NEW YORK — J.C. Penney’s stock was downgraded to “market perform” from “outperform” by Piper Jaffray analyst Jeffrey Klinefelter Wednesday on the possibility the retailer faces a consumer spending slowdown of its core customers.

Klinefelter cut his target price on the stock to $41 from $44, and reduced his earnings forecast.

The analyst had been bullish on the stock, expecting Penney to outperform the broader market over the next 12 months. But the analyst said in his research note that the “lower- and middle- income consumer is likely to be challenged by economic conditions through the balance of 2004.”

Klinefelter noted that Penney would lose share in the moderate segment as other retailers in the channel strengthen their positions.

The analyst also cited a recent teen-parent shopping study that showed spending on teens was moving upstream. The survey revealed that parents are going a bit more high end when shopping for their kids by shelling out for more expensive brands at retailers such as Nordstrom and Abercombie & Fitch. This is a reversal of last year, when Kohl’s and Old Navy were top destinations in the fall.

Klinefelter cut his third-quarter earnings estimate on Penney to 36 cents from 38 cents.

— Dawn S. Kissi

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