PLANO, Tex. -- J.C. Penney Co. said robust catalog sales and lower expenses boosted fourth-quarter net profits by 16.5 percent, reaching the high end of Wall Street's estimates.

In the quarter ended Jan. 29, Penney's earned $437 million, or $1.64 a share, up from $375 million, or $1.42, a year earlier. The latest period includes a $2 million debt-buyback charge. Sales increased 3.9 percent, to $6.3 billion from $6.1 billion.

William R. Howell, chairman, said the company benefited from a 23 percent jump in sales at its catalog operation and "well managed expenses in J.C. Penney stores and all support areas."

Gross margin as a percentage of sales slipped to 31.9 percent from 32.1 percent a year earlier, reflecting the "intensely competitive retail environment" at the stores during the holiday season, the company said.

Penney's bottom line was also boosted by an increase in its LIFO inventory benefit to $36 million from $32 million in the year-ago period, which it attributed to its continuing shift to "more affordable retail prices."

In the year, profits climbed 20.9 percent to $940 million, or $3.53 a share, from $777 million, or $2.95. The latest year had a $55 million debt redemption charge, offset by a $51 million accounting gain. Sales grew 5.4 percent to $19 billion from $18 billion.

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