Department store operator JC Penney Company Inc is reducing the number of new stores it plans to open in 2009 as part of efforts to cut annual expenditures by $350m in a difficult retail environment.

But the retailer, which operates 1,074 department stores, said it still expects year-on-year gross margin trends to improve in the third and fourth quarters.

JC Penney's plans for 2009 call for a reduction in capital expenditures to $650m, which compared to $1bn expected for 2008 and $1.2bn in 2007.

It will now open 20 new or relocated stores in 2009 - including its first store in Manhattan - down from 36 in 2008. The retailer had previously planed to open 50 stores each year through 2011.

The company has also reduced its renovation plans to 10-15 stores in 2009, down from 20 in 2008 and less than one-third of its earlier goal of renovating 65 stores each year through 2011.

Total inventories are also expected to be below 2007 levels by the end of the 2008 back-to-school season.

"We have just completed our strategic planning process for the coming year, a period that we expect to remain very challenging for the American consumer," said Myron E (Mike) Ullman III, chairman and chief executive officer.

"We believe the combination of our merchandising, marketing and pricing programs, together with our prudent capital expenditure plans will allow us to minimise the impact of the difficult retail environment and improve both our competitive positioning and market share."