues from the performance of the credit card portfolios. The income and cash flow that the Company receives from Synchrony is dependent upon a number of factors including the level of sales on private label and co-branded accounts, the percentage of sales on private label and co-branded accounts relative to the Company’s total sales, the level of balances carried on the accounts, payment rates on the accounts, finance charge rates and other fees on the accounts, the level of credit losses for the accounts, Synchrony’s ability to extend credit to our customers as well as the cost of customer rewards programs. All of these factors can vary based on changes in federal and state credit card, banking and consumer protection laws, which could also materially limit the availability of credit to consumers or increase the cost of credit to our cardholders. The factors affecting the income and cash flow that the Company receives from Synchrony can also vary based on a variety of economic, legal, social and other factors that we cannot control. If the income or cash flow that the Company receives from our consumer credit card program agreement with Synchrony decreases, our operating results and cash flows could be adversely affected.

We are subject to customer payment-related risks that could increase operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.

We accept payments using a variety of methods, including cash, checks, credit and debit cards (including private label credit cards) and gift cards. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted,

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making compliance more difficult or costly. The payment card industry set October 1, 2015 as the date on which liability shifted for certain debit and credit card transactions to retailers who are not able to accept EMV chip technology transactions. As a result, we bear the chargeback risk for fraudulent transactions generated through EMV chip enabled cards prior to implementation of the EMV chip technology. Further, we may experience a decrease in transaction volume if we cannot process transactions for cardholders whose issuer has migrated entirely from magnetic strip to EMV chip enabled cards. Any prolonged inability to accept EMV chip technology transactions may subject us to increased risk of liability for fraudulent transactions and may adversely affect our business and operating results.

We are subject to risks associated with importing merchandise from foreign countries.

A substantial portion of our merchandise is sourced by our vendors and by us outside of the United States. All of our vendors must comply with our supplier legal compliance program and applicable laws, including consumer and product safety laws. Although we diversify our sourcing and production by country and supplier, the failure of a supplier to produce and deliver our goods on time, to meet our quality standards and adhere to our product safety requirements or to meet the requirements of our supplier compliance program or applicable laws, or our inability to flow merchandise to our stores or through the Internet channel in the right quantities at the right time, could adversely affect our profitability and could result in damage to our reputation.

Although we have implemented policies and procedures designed to facilitate compliance with laws and regulations relating to doing business in foreign markets and importing merchandise from abroad, there can be no assurance that suppliers and other third parties with whom we do business will not violate such laws and regulations or our policies, which could subject us to liability and could adversely affect our results of operations.

We are subject to the various risks of importing merchandise from abroad and purchasing product made in foreign countries, such as:

• potential disruptions in manufacturing, logistics and supply;

• changes in duties, tariffs, quotas and voluntary export restrictions on imported merchandise;

• strikes and other events affecting delivery;

• consumer perceptions of the safety of imported merchandise;

• product compliance with laws and regulations of the destination country;

• product liability claims from customers or penalties from government agencies relating to products that are recalled, defective or otherwise noncompliant or alleged to be harmful;

• concerns about human rights, working conditions and other labor rights and conditions and environmental impact in foreign countries where merchandise is produced and raw materials or components are sourced, and changing labor, environmental and other laws in these countries;

• local business practice and political issues that may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts;

• compliance with laws and regulations concerning ethical business practices, such as the U.S. Foreign Corrupt Practices Act; and

• economic, political or other problems in countries from or through which merchandise is imported.

Political or financial instability, trade restrictions, tariffs, currency exchange rates, labor conditions, congestion and labor issues at major ports, transport capacity and costs, systems issues, problems in third party distribution and warehousing and other interruptions of the supply chain, compliance with U.S. and foreign laws and regulations and other factors relating to international trade and imported merchandise beyond our control could affect the availability and the price of our inventory. These risks and other factors relating to foreign trade could subject us to liability or hinder our ability to access suitable merchandise on acceptable terms, which could adversely impact our results of operations.

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Disruptions and congestion at ports through which we import merchandise may increase our costs and/or delay the receipt of goods in our stores, which could adversely impact our profitability, financial position and cash flows.

We ship the majority of our private brand merchandise by ocean to ports in the United States. Our national brand suppliers also ship merchandise by ocean. Disruptions in the operations of ports through which we import our merchandise, including but not limited to labor disputes involving work slowdowns, lockouts or strikes, could require us and/or our vendors to ship merchandise by air freight or to alternative ports in the United States. Shipping by air is significantly more expensive than shipping by ocean which could adversely affect our profitability. Similarly, shipping to alternative ports in the United States could result in increased lead times and transportation costs. Disruptions at ports through which we import our goods could also result in unanticipated inventory shortages, which could adversely impact our reputation and our results of operations.

Our Company’s growth and profitability depend on the levels of consumer confidence and spending.

Our results of operations are sensitive to changes in overall economic and political conditions that impact consumer spending, including discretionary spending. Many economic factors outside of our control, including the housing market, interest rates, recession, inflation and deflation, energy costs and availability, consumer credit availability and terms, consumer debt levels, tax rates and policy, and unemployment trends influence consumer confidence and spending. The domestic and international political situation and actions also affect consumer confidence and spending. Additional events that could impact our performance include pandemics, terrorist threats and activities, worldwide military and domestic disturbances and conflicts, political instability and civil unrest. Declines in the level of consumer spending could adversely affect our growth and profitability.

Our business is seasonal, which impacts our results of operations.

Our annual earnings and cash flows depend to a great extent on the results of operations for the last quarter of our fiscal year, which includes the holiday season. Our fiscal fourth-quarter results may fluctuate significantly, based on many factors, including holiday spending patterns and weather conditions. This seasonality causes our operating results to vary considerably from quarter to quarter.

Our profitability may be impacted by weather conditions.

Our merchandise assortments reflect assumptions regarding expected weather patterns and our profitability depends on our ability to timely deliver seasonally appropriate inventory. Unseasonable or unexpected weather conditions such as warm temperatures during the winter season or prolonged or extreme periods of warm or cold temperatures could render a portion of our inventory incompatible with consumer needs. Extreme weather or natural disasters could also severely hinder our ability to timely deliver seasonally appropriate merchandise, preclude customers from traveling to our stores, delay capital improvements or cause us to close stores. A reduction in the demand for or supply of our seasonal merchandise could have an adverse effect on our inventory levels, gross margins and results of operations.

Changes in federal, state or local laws and regulations could increase our expenses and adversely affect our results of operations.

Our business is subject to a wide array of laws and regulations. Government intervention and activism and/or regulatory reform may result in substantial new regulations and disclosure obligations and/or changes in the interpretation of existing laws and regulations, which may lead to additional compliance costs as well as the diversion of our management’s time and attention from strategic initiatives. If we fail to comply with applicable laws and regulations we could be subject to legal risk, including government enforcement action and class action civil litigation that could disrupt our operations and increase our costs of doing business. Changes in the regulatory environment regarding topics such as privacy and information security, product safety, environmental protection, including regulations in response to concerns regarding climate change, collective bargaining activities, minimum wage, wage and hour, and health care mandates, among others, as well as changes to applicable accounting rules and regulations, such as changes to lease accounting standards, could also cause our compliance costs to increase and adversely affect our business, financial condition and results of operations.

Legal and regulatory proceedings could have an adverse impact on our results of operations.

Our Company is subject to various legal and regulatory proceedings relating to our business, certain of which may involve jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants. We are impacted by trends in litigation, including class action litigation brought under various consumer protection, employment, and privacy and information security laws. In addition, litigation risks related to claims that technologies we use infringe intellectual

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property rights of third parties have been amplified by the increase in third parties whose primary business is to assert such claims. Reserves are established based on our best estimates of our potential liability. However, we cannot accurately predict the ultimate outcome of any such proceedings due to the inherent uncertainties of litigation. Regardless of the outcome or whether the claims are meritorious, legal and regulatory proceedings may require that we devote substantial time and expense to defend our Company. Unfavorable rulings could result in a material adverse impact on our business, financial condition or results of operations.

Significant changes in discount rates, actual investment return on pension assets, and other factors could affect our earnings, equity, and pension contributions in future periods.

Our earnings may be positively or negatively impacted by the amount of income or expense recorded for our qualified pension plan. Generally accepted accounting principles in the United States of America (GAAP) require that income or expense for the plan be calculated at the annual measurement date using actuarial assumptions and calculations. The most significant assumptions relate to the capital markets, interest rates and other economic conditions. Changes in key economic indicators can change the assumptions. Two critical assumptions used to estimate pension income or expense for the year are the expected long-term rate of return on plan assets and the discount rate. In addition, at the measurement date, we must also reflect the funded status of the plan (assets and liabilities) on the balance sheet, which may result in a significant change to equity through a reduction or increase to other comprehensive income. We may also experience volatility in the amount of the annual actuarial gains or losses recognized as income or expense because we have elected to recognize pension expense using mark-to-market accounting. Although GAAP expense and pension contributions are not directly related, the key economic factors that affect GAAP expense would also likely affect the amount of cash we could be required to contribute to the pension plan. Potential pension contributions include both mandatory amounts required under federal law and discretionary contributions to improve a plan’s funded status.

Our stock price has been and may continue to be volatile.

The market price of our common stock has fluctuated substantially and may continue to fluctuate significantly. Future announcements or disclosures concerning us or any of our competitors, our strategic initiatives, our sales and profitability, our financial condition, any quarterly variations in actual or anticipated operating results or comparable sales, any failure to meet analysts’ expectations and sales of large blocks of our common stock, among other factors, could cause the market price of our common stock to fluctuate substantially. In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks that have often been unrelated or disproportionate to the operating performance of these companies. This volatility could affect the price at which you could sell shares of our common stock.

Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. The Company and certain of our current and former members of the Board of Directors and executives are defendants in a consolidated class action lawsuit and two related stockholder derivative actions that were filed following our announcement of an issuance of common stock on September 26, 2013. Such litigation could result in substantial costs, divert our management’s attention and resources and have an adverse effect on our business, results of operations and financial condition.

The Company’s ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited.

The Company has a federal net operating loss (NOL) of $2.6 billion as of January 30, 2016. These NOL carryforwards (expiring in 2032 through 2034) are available to offset future taxable income. The Company may recognize additional NOLs in the future.

Section 382 of the Internal Revenue Code of 1986, as amended (the Code) imposes an annual limitation on the amount of taxable income that may be offset by a corporation's NOLs if the corporation experiences an “ownership change” as defined in Section 382 of the Code. An ownership change occurs when the Company’s “five-percent shareholders” (as defined in Section 382 of the Code) collectively increase their ownership in the Company by more than 50 percentage points (by value) over a rolling three-year period. Additionally, various states have similar limitations on the use of state NOLs following an ownership change.

If an ownership change occurs, the amount of the taxable income for any post-change year that may be offset by a pre-change loss is subject to an annual limitation that is cumulative to the extent it is not all utilized in a year. This limitation is derived by multiplying the fair market value of the Company stock as of the ownership change by the applicable federal long-term tax-exempt rate, which was 2.65% at January 30, 2016. To the extent that a company has a net unrealized built-in gain at the time

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of an ownership change, which is realized or deemed recognized during the five-year period following the ownership change, there is an increase in the annual limitation for each of the first five-years that is cumulative to the extent it is not all utilized in a year.

The Company has an ongoing study of the rolling three-year testing periods. Based upon the elections the Company has made and the information that has been filed with the Securities and Exchange Commission through July 30, 2016, the Company has not had a Section 382 ownership change through July 30, 2016.

If an ownership change should occur in the future, the Company’s ability to use the NOL to offset future taxable income will be subject to an annual limitation and will depend on the amount of taxable income generated by the Company in future periods. There is no assurance that the Company will be able to fully utilize the NOL and the Company could be required to record an additional valuation allowance related to the amount of the NOL that may not be realized, which could impact the Company’s result of operations.

We believe that these NOL carryforwards are a valuable asset for us.  Consequently, we have a stockholder rights plan in place, which was approved by the Company’s stockholders, to protect our NOLs during the effective period of the rights plan.  Although the rights plan is intended to reduce the likelihood of an “ownership change” that could adversely affect us, there is no assurance that the restrictions on transferability in the rights plan will prevent all transfers that could result in such an “ownership change”.

The rights plan could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, our Company or a large block of our common stock.  A third party that acquires 4.9% or more of our common stock could suffer substantial dilution of its ownership interest under the terms of the rights plan through the issuance of common stock or common stock equivalents to all stockholders other than the acquiring person.

The foregoing provisions may adversely affect the marketability of our common stock by discouraging potential investors from acquiring our stock.  In addition, these provisions could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our stockholders.

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Item 6. Exhibits

Exhibit Index

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date	Filed (†) Herewith (as indicated)
3.1	Restated Certificate of Incorporation of J. C. Penney Company, Inc., as amended to May 20, 2011	10-Q	001-15274	3.1	6/8/2011
3.2	J. C. Penney Company, Inc. Bylaws, as amended to July 20, 2016	8-K	001-15274	3.1	7/21/2016
3.3	Certificate of Designation, Preferences and Rights of Series C Junior Participating Preferred Stock	8-K	001-15274	3.1	8/22/2013
4.1	Indenture (including the form of Note), dated as of June 23, 2016, among J. C. Penney Company, Inc., J. C. Penney Corporation, Inc., the subsidiary guarantors party thereto and Wilmington Trust, National Association	8-K	001-15274	4.1	6/24/2016
10.1	J. C. Penney Company, Inc. 2016 Long-Term Incentive Plan	Def. Proxy Stmt.	001-15274	Annex A	3/23/2016
10.2	Form of Notice of Non-Associate Director Restricted Stock Unit Award under the J. C. Penney Company, Inc. 2016 Long-Term Incentive Plan					†
10.3	Restatement Agreement, dated as of June 23, 2016, among J. C. Penney Company, Inc., J. C. Penney Corporation, Inc., the subsidiary guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent	8-K	001-15274	10.1	6/24/2016
10.4	Amended and Restated Pledge and Security Agreement, dated as of June 23, 2016, among J. C. Penney Company, Inc., J. C. Penney Corporation, Inc., the subsidiary guarantors party thereto and Wilmington Trust, National Association, as collateral agent	8-K	001-15274	10.2	6/24/2016
10.5	Intercreditor and Collateral Cooperation Agreement, dated as of June 23, 2016, among Wells Fargo Bank, National Association, as representative for the ABL secured parties, Wilmington Trust, National Association, as representative for the term loan/notes secured parties, J. C. Penney Company, Inc., J. C. Penney Corporation, Inc. and the subsidiary guarantors party thereto	8-K	001-15274	10.3	6/24/2016
10.6	Pari Passu Intercreditor Agreement, dated as of June 23, 2016, among Wilmington Trust, National Association, as collateral agent, Wilmington Trust, National Association, as trustee, and JPMorgan Chase Bank, N.A., as administrative agent	8-K	001-15274	10.4	6/24/2016

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31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	†
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	†
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	†
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	†
101.INS	XBRL Instance Document	†
101.SCH	XBRL Taxonomy Extension Schema Document	†
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	†
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	†
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	†
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	†

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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 COMPANY, INC.
By	/s/Andrew S. Drexler
Andrew S. Drexler Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)

Date: August 30, 2016

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EX-10.2

Exhibit 10.2

J. C. PENNEY COMPANY, INC. 2016 LONG-TERM INCENTIVE PLAN

NOTICE OF RESTRICTED STOCK UNIT AWARD

NON-ASSOCIATE DIRECTOR ANNUAL GRANT

Name:

Restricted Stock Unit Grant

A restricted stock unit grant for [NUMBER] was granted to you on [GRANT DATE]. Each restricted stock unit shall at all times be deemed to have a value equal to the then-current fair market value of one share of J. C. Penney Company, Inc. Common Stock of 50¢ par value (“Common Stock”). This grant is subject to all the terms, rules, and conditions of the J. C. Penney Company, Inc. 2016 Long-Term Incentive Plan (“Plan”). In the event of a change in capitalization of the Company or other similar event, the number of units shall be adjusted as provided in the Plan.

If the Company declares a dividend, you will be credited with a quarterly distribution of an amount equivalent to the dividend declared on Common Stock on the restricted stock units until such time as the units are converted to shares of Common Stock. Any such dividends shall be converted into a number of additional restricted stock units equal to the aggregate dividend which would have been paid with respect to the number of restricted stock units then credited to you under this grant divided by the closing price of the Common Stock on the New York Stock Exchange on the day on which such dividends are paid. Any such additional restricted stock units shall vest at the same time as the restricted stock units granted hereunder.

Payment Date

Upon your separation from Board service, the restricted stock units will vest. Your vested restricted stock units shall be paid out in shares of Common Stock as soon as practicable following the date of your separation from Board service, but in no event later than 2½ months following the end of the calendar year in which you separate from Board service. You shall not be allowed to defer the payment of your shares of Common Stock to a later date. If your separation from Board service is for any reason other than a Qualifying Termination as defined in the Plan, the restricted stock units will be forfeited. The beneficiary listed on your J. C. Penney Company, Inc. Beneficiary Designation Form will receive the vested shares upon separation due to death.

Taxes

At the time the Company issues to you, in cancellation of the restricted stock units, shares of Common Stock, the fair market value of the shares on the vesting date (the closing price of the Common Stock on the New York Stock Exchange, or if the Common Stock does not trade on such date, the closing price reported in the composite transaction table on the last trading date immediately preceding such date) multiplied by the number of vested shares will be reported to the Internal Revenue Service on a Form 1099. The fair market value is subject to Federal Income Tax and Social Security Self-Employment Tax.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Marvin R. Ellison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of J. C. Penney Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 30, 2016

/s/ Marvin R. Ellison

Marvin R. Ellison

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Edward J. Record, certify that:

1. I have reviewed this quarterly report on Form 10-Q of J. C. Penney Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 30, 2016

/s/ Edward J. Record

Edward J. Record

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of J. C. Penney Company, Inc. (the “Company”) on Form 10-Q for the period ended July 30, 2016 (the “Report”), I, Marvin R. Ellison, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATED this 30th day of August 2016.

/s/ Marvin R. Ellison

Marvin R. Ellison

Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of J. C. Penney Company, Inc. (the “Company”) on Form 10-Q for the period ended July 30, 2016 (the “Report”), I, Edward J. Record, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATED this 30th day of August 2016.

/s/ Edward J. Record

Edward J. Record

Executive Vice President and Chief Financial Officer

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Document and Entity Information - shares	6 Months Ended
	Jul. 30, 2016	Aug. 26, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	J C PENNEY CO INC
Entity Central Index Key	0001166126
Current Fiscal Year End Date	--01-28
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Jul. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		307,729,570
Trading Symbol	jcp

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	[1]	Jul. 30, 2016	Aug. 01, 2015
Income Statement [Abstract]
Total net sales	$ 2,918	$ 2,875		$ 5,729	$ 5,732	[1]
Cost of goods sold	1,834	1,810		3,627	3,626	[1]
Gross margin	1,084	1,065		2,102	2,106	[1]
Operating expenses/(income):
Selling, general and administrative (SG&A)	853	901		1,725	1,866	[1]
Pension	2	(16)		4	(35)
Depreciation and amortization	153	153		307	307	[1]
Real estate and other, net	(9)	19		(47)	(16)	[1]
Restructuring and management transition	9	17		15	39	[1]
Total operating expenses	1,008	1,074		2,004	2,161
Operating income/(loss)	76	(9)		98	(55)	[1]
(Gain)/loss on extinguishment of debt	34	0		30	0	[1]
Net interest expense	93	103		188	201	[1]
Income/(loss) before income taxes	(51)	(112)		(120)	(256)	[1]
Income tax expense/(benefit)	5	5		4	11
Net income/(loss)	$ (56)	$ (117)		$ (124)	$ (267)	[1]
Earnings/(loss) per share:
Basic (in dollars per share)	$ (0.18)	$ (0.38)		$ (0.40)	$ (0.87)	[1]
Diluted (in dollars per share)	$ (0.18)	$ (0.38)		$ (0.40)	$ (0.87)	[1]
Weighted average shares – basic	308.0	305.9		307.6	305.7	[1]
Weighted average shares – diluted	308.0	305.9		307.6	305.7	[1]

[1] As Adjusted

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015
Statement of Comprehensive Income [Abstract]
Net income/(loss)	$ (56)	$ (117)	[1]	$ (124)	$ (267)	[1]
Other comprehensive income/(loss), net of tax:
Prior service credit/(cost) arising during the period (1)	0	0	[1]	5	0	[1]
Reclassification for net actuarial (gain)/loss (2)	(1)	0	[1]	(2)	0	[1]
Reclassification for amortization of prior service (credit)/cost (3)	0	0	[1]	0	0	[1]
Gain/(loss) on interest rate swaps (4)	(6)	(7)	[1]	(9)	(7)	[1]
Reclassification for periodic settlements (5)	2	1	[1]	4	1	[1]
Deferred tax valuation allowance	(1)	(3)	[1]	(1)	(3)	[1]
Total other comprehensive income/(loss), net of tax	(6)	(9)	[1]	(3)	(9)	[1]
Total comprehensive income/(loss), net of tax	(62)	(126)	[1]	(127)	(276)	[1]
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Plan Amendments, Tax Effect				(3)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, for Net Gain (Loss), Tax	1			2
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, for Net Gain (Loss), before Tax	2			4
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	3	3		4	3
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax	(1)	(1)		(2)	(1)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax	$ 3	$ 2		$ 6	$ 2

[1] As Adjusted

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) Consolidated Statements of Comprehensive Income/(loss) Parenthetical - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jul. 30, 2016	Jul. 30, 2016
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax	$ 3	$ 4
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax	(1)	(2)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax	3	6
pension [Member]
Other Comprehensive (Income) Loss, Amortization Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, for Net Prior Service Cost (Credit), before Tax	2	4
Selling, General and Administrative Expenses [Member]
Other Comprehensive (Income) Loss, Amortization Adjustment from AOCI, Pension and Other Postretirement Benefit Plans, for Net Prior Service Cost (Credit), before Tax	$ (2)	$ (4)

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions		Jul. 30, 2016	Jan. 30, 2016	Aug. 01, 2015	[1]
Current assets:
Cash in banks and in transit		$ 171	$ 119	$ 178
Cash short-term investments		258	781	795
Cash and cash equivalents		429	900	973
Merchandise inventory		2,981	2,721	3,005
Deferred taxes		231	231	184
Prepaid expenses and other		235	166	200
Total current assets		3,876	4,018	4,362
Property and equipment (net of accumulated depreciation of $3,742, $3,586 and $3,757)		4,686	4,816	4,989
Prepaid pension		0	0	266
Other assets		604	608	615
Total Assets		9,166	9,442	10,232
Current liabilities:
Merchandise accounts payable		1,094	925	1,122
Other accounts payable and accrued expenses		1,121	1,360	1,170
Current portion of capital leases and note payable		18	26	27
Current maturities of long-term debt		341	101	28
Total current liabilities		2,574	2,412	2,347
Long-term capital leases and note payable		10	10	18
Long-term debt		4,356	4,668	5,225
Deferred taxes		425	425	378
Other liabilities		604	618	604
Total Liabilities		7,969	8,133	8,572
Stockholders’ Equity
Common stock	[2]	154	153	153
Additional paid-in capital		4,668	4,654	4,627
Reinvested earnings/(accumulated deficit)		(3,131)	(3,007)	(2,761)
Accumulated other comprehensive income/(loss)		(494)	(491)	(359)
Total Stockholders’ Equity		1,197	1,309	1,660
Total Liabilities and Stockholders’ Equity		$ 9,166	$ 9,442	$ 10,232

[1] As Adjusted

[2] 1,250 million shares of common stock are authorized with a par value of $0.50 per share. The total shares issued and outstanding were 307.6 million, 305.5 million and 306.1 million as of July 30, 2016, August 1, 2015 and January 30, 2016, respectively.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions	Jul. 30, 2016	Jan. 30, 2016	Aug. 01, 2015
Statement of Financial Position [Abstract]
Accumulated depreciation	$ (3,742)	$ (3,757)	$ (3,586)
Common stock, shares authorized	1,250,000,000	1,250,000,000	1,250,000,000
Common stock, par value per share	$ 0.50	$ 0.50	$ 0.5
Common stock, shares issued	307,600,000	306,100,000	305,500,000
Common stock, shares outstanding	307,600,000	306,100,000	305,500,000

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	[1]	Jul. 30, 2016	Aug. 01, 2015	[1]
Cash flows from operating activities
Net income/(loss)	$ (56)	$ (117)		$ (124)	$ (267)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Restructuring and management transition	0	1		(1)	4
Asset impairments and other charges	1	1		2	2
Gain (Loss) on Disposition of Other Assets	0	6		5	8
Net gain on sale of operating assets	(2)	0		(10)	(8)
(Gain)/loss on extinguishment of debt	34	0		30	0
Depreciation and amortization	153	153		307	307
Benefit plans	(15)	(23)		(27)	(48)
Stock-based compensation	10	11		20	21
Deferred taxes	3	2		0	3
Change in cash from:
Inventory	(56)	(194)		(260)	(353)
Prepaid expenses and other	(9)	26		(68)	(11)
Merchandise accounts payable	99	59		169	125
Current income taxes	(3)	2		(4)	6
Accrued expenses and other	27	127		(237)	43
Net cash provided by/(used in) operating activities	186	42		(208)	(184)
Cash flows from investing activities
Capital expenditures	(121)	(95)		(160)	(141)
Net proceeds from sale of non-operating assets	0	7		2	13
Net proceeds from sale of operating assets	4	0		16	5
Joint venture return of investment	1	0		15	0
Net cash provided by/(used in) investing activities	(116)	(88)		(127)	(123)
Cash flows from financing activities
Proceeds from issuance of long-term debt	2,188	0		2,188	0
Payments of capital leases and note payable	(5)	(18)		(19)	(23)
Payments of long-term debt	(2,188)	(7)		(2,250)	(13)
Proceeds from stock options exercised	0	0		1	0
Financing costs	(49)	0		(49)	0
Tax withholding payments for vested restricted stock	(2)	0		(7)	(2)
Net cash provided by/(used in) financing activities	(56)	(25)		(136)	(38)
Net increase/(decrease) in cash and cash equivalents	14	(71)		(471)	(345)
Cash and cash equivalents at beginning of period	415	1,044		900	1,318
Cash and cash equivalents at end of period	429	973		429	973
Supplemental cash flow information
Income taxes received/(paid), net	(5)	(2)		(8)	(2)
Interest received/(paid), net	(62)	(58)		(184)	(184)
Supplemental non-cash investing and financing activity
Increase/(decrease) in other accounts payable related to purchases of property and equipment and software	$ (9)	$ 18		$ 32	$ 29

[1] As Adjusted

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Basis of Presentation and Consolidation

6 Months Ended

Jul. 30, 2016

Basis of Presentation and Consolidation [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

Basis of Presentation

J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The holding company has no independent assets or operations, and no direct subsidiaries other than JCP. The holding company and its consolidated subsidiaries, including JCP, are collectively referred to in this quarterly report as “we,” “us,” “our,” “ourselves” or the “Company,” unless otherwise indicated.

J. C. Penney Company, Inc. is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee of certain of JCP’s outstanding debt securities by J. C. Penney Company, Inc. is full and unconditional.

These unaudited Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying unaudited Interim Consolidated Financial Statements, in our opinion, include all material adjustments necessary for a fair presentation and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (2015 Form 10-K). We follow substantially the same accounting policies to prepare quarterly financial statements as are followed in preparing annual financial statements. A description of such significant accounting policies is included in the 2015 Form 10-K. The January 30, 2016 financial information was derived from the audited Consolidated Financial Statements, with related footnotes, included in the 2015 Form 10-K. Because of the seasonal nature of the retail business, operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

Fiscal Year

Our fiscal year ends on the Saturday closest to January 31. As used herein, “three months ended July 30, 2016” and “three months ended August 1, 2015” refer to the 13-week periods ended July 30, 2016 and August 1, 2015, respectively. “Six months ended July 30, 2016” and “six months ended August 1, 2015” refer to the 26-week periods ended July 30, 2016 and August 1, 2015, respectively. Fiscal years 2016 and 2015 contain 52 weeks.

Basis of Consolidation

All significant inter-company transactions and balances have been eliminated in consolidation.

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Change in Accounting for Retirement-Related Benefits (Notes)

6 Months Ended

Jul. 30, 2016

Change in Accounting for Retirement-Related Benefits [Abstract]

Accounting Changes [Text Block]

 Change in Accounting for Retirement-Related Benefits

In 2015, the Company elected to change its method of recognizing pension expense. Previously, for the primary and supplemental pension plans, net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) were recognized over the remaining service period of plan participants (eight years for the primary pension plan). Under the Company’s new accounting method, the Company recognizes changes in net actuarial gains or losses in excess of the corridor annually in the fourth quarter each year (Mark-to-market Adjustment). The remaining components of pension expense, primarily service and interest costs and assumed return on plan assets, will be recorded on a quarterly basis. While the historical policy of recognizing pension expense was considered acceptable, the Company believes that the new policy is preferable as it eliminates the delay in recognition of actuarial gains and losses outside the corridor.

This change has been reported through retrospective application of the new policy to all periods presented. The impacts of all adjustments made to the financial statements are summarized below:

Consolidated Statements of Operations

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions, except per share data)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Pension	$	13		$	(16	)	$	(29	)	$	23		$	(35	)	$	(58	)
Income/(loss) before income taxes	(141		)	(112		)	29			(314		)	(256		)	58
Income tax expense/(benefit)	(3		)	5			8			(9		)	11			20
Net income/(loss)	$	(138	)	(117		)	$	21		$	(305	)	(267		)	$	38
Basic earnings/(loss) per common share	$	(0.45	)	$	(0.38	)	$	0.07		$	(1.00	)	$	(0.87	)	$	0.13
Diluted earnings/(loss) per common share	$	(0.45	)	$	(0.38	)	$	0.07		$	(1.00	)	$	(0.87	)	$	0.13

Consolidated Statements of Comprehensive Income/(Loss)

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Net income/(loss)	$	(138	)	$	(117	)	$	21		$	(305	)	$	(267	)	$	38
Reclassifications for amortization of net actuarial (gain)/loss	18			—			(18		)	35			—			(35		)
Deferred tax valuation allowance	—			(3		)	(3		)	—			(3		)	(3		)
Total other comprehensive income/(loss), net of tax	12			(9		)	(21		)	29			(9		)	(38		)
Total comprehensive income/(loss), net of tax	$	(126	)	$	(126	)	$	—		$	(276	)	$	(276	)	$	—

Consolidated Balance Sheets

	August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change
Reinvested earnings/(accumulated deficit)	$	(2,084	)	$	(2,761	)	$	(677	)
Accumulated other comprehensive income/(loss)	(1,036		)	(359		)	677

Consolidated Statements of Cash Flows

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Cash flows from operating activities:
Net income/(loss)	$	(138	)	$	(117	)	$	21		$	(305	)	$	(267	)	$	38
Benefit plans	6			(23		)	(29		)	10			(48		)	(58		)
Deferred taxes	$	(6	)	$	2		$	8		$	(17	)	$	3		$	20

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Effect of New Accounting Standards

6 Months Ended

Jul. 30, 2016

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Effect of New Accounting Standards

Effect of New Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled (i.e., additional paid-in capital or APIC pools will be eliminated). The guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is changing. The ASU also provides a practical expedient for public companies that will allow the use of a simplified method to estimate the expected term for certain awards. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effect that adopting this new accounting guidance will have on our financial condition, results of operations or cash flows.

In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the FASB Emerging Issues Task Force) (ASU 2016-05). Under the ASU, the novation of a derivative contract (i.e., a change in the counterparty) in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. The hedge accounting relationship could continue uninterrupted if all of the other hedge accounting criteria are met, including the expectation that the hedge will be highly effective when the creditworthiness of the new counterparty to the derivative contract is considered. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods therein. Early adoption is permitted. Entities may apply the guidance prospectively or on a modified retrospective basis. We are currently evaluating the effect that adopting this new accounting guidance will have on our financial condition, results of operations or cash flows.

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Earnings/(Loss) per Share

6 Months Ended

Jul. 30, 2016

Earnings Per Share [Abstract]

Earnings/(Loss) per Share

Earnings/(Loss) per Share

Net income/(loss) and shares used to compute basic and diluted earnings/(loss) per share (EPS) are reconciled below:

	Three Months Ended						Six Months Ended
(in millions, except per share data)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Earnings/(loss)
Net income/(loss)	$	(56	)	$	(117	)	$	(124	)	$	(267	)
Shares
Weighted average common shares outstanding (basic shares)	308.0			305.9			307.6			305.7
Adjustment for assumed dilution:
Stock options, restricted stock awards and warrant	—			—			—			—
Weighted average shares assuming dilution (diluted shares)	308.0			305.9			307.6			305.7
EPS
Basic	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)
Diluted	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)

The following average potential shares of common stock were excluded from the diluted EPS calculation because their effect would have been anti-dilutive:

	Three Months Ended		Six Months Ended
(Shares in millions)	July 30, 2016	August 1, 2015	July 30, 2016	August 1, 2015
Stock options, restricted stock awards and warrant	34.8	34.6	35.0	33.2

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Long-Term Debt

6 Months Ended

Jul. 30, 2016

Debt Disclosure [Abstract]

Long-Term Debt

5. Long-Term Debt

($ in millions)	July 30, 2016			August 1, 2015			January 30, 2016
Issue:
5.65% Senior Notes Due 2020 (1)	$	400		$	400		$	400
5.75% Senior Notes Due 2018 (1)	265			300			300
5.875% Senior Secured Notes Due 2023 (1)	500			—			—
6.375% Senior Notes Due 2036 (1)	388			400			400
6.9% Notes Due 2026	2			2			2
7.125% Debentures Due 2023	10			10			10
7.4% Debentures Due 2037	313			326			326
7.625% Notes Due 2097	500			500			500
7.65% Debentures Due 2016	78			78			78
7.95% Debentures Due 2017	220			220			220
8.125% Senior Notes Due 2019	400			400			400
2016 Term Loan Facility	1,688			—			—
2013 Term Loan Facility	—			2,205			2,194
2014 Term Loan	—			495			—
Total debt, excluding unamortized debt issuance costs, capital leases and note payable	4,764			5,336			4,830
Unamortized debt issuance costs	(67		)	(83		)	(61		)
Total debt, excluding capital leases and note payable	4,697			5,253			4,769
Less: current maturities	341			28			101
Total long-term debt, excluding capital leases and note payable	$	4,356		$	5,225		$	4,668

(1) These debt issuances contain a change of control provision that would obligate us, at the holders’ option, to repurchase the debt at a price of 101%.

During the first quarter of 2016, we repurchased and retired $60 million aggregate principal amount of our outstanding debt resulting in a gain on extinguishment of debt of $4 million.

During the second quarter of 2016, we completed the refinancing of our $2.25 billion five-year senior secured term loan facility entered into in 2013 (2013 Term Loan Facility) with an amended and restated $1.688 billion seven-year senior secured term loan credit facility (2016 Term Loan Facility) and the issuance of $500 million of 5.875% Senior Secured Notes due 2023 (Senior Secured Notes), resulting in a loss on extinguishment of debt of $34 million.

The 2016 Term Loan Facility bears interest at a rate of LIBOR plus 4.25% and matures on June 23, 2023. We are required to make quarterly repayments in a principal amount equal to $10.55 million during the seven-year term, subject to certain reductions for mandatory and optional prepayments. Proceeds from the 2016 Term Loan Facility and the Senior Secured Notes were used to repay the entire outstanding principal balance of the 2013 Term Loan Facility. The 2016 Term Loan facility and the Senior Secured Notes are guaranteed by the Company and certain subsidiaries of JCP and are secured by mortgages on certain real estate of JCP and the guarantors.

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Derivative Financial Instruments (Notes)

6 Months Ended

Jul. 30, 2016

Derivative [Line Items]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

6. Derivative Financial Instruments

We use derivative financial instruments for hedging and non-trading purposes to manage our exposure to changes in interest rates. Use of derivative financial instruments in hedging programs subjects us to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative instrument will change. In a hedging relationship, the change in the value of the derivative is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to derivatives represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of our derivative financial instruments is used to measure interest to be paid or received and does not represent our exposure due to credit risk. Credit risk is monitored through established approval procedures, including setting concentration limits by counterparty, reviewing credit ratings and requiring collateral (generally cash) from the counterparty when appropriate.

When we use derivative financial instruments for the purpose of hedging our exposure to interest rates, the contract terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria are recorded using hedge accounting. If a derivative instrument is a hedge, depending on the nature of the hedge, changes in the fair value of the instrument will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or be recognized in accumulated other comprehensive income/(loss) until the hedged item is recognized in earnings. The ineffective portion of an instrument’s change in fair value will be immediately recognized in earnings during the period. Instruments that do not meet the criteria for hedge accounting, or contracts for which we have not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of change.

We have entered into interest rate swap agreements with notional amounts totaling $1,250 million to fix a portion of our variable LIBOR-based interest payments. The interest rate swap agreements have a weighted-average fixed rate of 2.04%, mature on May 7, 2020 and have been designated as cash flow hedges.

The fair value of our interest rate swaps are recorded on the unaudited Interim Consolidated Balance Sheets as an asset or a liability (see Note 7). The effective portion of the interest rate swaps' changes in fair values is reported in Accumulated other comprehensive income/(loss) (see Note 8), and the ineffective portion is reported in Net income/(loss). Amounts in Accumulated other comprehensive income/(loss) are reclassified into net income/(loss) when the related interest payments affect earnings. For the periods presented, all of the interest rate swaps were 100% effective.

Information regarding the gross amounts of our derivative instruments in the unaudited Interim Consolidated Balance Sheets is as follows:

	Asset Derivatives at Fair Value							Liability Derivatives at Fair Value
($ in millions)	Balance Sheet Location	July 30, 2016		August 1, 2015		January 30, 2016		Balance Sheet Location	July 30, 2016		August 1, 2015		January 30, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	N/A	$	—	$	—	$	—	Other accounts payable and accrued expenses	$	2	$	2	$	2
Interest rate swaps	N/A	—		—		—		Other liabilities	35		9		28
Total derivatives designated as hedging instruments		$	—	$	—	$	—		$	37	$	11	$	30

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Fair Value Disclosures

6 Months Ended

Jul. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value Disclosures

In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value, as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Significant unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.

Cash Flow Hedges Measured on a Recurring Basis

The $37 million, $11 million and $30 million fair value of our cash flow hedges as of July 30, 2016, August 1, 2015 and January 30, 2016, respectively, are valued in the market using discounted cash flow techniques which use quoted market interest rates in discounted cash flow calculations which consider the instrument's term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps are observable in the active markets and are classified as Level 2 in the fair value measurement hierarchy.

Other Financial Instruments

Carrying values and fair values of financial instruments that are not carried at fair value in the unaudited Interim Consolidated Balance Sheets are as follows:

	July 30, 2016				August 1, 2015				January 30, 2016
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Total debt, excluding unamortized debt issuance costs, capital leases and note payable	$	4,764	$	4,530	$	5,336	$	5,002	$	4,830	$	4,248

The fair value of long-term debt was estimated by obtaining quotes from brokers or was based on current rates offered for similar debt. As of July 30, 2016, August 1, 2015 and January 30, 2016, the fair values of cash and cash equivalents and accounts payable approximated their carrying values due to the short-term nature of these instruments. In addition, the fair values of capital lease commitments and the note payable approximated their carrying values. These items have been excluded from the table above.

Concentrations of Credit Risk

We have no significant concentrations of credit risk.

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Stockholders' Equity

6 Months Ended

Jul. 30, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

The following table shows the change in the components of stockholders’ equity for the six months ended July 30, 2016:

(in millions)	Number of Common Shares	Common Stock		Additional Paid-in Capital		Reinvested Earnings/ (Accumulated Deficit)			Accumulated Other Comprehensive Income/(Loss)			Total Stockholders’ Equity
January 30, 2016	306.1	$	153	$	4,654	$	(3,007	)	$	(491	)	$	1,309
Net income/(loss)	—	—		—		(124		)	—			(124		)
Other comprehensive income/(loss)	—	—		—		—			(3		)	(3		)
Stock-based compensation and other	1.5	1		14		—			—			15
July 30, 2016	307.6	$	154	$	4,668	$	(3,131	)	$	(494	)	$	1,197

Accumulated Other Comprehensive Income/(Loss)

The following table shows the changes in accumulated other comprehensive income/(loss) balances for the six months ended July 30, 2016:

($ in millions)	Net  Actuarial Gain/(Loss)			Prior Service Credit/(Cost)			Foreign Currency Translation			Gain/(Loss) on Cash Flow Hedges			Accumulated Other Comprehensive Income/(Loss)
January 30, 2016	$	(423	)	$	(38	)	$	(2	)	$	(28	)	$	(491	)
Other comprehensive income/(loss) before reclassifications	—			8			—			(13		)	(5		)
Amounts reclassified from accumulated other comprehensive income	(4		)	—			—			6			2
July 30, 2016	$	(427	)	$	(30	)	$	(2	)	$	(35	)	$	(494	)

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Retirement Benefit Plans

6 Months Ended

Jul. 30, 2016

Retirement Benefit Plans [Abstract]

Retirement Benefit Plans

Retirement Benefit Plans

The components of net periodic benefit expense/(income) for our non-contributory qualified defined benefit pension plan (Primary Pension Plan) and non-contributory supplemental pension plans were as follows:

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Primary Pension Plan
Service cost	$	14		$	18		$	28		$	35
Interest cost	38			49			76			98
Other cost	—			3			—			3
Expected return on plan assets	(54		)	(89		)	(108		)	(178		)
Amortization of prior service cost/(credit)	2			2			4			4
Net periodic benefit expense/(income)	$	—		$	(17	)	$	—		$	(38	)
Supplemental Pension Plans
Interest cost	2			1			4			3
Net periodic benefit expense/(income)	$	2		$	1		$	4		$	3
Primary and Supplemental Pension Plans Total
Service cost	$	14		$	18		$	28		$	35
Interest cost	40			50			80			101
Other cost	—			3			—			3
Expected return on plan assets	(54		)	(89		)	(108		)	(178		)
Amortization of prior service cost/(credit)	2			2			4			4
Net periodic benefit expense/(income)	$	2		$	(16	)	$	4		$	(35	)

Additionally, the Company had net periodic postretirement income of $4 million and $2 million, respectively, in the three months ended July 30, 2016 and August 1, 2015 and net periodic postretirement income of $8 million and $4 million, respectively, in the six months ended July 30, 2016 and August 1, 2015. These amounts are related to the Company's noncontributory postretirement health and welfare plan and are included in SG&A expense in the unaudited Interim Consolidated Statements of Operations. The Company communicated to plan participants that the postretirement health and welfare plan will terminate by December 2016 and this resulted in a reduction of the accumulated plan benefit obligation from $8 million at January 30, 2016 to $1 million at July 30, 2016.

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Restructuring and Management Transition

6 Months Ended

Jul. 30, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Management Transition

Restructuring and Management Transition

The components of Restructuring and management transition include:

• Home office and stores -- charges for actions to reduce our store and home office expenses including employee termination benefits, store lease termination and impairment charges;

• Management transition -- charges related to implementing changes within our management leadership team for both incoming and outgoing members of management; and

• Other -- charges related primarily to contract termination costs and other costs associated with our previous shops strategy and costs related to the closure of certain supply chain locations.

The composition of restructuring and management transition charges was as follows:

	Three Months Ended				Six Months Ended				Cumulative Amount From Program Inception Through July 30, 2016
($ in millions)	July 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Home office and stores	$	—	$	15	$	4	$	29	$	293
Management transition	1		1		3		7		255
Other	8		1		8		3		171
Total	$	9	$	17	$	15	$	39	$	719

Activity for the restructuring and management transition liability for the six months ended July 30, 2016 was as follows:

($ in millions)	Home Office and Stores			Management Transition			Other			Total
January 30, 2016	$	18		$	10		$	23		$	51
Charges	4			3			8			15
Cash payments	(15		)	(12		)	(8		)	(35		)
Non-cash	1			—			—			1
July 30, 2016	$	8		$	1		$	23		$	32

Non-cash amounts represent charges that do not result in cash outflows.

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Real Estate and Other, Net

6 Months Ended

Jul. 30, 2016

Real Estate and Other, Net [Abstract]

Real Estate and Other, Net

Real Estate and Other, Net

Real estate and other consists of ongoing operating income from our real estate subsidiaries. Real estate and other also includes net gains from the sale of facilities and equipment that are no longer used in operations, asset impairments, accruals for certain litigation and other non-operating charges and credits. In addition, during the first quarter of 2014, we entered into a joint venture in which we contributed approximately 220 acres of excess property adjacent to our home office facility in Plano, Texas (Home Office Land Joint Venture). The joint venture was formed to develop the contributed property and our proportional share of the joint venture's activities is recorded in Real estate and other, net.

The composition of Real estate and other, net was as follows:  

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Net gain from sale of non-operating assets	$	—		$	(6	)	$	(5	)	$	(8	)
Investment income from Home Office Land Joint Venture	(5		)	—			(29		)	(22		)
Net gain from sale of operating assets	(2		)	—			(10		)	(8		)
Other	(2		)	25			(3		)	22
Total expense/(income)	$	(9	)	$	19		$	(47	)	$	(16	)

Investment Income from Joint Ventures

During the second quarter and first six months of 2016, the Company had $5 million and $29 million, respectively, in income related to its proportional share of the net income in the Home Office Land Joint Venture and received an aggregate cash distribution of $6 million and $44 million, respectively. During the second quarter of 2015, no investment income was generated from the Home Office Land Joint Venture. During the first half of 2015, the Company had $22 million in income related to its proportional share of the net income in the Home Office Land Joint Venture and received an aggregate cash distribution of $22 million.

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Income Taxes

6 Months Ended

Jul. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The net tax expense of $5 million for the three months ended July 30, 2016 consisted of state and foreign tax expenses of $4 million, $1 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets and $2 million of expense relating to other comprehensive income, offset by a $2 million benefit for state audit settlements.

The net tax expense of $4 million for the six months ended July 30, 2016 consisted of state and foreign tax expenses of $7 million and $3 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets, offset by net tax benefits of $4 million to adjust the valuation allowance and $2 million for state audit settlements.

As of July 30, 2016, we have approximately $2.6 billion of net operating losses (NOLs) available for U.S. federal income tax purposes, which expire in 2032 through 2034 and $62 million of tax credit carryforwards that expire at various dates through 2035. For these NOL and tax credit carryforwards a net deferred tax asset of $78 million has been recorded, net of a valuation allowance of $818 million. A valuation allowance of $239 million fully offsets the deferred tax assets resulting from the state NOL carryforwards that expire at various dates through 2034. In assessing the need for the valuation allowance, we considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As a result of our periodic assessment, our estimate of the realization of deferred tax assets is solely based on the future reversals of existing taxable temporary differences and tax planning strategies that we would make use of to accelerate taxable income to utilize expiring NOL and tax credit carryforwards. Accordingly, in the second quarter and first six months of 2016, the valuation allowance was increased by $19 million and $32 million, respectively, to offset the net deferred tax assets created in those periods relating primarily to the increase in NOL carryforwards.

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Litigation, Other Contingencies and Guarantees

6 Months Ended

Jul. 30, 2016

Litigation, Other Contingencies and Guarantees [Abstract]

Litigation, Other Contingencies and Guarantees

Litigation and Other Contingencies

Litigation

Macy’s Litigation

On August 16, 2012, Macy’s, Inc. and Macy’s Merchandising Group, Inc. (together the Plaintiffs) filed suit against JCP in the Supreme Court of the State of New York, County of New York, alleging that the Company tortiously interfered with, and engaged in unfair competition relating to, a 2006 agreement between Macy’s and Martha Stewart Living Omnimedia, Inc. (MSLO) by entering into a partnership agreement with MSLO in December 2011. The Plaintiffs sought primarily to prevent the Company from implementing our partnership agreement with MSLO as it related to products in the bedding, bath, kitchen and cookware categories. The suit was consolidated with an already-existing breach of contract lawsuit by the Plaintiffs against MSLO, and a bench trial commenced on February 20, 2013. On October 21, 2013, the Company and MSLO entered into an amendment of the partnership agreement, providing in part that the Company will not sell MSLO-designed merchandise in the bedding, bath, kitchen and cookware categories. On January 2, 2014, MSLO and Macy's announced that they had settled the case as to each other, and MSLO was subsequently dismissed as a defendant. On June 16, 2014, the court issued a ruling against the Company on the remaining claim of intentional interference, and held that Macy’s is not entitled to punitive damages. The court referred other issues related to damages to a Judicial Hearing Officer. On June 30, 2014, the Company appealed the court’s decision, and Macy’s cross-appealed a portion of the decision. On February 26, 2015, the appellate court affirmed the trial court's rulings concerning the claim of intentional interference and lack of punitive damages, and reinstated Macy's claims for intentional interference and unfair competition that had been dismissed during trial. On June 17, 2015, Macy’s appealed the court’s order that the Judicial Hearing Officer proceed with the damages phase of the proceedings on the tortious interference claim. On November 24, 2015, the Judicial Hearing Officer issued a recommendation on the amount of damages to be awarded to Macy’s. On December 1, 2015, the appellate court heard oral argument on Macy's appeal of the trial court's order referring issues related to damages to the Judicial Hearing Officer and the parties are awaiting a decision. On June 6, 2016, the court adopted the Judicial Hearing Officer's recommendation on the amount of damages to be awarded to Macy's. Both parties have filed a notice of appeal. While no assurance can be given as to the ultimate outcome of this matter, we believe that the final resolution of this action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Ozenne Derivative Lawsuit

On January 19, 2012, a purported shareholder of the Company, Everett Ozenne, filed a shareholder derivative lawsuit in the 193^rd District Court of Dallas County, Texas, against certain of the Company’s Board of Directors and executives. The Company is a nominal defendant in the suit. The lawsuit alleged breaches of fiduciary duties, corporate waste and unjust enrichment involving decisions regarding executive compensation, specifically that compensation paid to certain executive officers from 2008 to 2011 was too high in light of the Company’s financial performance. The suit sought damages including unspecified compensatory damages, disgorgement by the former officers of allegedly excessive compensation, and equitable relief to reform the Company’s compensation practices. The Company and the named individuals filed an Answer and Special Exceptions to the lawsuit, arguing primarily that the plaintiff could not proceed with his suit because he failed to make demand on the Company’s Board of Directors, and that because demand on the Board would not be futile, demand was not excused. The trial court heard arguments on the Special Exceptions on June 25, 2012 and denied them. The Company and named individuals filed a mandamus proceeding in the Fifth District Court of Appeals challenging the trial court’s decision. The parties then settled the litigation and the appellate court stayed the appeal so that the trial court could review the proposed settlement. The trial court approved the settlement at a hearing on October 28, 2013 and, despite objection, awarded the plaintiff $3.1 million in attorneys’ fees and costs. The Fifth District Court of Appeals affirmed the award on December 19, 2014. The Company filed a Petition for Review with the Texas Supreme Court, which was denied on May 27, 2016.

Class Action Securities Litigation

The Company, Myron E. Ullman, III and Kenneth H. Hannah are parties to the Marcus consolidated purported class action lawsuit in the U.S. District Court, Eastern District of Texas, Tyler Division. The Marcus consolidated complaint is purportedly brought on behalf of persons who acquired our common stock during the period from August 20, 2013 through September 26, 2013, and alleges claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Plaintiff claims that the defendants made false and misleading statements and/or omissions regarding the Company’s financial condition and business prospects that caused our common stock to trade at artificially inflated prices.  The consolidated complaint seeks class certification, unspecified compensatory damages, including interest, reasonable costs and expenses, and other relief as the court may deem just and proper. Defendants filed a motion to dismiss the consolidated complaint which was denied by the court on September 29, 2015. Defendants filed an answer to the consolidated complaint on November 12, 2015. Plaintiff filed a motion for class certification on January 25, 2016, and defendants submitted a response to the motion on April 15, 2016. The motion was heard by the court on June 29, 2016.

Also, on August 26, 2014, plaintiff Nathan Johnson filed a purported class action lawsuit against the Company, Myron E. Ullman, III and Kenneth H. Hannah in the U.S. District Court, Eastern District of Texas, Tyler Division. The suit is purportedly brought on behalf of persons who acquired our securities other than common stock during the period from August 20, 2013 through September 26, 2013, generally mirrors the allegations contained in the Marcus lawsuit discussed above, and seeks similar relief. On June 8, 2015, plaintiff in the Marcus lawsuit amended the consolidated complaint to include the members of the purported class in the Johnson lawsuit, and on June 10, 2015, the Johnson lawsuit was consolidated into the Marcus lawsuit.

We believe these lawsuits are without merit and we intend to vigorously defend them. While no assurance can be given as to the ultimate outcome of these matters, we believe that the final resolution of these actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Shareholder Derivative Litigation

In October, 2013, two purported shareholder derivative actions were filed against certain present and former members of the Company’s Board of Directors and executives by the following parties in the U.S. District Court, Eastern District of Texas, Sherman Division: Weitzman (filed October 2, 2013) and Zauderer (filed October 3, 2013). The Company is named as a nominal defendant in both suits. The lawsuits assert claims for breaches of fiduciary duties and unjust enrichment based upon alleged false and misleading statements and/or omissions regarding the Company’s financial condition. The lawsuits seek unspecified compensatory damages, restitution, disgorgement by the defendants of all profits, benefits and other compensation, equitable relief to reform the Company’s corporate governance and internal procedures, reasonable costs and expenses, and other relief as the court may deem just and proper. On October 28, 2013, the Court consolidated the two cases into the Weitzman lawsuit. On January 15, 2014, the Court entered an order staying the derivative suits pending certain events in the class action securities litigation described above.

Also, in March 2016, plaintiff Frank Lipsius filed a purported shareholder derivative action against certain present and former members of the Company's Board of Directors and executives in the District Court of Collin County in the State of Texas. The Company is named as a nominal defendant in the suit. The suit generally mirrors the allegations contained in the Weitzman and Zauderer suits discussed above, and seeks similar relief.

While no assurance can be given as to the ultimate outcome of these matters, we believe that the final resolution of these actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

ERISA Class Action Litigation

JCP and certain present and former members of JCP's Board of Directors have been sued in a purported class action complaint by plaintiffs Roberto Ramirez and Thomas Ihle, individually and on behalf of all others similarly situated, which was filed on July 8, 2014 in the U.S. District Court, Eastern District of Texas, Tyler Division. The suit alleges that the defendants violated Section 502 of the Employee Retirement Income Security Act (ERISA) by breaching fiduciary duties relating to the J. C. Penney Corporation, Inc. Savings, Profit-Sharing and Stock Ownership Plan (the Plan). The class period is alleged to be between November 1, 2011 and September 27, 2013. Plaintiffs allege that they and others who invested in or held Company stock in the Plan during this period were injured because defendants allegedly made false and misleading statements and/or omissions regarding the Company’s financial condition and business prospects that caused the Company’s common stock to trade at artificially inflated prices. The complaint seeks class certification, declaratory relief, a constructive trust, reimbursement of alleged losses to the Plan, actual damages, attorneys’ fees and costs, and other relief. Defendants filed a motion to dismiss the complaint which was granted in part and denied in part by the court on September 29, 2015. The parties have reached a settlement agreement, subject to court approval, pursuant to which JCP would make available $4.5 million to settle class members’ claims. While no assurance can be given as to the ultimate outcome of this matter, we believe that the final resolution of this action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Employment Class Action Litigation

JCP is a defendant in a class action proceeding entitled Tschudy v. JCPenney Corporation filed on April 15, 2011 in the U.S. District Court, Southern District of California. The lawsuit alleges that JCP violated the California Labor Code in connection with the alleged forfeiture of accrued and vested vacation time under its “My Time Off” policy. The class consists of all JCP employees who worked in California from April 5, 2007 to the present. Plaintiffs amended the complaint to assert additional claims under the Illinois Wage Payment and Collection Act on behalf of all JCP employees who worked in Illinois from January 1, 2004 to the present. After the court granted JCP’s motion to transfer the Illinois claims, those claims are now pending in a separate action in the U.S. District Court, Northern District of Illinois, entitled Garcia v. JCPenney Corporation. The lawsuits seek compensatory damages, penalties, interest, disgorgement, declaratory and injunctive relief, and attorney’s fees and costs. Plaintiffs in both lawsuits filed motions, which the Company opposed, to certify these actions on behalf of all employees in California and Illinois based on the specific claims at issue. On December 17, 2014, the California court granted plaintiffs’ motion for class certification. Pursuant to a motion by the Company, the California court decertified the class on December 9, 2015. On March 30, 2016, the California court granted JCP’s motion for summary judgment, and on May 4, 2016, entered judgment for JCP on all plaintiffs’ claims. The Illinois court denied without prejudice plaintiffs' motion for class certification pending the filing of an amended complaint. Plaintiffs filed their amended complaint in the Illinois lawsuit on April 14, 2015 and the Company has answered. On July 2, 2015, the Illinois plaintiffs renewed their motion for class certification, which the Illinois court granted on March 8, 2016. We believe these lawsuits are without merit and we intend to continue to vigorously defend these lawsuits. While no assurance can be given as to the ultimate outcome of these matters, we believe that the final resolution of these actions will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Pricing Class Action Litigation

JCP is a defendant in a class action proceeding entitled Spann v. J. C. Penney Corporation, Inc. filed on February 8, 2012 in the U.S. District Court, Central District of California. The lawsuit alleges that JCP violated California’s Unfair Competition Law and related state statutes in connection with its advertising of sale prices for private label apparel and accessories. The lawsuit seeks restitution, damages, injunctive relief, and attorney’s fees and costs. On May 18, 2015, the court granted plaintiff's request for certification of a class consisting of all people who, between November 5, 2010 and January 31, 2012, made purchases in California of JCP private or exclusive label apparel or accessories advertised at a discount of at least 30% off the stated original or regular price (excluding those who only received such discount by using coupon(s)), and who have not received a refund or credit for their purchases. The parties have reached a settlement agreement, subject to court approval, and in accordance with the term of the settlement, we have established a $50 million reserve to settle class members' claims. The court has granted preliminary approval of the settlement. A final approval hearing was held on August 25, 2016 and the parties are awaiting the court's decision.

Other Legal Proceedings

We are subject to various other legal and governmental proceedings involving routine litigation incidental to our business. Accruals have been established based on our best estimates of our potential liability in certain of these matters, including certain matters discussed above, all of which we believe aggregate to an amount that is not material to the Consolidated Financial Statements. These estimates were developed in consultation with in-house and outside counsel. While no assurance can be given as to the ultimate outcome of these matters, we currently believe that the final resolution of these actions, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Contingencies

As of July 30, 2016, we estimated our total potential environmental liabilities to range from $19 million to $25 million and recorded our best estimate of $23 million in Other accounts payable and accrued expenses and Other liabilities in the unaudited Interim Consolidated Balance Sheet as of that date. This estimate covered potential liabilities primarily related to underground storage tanks, remediation of environmental conditions involving our former drugstore locations and asbestos removal in connection with approved plans to renovate or dispose of our facilities. We continue to assess required remediation and the adequacy of environmental reserves as new information becomes available and known conditions are further delineated. If we were to incur losses at the upper end of the estimated range, we do not believe that such losses would have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

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Basis of Presentation and Consolidation (Policy)

6 Months Ended

Jul. 30, 2016

Basis of Presentation and Consolidation [Abstract]

Consolidation, Policy

J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The holding company has no independent assets or operations, and no direct subsidiaries other than JCP. The holding company and its consolidated subsidiaries, including JCP, are collectively referred to in this quarterly report as “we,” “us,” “our,” “ourselves” or the “Company,” unless otherwise indicated.

J. C. Penney Company, Inc. is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee of certain of JCP’s outstanding debt securities by J. C. Penney Company, Inc. is full and unconditional.

These unaudited Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying unaudited Interim Consolidated Financial Statements, in our opinion, include all material adjustments necessary for a fair presentation and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended January 30, 2016 (2015 Form 10-K). We follow substantially the same accounting policies to prepare quarterly financial statements as are followed in preparing annual financial statements. A description of such significant accounting policies is included in the 2015 Form 10-K. The January 30, 2016 financial information was derived from the audited Consolidated Financial Statements, with related footnotes, included in the 2015 Form 10-K. Because of the seasonal nature of the retail business, operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

Fiscal Period, Policy

Our fiscal year ends on the Saturday closest to January 31. As used herein, “three months ended July 30, 2016” and “three months ended August 1, 2015” refer to the 13-week periods ended July 30, 2016 and August 1, 2015, respectively. “Six months ended July 30, 2016” and “six months ended August 1, 2015” refer to the 26-week periods ended July 30, 2016 and August 1, 2015, respectively. Fiscal years 2016 and 2015 contain 52 weeks.

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Change in Accounting for Retirement-Related Benefits (Tables)

6 Months Ended

Jul. 30, 2016

Change in Accounting for Retirement-Related Benefits [Abstract]

Schedule of Prior Period Adjustments Made to Consolidated Statements of Operations [Table Text Block]

Consolidated Statements of Operations

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions, except per share data)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Pension	$	13		$	(16	)	$	(29	)	$	23		$	(35	)	$	(58	)
Income/(loss) before income taxes	(141		)	(112		)	29			(314		)	(256		)	58
Income tax expense/(benefit)	(3		)	5			8			(9		)	11			20
Net income/(loss)	$	(138	)	(117		)	$	21		$	(305	)	(267		)	$	38
Basic earnings/(loss) per common share	$	(0.45	)	$	(0.38	)	$	0.07		$	(1.00	)	$	(0.87	)	$	0.13
Diluted earnings/(loss) per common share	$	(0.45	)	$	(0.38	)	$	0.07		$	(1.00	)	$	(0.87	)	$	0.13

Schedule of Prior Period Adjustments Made to Consolidated Statements of Comprehensive Income/(Loss) [Table Text Block]

Consolidated Statements of Comprehensive Income/(Loss)

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Net income/(loss)	$	(138	)	$	(117	)	$	21		$	(305	)	$	(267	)	$	38
Reclassifications for amortization of net actuarial (gain)/loss	18			—			(18		)	35			—			(35		)
Deferred tax valuation allowance	—			(3		)	(3		)	—			(3		)	(3		)
Total other comprehensive income/(loss), net of tax	12			(9		)	(21		)	29			(9		)	(38		)
Total comprehensive income/(loss), net of tax	$	(126	)	$	(126	)	$	—		$	(276	)	$	(276	)	$	—

Schedule of Prior Period Adjustments Made to Consolidated Balance Sheet [Table Text Block]

Consolidated Balance Sheets

	August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change
Reinvested earnings/(accumulated deficit)	$	(2,084	)	$	(2,761	)	$	(677	)
Accumulated other comprehensive income/(loss)	(1,036		)	(359		)	677

Schedule of Prior Period Adjustments Made to Consolidated Statements of Cash Flows [Table Text Block]

Consolidated Statements of Cash Flows

	Three Months Ended									Six Months Ended
	August 1, 2015									August 1, 2015
($ in millions)	Previously Reported			As Adjusted			Effect of Change			Previously Reported			As Adjusted			Effect of Change
Cash flows from operating activities:
Net income/(loss)	$	(138	)	$	(117	)	$	21		$	(305	)	$	(267	)	$	38
Benefit plans	6			(23		)	(29		)	10			(48		)	(58		)
Deferred taxes	$	(6	)	$	2		$	8		$	(17	)	$	3		$	20

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Earnings/(Loss) per Share (Tables)

6 Months Ended

Jul. 30, 2016

Earnings Per Share [Abstract]

Earnings/(Loss) per Share

Net income/(loss) and shares used to compute basic and diluted earnings/(loss) per share (EPS) are reconciled below:

	Three Months Ended						Six Months Ended
(in millions, except per share data)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Earnings/(loss)
Net income/(loss)	$	(56	)	$	(117	)	$	(124	)	$	(267	)
Shares
Weighted average common shares outstanding (basic shares)	308.0			305.9			307.6			305.7
Adjustment for assumed dilution:
Stock options, restricted stock awards and warrant	—			—			—			—
Weighted average shares assuming dilution (diluted shares)	308.0			305.9			307.6			305.7
EPS
Basic	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)
Diluted	$	(0.18	)	$	(0.38	)	$	(0.40	)	$	(0.87	)

Antidilutive common stock

The following average potential shares of common stock were excluded from the diluted EPS calculation because their effect would have been anti-dilutive:

	Three Months Ended		Six Months Ended
(Shares in millions)	July 30, 2016	August 1, 2015	July 30, 2016	August 1, 2015
Stock options, restricted stock awards and warrant	34.8	34.6	35.0	33.2

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Long-Term Debt Long-Term Debt (Tables)

6 Months Ended

Jul. 30, 2016

Debt Instrument [Line Items]

Schedule of Debt [Table Text Block]

($ in millions)	July 30, 2016			August 1, 2015			January 30, 2016
Issue:
5.65% Senior Notes Due 2020 (1)	$	400		$	400		$	400
5.75% Senior Notes Due 2018 (1)	265			300			300
5.875% Senior Secured Notes Due 2023 (1)	500			—			—
6.375% Senior Notes Due 2036 (1)	388			400			400
6.9% Notes Due 2026	2			2			2
7.125% Debentures Due 2023	10			10			10
7.4% Debentures Due 2037	313			326			326
7.625% Notes Due 2097	500			500			500
7.65% Debentures Due 2016	78			78			78
7.95% Debentures Due 2017	220			220			220
8.125% Senior Notes Due 2019	400			400			400
2016 Term Loan Facility	1,688			—			—
2013 Term Loan Facility	—			2,205			2,194
2014 Term Loan	—			495			—
Total debt, excluding unamortized debt issuance costs, capital leases and note payable	4,764			5,336			4,830
Unamortized debt issuance costs	(67		)	(83		)	(61		)
Total debt, excluding capital leases and note payable	4,697			5,253			4,769
Less: current maturities	341			28			101
Total long-term debt, excluding capital leases and note payable	$	4,356		$	5,225		$	4,668

(1) These debt issuances contain a change of control provision that would obligate us, at the holders’ option, to repurchase the debt at a price of 101%.

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Derivative Financial Instruments (Tables)

6 Months Ended

Jul. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

Information regarding the gross amounts of our derivative instruments in the unaudited Interim Consolidated Balance Sheets is as follows:

	Asset Derivatives at Fair Value							Liability Derivatives at Fair Value
($ in millions)	Balance Sheet Location	July 30, 2016		August 1, 2015		January 30, 2016		Balance Sheet Location	July 30, 2016		August 1, 2015		January 30, 2016
Derivatives designated as hedging instruments:
Interest rate swaps	N/A	$	—	$	—	$	—	Other accounts payable and accrued expenses	$	2	$	2	$	2
Interest rate swaps	N/A	—		—		—		Other liabilities	35		9		28
Total derivatives designated as hedging instruments		$	—	$	—	$	—		$	37	$	11	$	30

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Fair Value Disclosures (Tables)

6 Months Ended

Jul. 30, 2016

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Financial Instruments Not Carried at Fair Value, Carrying Value and Fair Value

Carrying values and fair values of financial instruments that are not carried at fair value in the unaudited Interim Consolidated Balance Sheets are as follows:

	July 30, 2016				August 1, 2015				January 30, 2016
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Total debt, excluding unamortized debt issuance costs, capital leases and note payable	$	4,764	$	4,530	$	5,336	$	5,002	$	4,830	$	4,248

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Stockholders' Equity (Tables)

6 Months Ended

Jul. 30, 2016

Stockholders' Equity Note [Abstract]

Schedule of Components in Stockholders' Equity

The following table shows the change in the components of stockholders’ equity for the six months ended July 30, 2016:

(in millions)	Number of Common Shares	Common Stock		Additional Paid-in Capital		Reinvested Earnings/ (Accumulated Deficit)			Accumulated Other Comprehensive Income/(Loss)			Total Stockholders’ Equity
January 30, 2016	306.1	$	153	$	4,654	$	(3,007	)	$	(491	)	$	1,309
Net income/(loss)	—	—		—		(124		)	—			(124		)
Other comprehensive income/(loss)	—	—		—		—			(3		)	(3		)
Stock-based compensation and other	1.5	1		14		—			—			15
July 30, 2016	307.6	$	154	$	4,668	$	(3,131	)	$	(494	)	$	1,197

Schedule of Changes in Accumulated Other Comprehensive Income (Loss)

The following table shows the changes in accumulated other comprehensive income/(loss) balances for the six months ended July 30, 2016:

($ in millions)	Net  Actuarial Gain/(Loss)			Prior Service Credit/(Cost)			Foreign Currency Translation			Gain/(Loss) on Cash Flow Hedges			Accumulated Other Comprehensive Income/(Loss)
January 30, 2016	$	(423	)	$	(38	)	$	(2	)	$	(28	)	$	(491	)
Other comprehensive income/(loss) before reclassifications	—			8			—			(13		)	(5		)
Amounts reclassified from accumulated other comprehensive income	(4		)	—			—			6			2
July 30, 2016	$	(427	)	$	(30	)	$	(2	)	$	(35	)	$	(494	)

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Retirement Benefit Plans (Tables)

6 Months Ended

Jul. 30, 2016

Retirement Benefit Plans [Abstract]

Schedule of Pension Plan Expense/(Income)

he components of net periodic benefit expense/(income) for our non-contributory qualified defined benefit pension plan (Primary Pension Plan) and non-contributory supplemental pension plans were as follows:

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Primary Pension Plan
Service cost	$	14		$	18		$	28		$	35
Interest cost	38			49			76			98
Other cost	—			3			—			3
Expected return on plan assets	(54		)	(89		)	(108		)	(178		)
Amortization of prior service cost/(credit)	2			2			4			4
Net periodic benefit expense/(income)	$	—		$	(17	)	$	—		$	(38	)
Supplemental Pension Plans
Interest cost	2			1			4			3
Net periodic benefit expense/(income)	$	2		$	1		$	4		$	3
Primary and Supplemental Pension Plans Total
Service cost	$	14		$	18		$	28		$	35
Interest cost	40			50			80			101
Other cost	—			3			—			3
Expected return on plan assets	(54		)	(89		)	(108		)	(178		)
Amortization of prior service cost/(credit)	2			2			4			4
Net periodic benefit expense/(income)	$	2		$	(16	)	$	4		$	(35	)

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Restructuring and Management Transition Charges (Tables)

6 Months Ended

Jul. 30, 2016

Restructuring Reserve [Abstract]

Composition of Restructuring and Management Transition Charges

The composition of restructuring and management transition charges was as follows:

	Three Months Ended				Six Months Ended				Cumulative Amount From Program Inception Through July 30, 2016
($ in millions)	July 30, 2016		August 1, 2015		July 30, 2016		August 1, 2015
Home office and stores	$	—	$	15	$	4	$	29	$	293
Management transition	1		1		3		7		255
Other	8		1		8		3		171
Total	$	9	$	17	$	15	$	39	$	719

Restructuring and Management Transition Charges

Activity for the restructuring and management transition liability for the six months ended July 30, 2016 was as follows:

($ in millions)	Home Office and Stores			Management Transition			Other			Total
January 30, 2016	$	18		$	10		$	23		$	51
Charges	4			3			8			15
Cash payments	(15		)	(12		)	(8		)	(35		)
Non-cash	1			—			—			1
July 30, 2016	$	8		$	1		$	23		$	32

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Real Estate and Other, Net Real Estate and Other, Net (Tables)

6 Months Ended

Jul. 30, 2016

Real Estate and Other, Net [Abstract]

Schedule of Other Operating Cost and Expense, by Component [Table Text Block]

The composition of Real estate and other, net was as follows:  

	Three Months Ended						Six Months Ended
($ in millions)	July 30, 2016			August 1, 2015			July 30, 2016			August 1, 2015
Net gain from sale of non-operating assets	$	—		$	(6	)	$	(5	)	$	(8	)
Investment income from Home Office Land Joint Venture	(5		)	—			(29		)	(22		)
Net gain from sale of operating assets	(2		)	—			(10		)	(8		)
Other	(2		)	25			(3		)	22
Total expense/(income)	$	(9	)	$	19		$	(47	)	$	(16	)

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Basis of Presentation and Consolidation (Nature of Operations) (Details)	6 Months Ended
	Jul. 30, 2016
Entity Information [Line Items]
State of incorporation	Delaware
J. C. Penney Corporation, Inc. [Member]
Entity Information [Line Items]
Year Incorporated	1924
J. C. Penney Company, Inc. [Member]
Entity Information [Line Items]
Year Incorporated	2002

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Change in Accounting for Retirement-Related Benefits (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015		Jan. 30, 2016
Pension	$ 2	$ (16)	[1]	$ 4	$ (35)
Income/(loss) before income taxes	(51)	(112)	[1]	(120)	(256)	[1]
Income tax expense/(benefit)	$ 5	$ 5	[1]	$ 4	$ 11
Basic earnings/(loss) per common share	$ (0.18)	$ (0.38)	[1]	$ (0.40)	$ (0.87)	[1]
Diluted earnings/(loss) per common share	$ (0.18)	$ (0.38)	[1]	$ (0.40)	$ (0.87)	[1]
Reclassifications for amortization of net actuarial (gain)/loss	$ (1)	$ 0	[1]	$ (2)	$ 0	[1]
Deferred tax valuation allowance	(1)	(3)	[1]	(1)	(3)	[1]
Other Comprehensive Income (Loss), Net of Tax	(6)	(9)	[1]	(3)	(9)	[1]
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	(62)	(126)	[1]	(127)	(276)	[1]
Benefit plans	(15)	(23)	[1]	(27)	(48)	[1]
Reinvested earnings/(accumulated deficit)	(3,131)	(2,761)	[1]	(3,131)	(2,761)	[1]	$ (3,007)
Net income/(loss)	(56)	(117)	[1]	(124)	(267)	[1]
Accumulated other comprehensive income/(loss)	(494)	(359)	[1]	(494)	(359)	[1]	$ (491)
Deferred taxes	$ 3	2	[1]	$ 0	3	[1]
Previously Reported [Member]
Pension		13			23
Income/(loss) before income taxes		(141)			(314)
Income tax expense/(benefit)		$ (3)			$ (9)
Basic earnings/(loss) per common share		$ (0.45)			$ (1.00)
Diluted earnings/(loss) per common share		$ (0.45)			$ (1.00)
Reclassifications for amortization of net actuarial (gain)/loss		$ 18			$ 35
Deferred tax valuation allowance		0			0
Other Comprehensive Income (Loss), Net of Tax		12			29
Comprehensive Income (Loss), Net of Tax, Attributable to Parent		(126)			(276)
Benefit plans		6			10
Reinvested earnings/(accumulated deficit)		(2,084)			(2,084)
Net income/(loss)		(138)			(305)
Accumulated other comprehensive income/(loss)		(1,036)			(1,036)
Deferred taxes		(6)			(17)
As Adjusted [Member]
Income/(loss) before income taxes		$ (112)			$ (256)
Basic earnings/(loss) per common share		$ (0.38)			$ (0.87)
Diluted earnings/(loss) per common share		$ (0.38)			$ (0.87)
Reclassifications for amortization of net actuarial (gain)/loss		$ 0			$ 0
Deferred tax valuation allowance		(3)			(3)
Other Comprehensive Income (Loss), Net of Tax		(9)			(9)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent		(126)			(276)
Net income/(loss)		(117)			(267)
Effect of Change [Member]
Pension		(29)			(58)
Income/(loss) before income taxes		29			58
Income tax expense/(benefit)		$ 8			$ 20
Basic earnings/(loss) per common share		$ 0.07			$ 0.13
Diluted earnings/(loss) per common share		$ 0.07			$ 0.13
Reclassifications for amortization of net actuarial (gain)/loss		$ (18)			$ (35)
Deferred tax valuation allowance		(3)			(3)
Other Comprehensive Income (Loss), Net of Tax		(21)			(38)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent		0			0
Benefit plans		(29)			(58)
Reinvested earnings/(accumulated deficit)		(677)			(677)
Net income/(loss)		21			38
Accumulated other comprehensive income/(loss)		677			677
Deferred taxes		$ 8			$ 20

[1] As Adjusted

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Effect of New Accounting Standards (Details)	6 Months Ended
	Jul. 30, 2016
Accounting standards update 2016-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New accounting pronouncement or change in accounting principle, description	In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects of awards in the income statement when the awards vest or are settled (i.e., additional paid-in capital or APIC pools will be eliminated). The guidance on employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and for forfeitures is changing. The ASU also provides a practical expedient for public companies that will allow the use of a simplified method to estimate the expected term for certain awards. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effect that adopting this new accounting guidance will have on our financial condition, results of operations or cash flows.
Accounting standards update 2016-05 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New accounting pronouncement or change in accounting principle, description	In March 2016, the FASB issued ASU 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the FASB Emerging Issues Task Force) (ASU 2016-05). Under the ASU, the novation of a derivative contract (i.e., a change in the counterparty) in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. The hedge accounting relationship could continue uninterrupted if all of the other hedge accounting criteria are met, including the expectation that the hedge will be highly effective when the creditworthiness of the new counterparty to the derivative contract is considered. The guidance is effective for fiscal years beginning after December 15, 2016, and interim periods therein. Early adoption is permitted. Entities may apply the guidance prospectively or on a modified retrospective basis. We are currently evaluating the effect that adopting this new accounting guidance will have on our financial condition, results of operations or cash flows.

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Earnings/(Loss) per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015
Earnings Per Share [Abstract]
Net income/(loss)	$ (56)	$ (117)	[1]	$ (124)	$ (267)	[1]
Weighted average common shares outstanding (basic shares)	308.0	305.9	[1]	307.6	305.7	[1]
Weighted average shares assuming dilution (diluted shares)	308.0	305.9	[1]	307.6	305.7	[1]
Basic (in dollars per share)	$ (0.18)	$ (0.38)	[1]	$ (0.40)	$ (0.87)	[1]
Diluted (in dollars per share)	$ (0.18)	$ (0.38)	[1]	$ (0.40)	$ (0.87)	[1]
Stock options, restricted stock awards and warrant	34.8	34.6		35.0	33.2

[1] As Adjusted

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Long-Term Debt (Details) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jul. 30, 2016	Apr. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015		Jan. 30, 2016
Debt Instrument, Repurchased Face Amount			$ 60
Less: current maturities		$ 341		$ 28	[1]	$ 341	$ 28	[1]	$ 101
Unamortized debt issuance costs		(67)		(83)		(67)	(83)		(61)
Total debt, excluding capital leases and note payable		4,697		5,253		4,697	5,253		4,769
Total debt, excluding unamortized debt issuance costs, capital leases and note payable		4,764		5,336		4,764	5,336		4,830
Total long-term debt, excluding capital leases and note payable		4,356		5,225	[1]	4,356	5,225	[1]	4,668
(Gain)/loss on extinguishment of debt		$ 34	$ (4)	0	[1]	$ 30	0	[1]
Senior Notes 5.65% Due 2020 [Member]
Debt Instrument, Interest Rate, Stated Percentage		5.65%				5.65%
Unsecured Long-term Debt, Noncurrent	[2]	$ 400		400		$ 400	400		400
Senior Notes 5.75% Due 2018 [Member]
Debt Instrument, Interest Rate, Stated Percentage		5.75%				5.75%
Unsecured Long-term Debt, Noncurrent	[2]	$ 265		300		$ 265	300		300
Senior Secured Notes Five Point Eight Seven Five Percent Due2023 [Member]
Debt Instrument, Interest Rate, Stated Percentage		5.875%				5.875%
Secured Long-term Debt, Noncurrent	[2]	$ 500				$ 500
Senior Notes 6.375% Due 2036 [Member]
Debt Instrument, Interest Rate, Stated Percentage		6.375%				6.375%
Unsecured Long-term Debt, Noncurrent	[2]	$ 388		400		$ 388	400		400
Notes 6.9% Due 2026 [Member]
Debt Instrument, Interest Rate, Stated Percentage		6.90%				6.90%
Unsecured Long-term Debt, Noncurrent		$ 2		2		$ 2	2		2
Debentures 7.125% Due 2023 [Member]
Debt Instrument, Interest Rate, Stated Percentage		7.125%				7.125%
Unsecured Long-term Debt, Noncurrent		$ 10		10		$ 10	10		10
Debentures 7.4% Due 2037 [Member]
Debt Instrument, Interest Rate, Stated Percentage		7.40%				7.40%
Unsecured Long-term Debt, Noncurrent		$ 313		326		$ 313	326		326
Notes 7.625% Due 2097 [Member]
Debt Instrument, Interest Rate, Stated Percentage		7.625%				7.625%
Unsecured Long-term Debt, Noncurrent		$ 500		500		$ 500	500		500
Debentures Seven Point Six Five Percent Due2016 [Member]
Debt Instrument, Interest Rate, Stated Percentage		7.65%				7.65%
Unsecured Long-term Debt, Noncurrent		$ 78		78		$ 78	78		78
Debentures Seven Point Nine Five Percent Due2017 [Member]
Debt Instrument, Interest Rate, Stated Percentage		7.95%				7.95%
Unsecured Long-term Debt, Noncurrent		$ 220		220		$ 220	220		220
Senior Notes 8.125% due 2019 [Member]
Debt Instrument, Interest Rate, Stated Percentage		8.125%				8.125%
Unsecured Long-term Debt, Noncurrent		$ 400		400		$ 400	400		400
2016 Term Loan Facility [Member]
Unsecured Long-term Debt, Noncurrent		1,688				1,688
2013 Term Loan Facility [Member]
Debt Instrument, Repurchased Face Amount		2,250				2,250
Unsecured Long-term Debt, Noncurrent		0		2,205		0	2,205		2,194
2014 Term Loan [Member]
Unsecured Long-term Debt, Noncurrent		0		495		0	495		0
Notes And Debentures Including Current Maturities [Member]
Total debt, excluding unamortized debt issuance costs, capital leases and note payable		$ 4,764		$ 5,336		$ 4,764	$ 5,336		$ 4,830

[1] As Adjusted

[2] These debt issuances contain a change of control provision that would obligate us, at the holders’ option, to repurchase the debt at a price of 101%.

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Long-Term Debt 2013 Term Loan Facility (Details) - USD ($) $ in Millions	Jul. 30, 2016	Apr. 30, 2016	Jan. 30, 2016	Aug. 01, 2015
Debt Instrument [Line Items]
Debt Instrument, Repurchased Face Amount		$ 60
2013 Term Loan Facility [Member]
Debt Instrument [Line Items]
Debt Instrument, Repurchased Face Amount	$ 2,250
Unsecured Long-term Debt, Noncurrent	$ 0		$ 2,194	$ 2,205

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Long-Term Debt 2016 Term Loan Facility (Details) - 2016 Term Loan Facility [Member] $ in Thousands	3 Months Ended
	Jul. 30, 2016 USD ($)
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	4.25%
Debt Instrument, Periodic Payment, Principal	$ 10,550

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Derivative Financial Instruments (Details) - USD ($) $ in Millions	3 Months Ended
	Jul. 30, 2016	Jan. 30, 2016	Aug. 01, 2015	May 07, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Discussion of Objectives for Using Interest Rate Derivative Instruments	Fix a portion of our variable LIBOR-based interest payments
Interest Rate Cash Flow Hedge Liability at Fair Value	$ 37	$ 30	$ 11
Derivative, Notional Amount				$ 1,250
Derivative, Average Fixed Interest Rate				2.04%
Description of Reclassification of Interest Rate Cash Flow Hedge Gain (Loss)	Amounts in Accumulated other comprehensive income/(loss) are reclassified into net income/(loss) when the related interest payments affect earnings
Description of Location of Interest Rate Cash Flow Hedge Derivative on Balance Sheet	The fair value of our interest rate swaps are recorded on the unaudited Interim Consolidated Balance Sheets as an asset or a liability (see Note 7).
Description of Location of Gain (Loss) on Interest Rate Cash Flow Hedge Derivative in Financial Statements	The effective portion of the interest rate swaps' changes in fair values is reported in Accumulated other comprehensive income/(loss) (see Note 8), and the ineffective portion is reported in Net income/(loss).
Description of Interest Rate Derivative Activities	We have entered into interest rate swap agreements with notional amounts totaling $1,250 million to fix a portion of our variable LIBOR-based interest payments. The interest rate swap agreements have a weighted-average fixed rate of 2.04%, mature on May 7, 2020 and have been designated as cash flow hedges.
Effectiveness of interest rate swaps	100.00%
Other Liabilities [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Cash Flow Hedge Liability at Fair Value	$ 35	28	9
Other Accounts Payable and Accrued Expenses [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Cash Flow Hedge Liability at Fair Value	$ 2	$ 2	$ 2

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Fair Value Disclosures (Other Financial Instruments) (Details) - USD ($) $ in Millions	Jul. 30, 2016	Jan. 30, 2016	Aug. 01, 2015
Fair Value Disclosures [Abstract]
Long-term debt, excluding unamortized debt issuance costs, including current maturities, Fair Value	$ 4,530	$ 4,248	$ 5,002
Long-term debt, excluding unamortized debt issuance costs, including current maturities, carrying amount	4,764	4,830	5,336
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Liability	$ 37	$ 30	$ 11

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Stockholders' Equity (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015
Increase (Decrease) in Stockholders' Equity [Roll Forward]
January 30, 2016, shares				306.1
January 30, 2016				$ 1,309
Net income/(loss)	$ (56)	$ (117)	[1]	(124)	$ (267)	[1]
Other comprehensive income/(loss)	$ (6)	$ (9)	[1]	(3)	$ (9)	[1]
Stock-based compensation and other				$ 15
July 30, 2016, shares	307.6	305.5		307.6	305.5
July 30, 2016	$ 1,197			$ 1,197
Common Stock [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
January 30, 2016, shares				306.1
January 30, 2016				$ 153
Stock-based compensation, shares				1.5
Stock-based compensation and other				$ 1
July 30, 2016, shares	307.6			307.6
July 30, 2016	$ 154			$ 154
Additional Paid-in Capital [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
January 30, 2016				4,654
Stock-based compensation and other				14
July 30, 2016	4,668			4,668
Reinvested Earnings/(Accumulated Deficit) [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
January 30, 2016				(3,007)
Net income/(loss)				(124)
July 30, 2016	(3,131)			(3,131)
Accumulated Other Comprehensive Income/(Loss) [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
January 30, 2016				(491)
Other comprehensive income/(loss)				(3)
July 30, 2016	$ (494)			$ (494)

[1] As Adjusted

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Stockholders' Equity (Components of Other Comprehensive Income/ (Loss) (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	[1]	Jul. 30, 2016	Aug. 01, 2015	[1]
Stockholders' Equity Note [Abstract]
Reclassification for amortization of net actuarial (gain)/loss, net of tax	$ (1)	$ 0		$ (2)	$ 0
Reclassification for amortization of prior service credit/(cost), net of tax	0	0		0	0
Total, net of tax	$ (6)	$ (9)		$ (3)	$ (9)

[1] As Adjusted

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Stockholders' Equity (Accumulated Other Comprehensive Income/ (Loss) (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	[1]	Jul. 30, 2016	Aug. 01, 2015	[1]
Changes in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
January 30, 2016				$ (491)
Amounts reclassified from accumulated other comprehensive income, Net Actuarial Gain/(Loss), net of tax	$ 1	$ 0		2	$ 0
Amounts reclassified from accumulated other comprehensive income, Prior Service Credit/(Cost), net of tax	0	0		0	0
Net current-period other comprehensive income	(6)	(9)		(3)	(9)
July 30, 2016	(494)	$ (359)		(494)	$ (359)
Net Actuarial Gain/(Loss) [Member]
Changes in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
January 30, 2016				(423)
Amounts reclassified from accumulated other comprehensive income, Net Actuarial Gain/(Loss), net of tax				4
July 30, 2016	(427)			(427)
Prior Service Credit/(Cost) [Member]
Changes in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
January 30, 2016				(38)
Other comprehensive income (loss) before reclassifications, gain (loss) on cash flow hedges, net of tax				8
Amounts reclassified from accumulated other comprehensive income, Prior Service Credit/(Cost), net of tax				0
July 30, 2016	(30)			(30)
Accumulated Translation Adjustment [Member]
Changes in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
January 30, 2016				(2)
July 30, 2016	(2)			(2)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Changes in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
January 30, 2016				(28)
Other comprehensive income (loss) before reclassifications, gain (loss) on cash flow hedges, net of tax				(13)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax				6
July 30, 2016	(35)			(35)
Accumulated Other Comprehensive Income/(Loss) [Member]
Changes in Accumulated Other Comprehensive Income (Loss) [Roll Forward]
January 30, 2016				(491)
Other comprehensive income (loss) before reclassifications, gain (loss) on cash flow hedges, net of tax				(5)
Amounts reclassified from accumulated other comprehensive income, Accumulated Other Comprehensive Income/(Loss)				2
Net current-period other comprehensive income				(3)
July 30, 2016	$ (494)			$ (494)

[1] As Adjusted

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Stockholders' Equity (Reclassifications Out of Accumulated Other Comprehensive Income/ (Loss) (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015
Other Comprehensive Income (Loss), Net of Tax [Abstract]
Total, net of tax	$ (6)	$ (9)	[1]	$ (3)	$ (9)	[1]

[1] As Adjusted

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Retirement Benefit Plans (Net Periodic Expense) (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015		Jul. 30, 2016	Aug. 01, 2015	Jan. 30, 2016
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Net periodic benefit expense/(income)	$ 2	$ (16)	[1]	$ 4	$ (35)
Other Postretirement Benefit Plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Net periodic benefit expense/(income)	(4)	(2)		(8)	(4)
Defined Benefit Plan, Accumulated Benefit Obligation	1			1		$ 8
Primary Pension Plan
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	14	18		28	35
Interest cost	38	49		76	98
Other cost	0	3		0	3
Expected return on plan assets	(54)	(89)		(108)	(178)
Amortization of prior service cost/(credit)	2	2		4	4
Net periodic benefit expense/(income)	0	(17)		0	(38)
Supplemental Pension Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	2	1		4	3
Net periodic benefit expense/(income)	2	1		4	3
Primary and Supplemental Pension Plans Total
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	14	18		28	35
Interest cost	40	50		80	101
Other cost	0	3		0	3
Expected return on plan assets	(54)	(89)		(108)	(178)
Amortization of prior service cost/(credit)	2	2		4	4
Net periodic benefit expense/(income)	$ 2	$ (16)		$ 4	$ (35)

[1] As Adjusted

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Restructuring and Management Transition Cumulative Charges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	Jul. 30, 2016	Aug. 01, 2015
Home Office And Stores [Member]
Restructuring Cost and Reserve [Line Items]
Charges	$ 0	$ 15	$ 4	$ 29
Cumulative Amount	293		293
Management Transition [Member]
Restructuring Cost and Reserve [Line Items]
Charges	1	1	3	7
Cumulative Amount	255		255
Other Restructuring And Management Transition [Member]
Restructuring Cost and Reserve [Line Items]
Charges	8	1	8	3
Cumulative Amount	171		171
Total [Member]
Restructuring Cost and Reserve [Line Items]
Charges	9	$ 17	15	$ 39
Cumulative Amount	$ 719		$ 719

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Restructuring and Management Transition Charges (Liability Activity) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	Jul. 30, 2016	Aug. 01, 2015
Home Office And Stores [Member]
Restructuring Reserve [Roll Forward]
January 30, 2016			$ 18
Charges	$ 0	$ 15	4	$ 29
Cash payments			(15)
Non-cash			1
July 30, 2016	8		8
Management Transition [Member]
Restructuring Reserve [Roll Forward]
January 30, 2016			10
Charges	1	1	3	7
Cash payments			(12)
Non-cash			0
July 30, 2016	1		1
Other Restructuring And Management Transition [Member]
Restructuring Reserve [Roll Forward]
January 30, 2016			23
Charges	8	1	8	3
Cash payments			(8)
Non-cash			0
July 30, 2016	23		23
Total [Member]
Restructuring Reserve [Roll Forward]
January 30, 2016			51
Charges	9	$ 17	15	$ 39
Cash payments			(35)
Non-cash			1
July 30, 2016	$ 32		$ 32

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Real Estate and Other, Net (Details) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016 USD ($)	Aug. 01, 2015 USD ($)		Jul. 30, 2016 USD ($)	Aug. 01, 2015 USD ($)		May 03, 2014 a
Real Estate and Other, Net [Abstract]
Joint venture land (in acres) | a							220
Real estate and other income/(expense), net	$ (9)	$ 19	[1]	$ (47)	$ (16)	[1]
Net proceeds from sale of a former department store location	4	0	[1]	16	5	[1]
Net gain from sale of non-operating assets	0	6	[1]	5	8	[1]
Investment income from Home Office Land Joint Venture	(5)	0		(29)	(22)
Home Office Land Joint Venture, aggregate cash distribution	6			44	22
Net gain from sale of operating assets	2	0	[1]	10	8	[1]
Other Cost and Expense, Operating	$ (2)	$ 25		$ (3)	$ 22

[1] As Adjusted

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Income Taxes (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jul. 30, 2016	Aug. 01, 2015	[1]	Jul. 30, 2016	Aug. 01, 2015
Income Tax Contingency [Line Items]
Income tax expense/(benefit)	$ 5	$ 5		$ 4	$ 11
Increase to tax valuation allowance for deferred tax assets	19			$ 32
Valuation allowance, methodologies and assumptions				In assessing the need for the valuation allowance, we considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As a result of our periodic assessment, our estimate of the realization of deferred tax assets is solely based on the future reversals of existing taxable temporary differences and tax planning strategies that we would make use of to accelerate taxable income to utilize expiring NOL and tax credit carryforwards. Accordingly, in the second quarter and first six months of 2016, the valuation allowance was increased by $19 million and $32 million, respectively, to offset the net deferred tax assets created in those periods relating primarily to the increase in NOL carryforwards.
Income tax expense (benefit), tax allocation	$ 2
State Audit Settlement	2			2
Net operating loss carryforwards	$ 2,600			$ 2,600
State and foreign [Member]
Income Tax Contingency [Line Items]
State and foreign tax expenses	(4)			(7)
Amortization of certain indefinite lived intangible assets [Member]
Income Tax Contingency [Line Items]
State and foreign tax expenses	(1)			(3)
Settlement with Taxing Authority [Member]
Income Tax Contingency [Line Items]
State and foreign tax expenses				4
Federal [Member]
Income Tax Contingency [Line Items]
Tax credit carryforwards	62			62
Federal tax authority [Member]
Income Tax Contingency [Line Items]
Valuation allowance	818			818
Net deferred tax asset, NOL and tax credit carryforwards	78			78
State Tax Authority [Member]
Income Tax Contingency [Line Items]
Valuation allowance	$ 239			$ 239

[1] As Adjusted

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Litigation, Other Contingencies and Guarantees (Narrative) (Details) $ in Millions	33 Months Ended
	Jul. 30, 2016 USD ($)
Loss Contingencies [Line Items]
Loss Contingency, Damages Awarded, Value	$ 3.1
Recorded Best Estimate Environmental Liabilities	23.0
ERISA Class Action Litigation [Member]
Loss Contingencies [Line Items]
Estimated Litigation Liability	4.5
Pricing Class Action Litigation [Member]
Loss Contingencies [Line Items]
Estimated Litigation Liability	50.0
Minimum [Member]
Loss Contingencies [Line Items]
Estimate Potential Environmental Liabilities	19.0
Maximum [Member]
Loss Contingencies [Line Items]
Estimate Potential Environmental Liabilities	$ 25.0