NEW YORK (Reuters) - Retailer J.C. Penney Inc JCP.N on Friday said quarterly profit fell nearly 53 percent and warned of worsening results for the rest of the year, just weeks before the crucial holiday shopping season begins.

Customers leave a JC Penney Co store in Westminster, Colorado August 14, 2008. JC Penny on Thursday will report on its earnings. REUTERS/Rick Wilking

The mid-tier department store operator forecast fourth-quarter earnings of 90 cents to $1.05, much lower than analyst expectations of $1.33 per share, according to Reuters Estimates.

The Plano, Texas-based company said it expects total fourth-quarter sales to fall 7 percent to 9 percent and sales at stores open a least a year, a key retail metric, to drop 9 percent to 11 percent.

Penney said it expects the rough economic conditions to continue well into 2009.

Sales and profits have suffered in recent months and took a turn for the worse in October as shoppers focused on essential purchases because of falling housing values, tight credit and worries about job security.

Penney's holiday warning is similar to those of Kohl's Corp KSS.N and Nordstrom Inc JWN.N. Both department stores reported sharply lower quarterly profits on Thursday and cut their forecasts for the rest of the year.

QUARTERLY PROFIT FALLS BY MORE THAN HALF

Penney’s net income fell to $124 million, or 55 cents per share, for its fiscal third quarter, ended November 1, from $261 million, or $1.17 cents per share, a year earlier.

Analysts had expected a profit of 54 cents on revenue of $4.34 billion.

Sales fell 8.7 percent to $4.32 billion, and sales at stores open at least a year, or same-store sales, fell 10.1 percent in the quarter.

Last week, Penney said October sales at stores open at least a year fell 13 percent.

Penney said quarterly inventory was 9 percent below last year’s levels on a comparable store basis and gross margin fell to 38.5 percent of sales, compared with 39.7 percent in last year’s quarter, as softer sales forced Penney cut prices to clear out merchandise.

Women’s and children’s apparel and family shoes sold best in the quarter, while home and fine jewelry continued to be weak.

Internet sales fell 0.3 percent, compared with an 11.8 percent increase in last year’s quarter.

Penney said it had cash and short-term investments of $1.6 billion and long-term debt of $3.5 billion as of November 1.

Penney shares have lost 56 percent of their value this year, more than the 35 percent drop this year in the Standard & Poor's retail index .RLX.