• by Sarah Mahoney  @mahoney_sarah, June 26, 2008

With Middle America still stalled on its discretionary spending, JCPenney says it cut its expansion and growth plans for 2009.

Penney expects the year ahead to "remain very challenging for the American consumer," the company says in a release, adding that it is making the cuts in order to balance its ongoing merchandising and marketing efforts. "We will further reduce new store openings and renovations from 2008 levels and continue to focus on rigorously controlling inventory levels and operating expenses."

Adding that it believes the cuts will allow it to "improve both our competitive positioning and market share," the company says it will only open 20 new or relocated stores in 2009--down from 36 new or relocated stores that will open this year, and far short of the 50 stores per year it had previously vowed to open through 2011. But it still plans to open its first store in Manhattan in 2009, which it believes will be its highest sales-volume store.

And the new plan calls for renovating 10 to 15 stores, down from the 20 it plans to complete this year. Previously, the company had said it would overhaul 65 stores per year.

All told, the company is cutting its capital expenditures to $650 million, "versus $1 billion expected for 2008, and $1.2 billion in 2007."

Still, some observers believe that sales are improving somewhat at department stores, and that JCPenney is particularly well-positioned to gain when consumers do decide to return to the mall. Before the announcement of the revised expansion plans, for example, Deutsche Bank, citing slightly improved sales trends and its reliable earnings estimates, upgraded its recommendation from "hold" to "buy."