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Department store retailer J.C. Penney Co. said Thursday its fourth-quarter profit fell 10%, but earnings beat Wall Street expectations as the company cut expenses.

J.C. Penney also said it was taking a "conservative" approach to guidance and predicted 2008 earnings below analysts’ expectations.

Plano, Texas-based J.C. Penney Co. said net income slipped to $430 million, or $1.93 per share, from $477 million, or $2.09 per share, a year ago. The latest period included 13 weeks, versus 14 weeks a year ago.

That beat analyst expectations of $1.77 per share, according to a Thomson Financial poll. The company had forecast earnings at the higher end of a range of $1.65 to $1.80 per share.

Sales fell 4% to $6.39 billion from $6.66 billion, while analysts surveyed by Thomson Financial expected revenue of $6.39 billion.

The company said cutting expenses offset a weak consumer environment. Consumers have been pressured to cut spending amid weak credit and housing markets and high food and gas prices. Mid-tier retailers such as J.C. Penney have been among the hardest hit as consumers trade down to discounters.

J.C. Penney said sales in stores open at least one year, a key retail metric known as same-store sales, fell 2.3% during the quarter, as demand for jewelry and big-ticket items for the home fell.

For the year, net income fell 4% to $1.11 billion, or $4.93 per share, from $1.15 billion, for $4.96 per share last year no fax payday loans. Revenue was nearly flat at $19.86 billion, from $19.9 billion last year.

For fiscal 2008, the company forecast earnings per share of $3.75 to $4, below analysts’ expectations of $4.02 per share.

J.C. Penney expects earnings of 75 to 80 cents per share in the first quarter, while analysts predict a profit of 80 cents per share.

The company said it expects total sales to "increase slightly" for the first quarter and in the low-single digits for the full year. It expects same-store sales to fall in the low-single digits for both the first quarter and the year.

"We walked away from J.C. Penney’s fourth-quarter with a continued ‘good awkward feeling’ after it posted better fourth-quarter results than planned and provided what we believe is both realistic and ‘achievable’ earnings per share guidance for 2008," said J.P. Morgan analyst Charles Grom in a client note on Thursday.

"Looking ahead, assuming same-store sales don’t deteriorate more than its "down low-single-digit" view, we believe the stock should continue to work from current levels."

J.C. Penney (JCP, Fortune 500) shares rose 3.8% to $49.77 in morning trading. 

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