NEW YORK J.C. Penney reported Friday that its earnings rose 63 percent in the third quarter, as the department store retailer says it saw strong reception to new exclusive brands such as Liz Claiborne and MNG by Mango.

But the company’s gross profit margin slipped as the chain had to aggressively discount, sending shares down almost 2 percent. Shares slipped 65 cents to $31.56 in morning trading.

The company also offered a solid profit outlook for the holiday quarter, though it acknowledged it will be heavily competitive.

The department store chain said its net income was $44 million, or 19 cents per share, in the quarter ended Oct. 30. That compares with $27 million, or 11 cents per share, in the year-ago period.

Gross profit margin slipped to 39 percent from 40.6 percent in the quarter.

Revenue reached $4.19 billion, up from $4.18 billion in the same period last year. Revenue at stores opened at least a year rose 1.9 percent.

The measure is a key indicator of a retailer’s health.

Analysts surveyed by Thomson Reuters expected profit of 17 cents per share on revenue of $4.25 billion for the period.

“We planned for our new merchandising initiatives to begin to take hold in the second half, and it’s playing out this way,” Myron E. Ullman III, chairman and CEO, said in a statement. “We have seen clear signs of strength in key businesses, and our Sephora inside J.C. Penney concept continues to surpass our expectations.”

Ullman added that the company’s strength in sourcing has allowed the company to “offer very sharp price points and to flow inventory into our stores in a way that reflects the ongoing trend of customer’s buying closer to need.”

He added, however, that retailing will remain “highly promotional” and consequently it has planned a “robust calendar” of events to make Penney stand out.

Department stores, hard hit by the Great Recession, have focused on expanding their exclusive items and working with suppliers to offer better prices.

This past fall, Penney became the only U.S. retailer to sell Liz Claiborne and Claiborne women’s wear, except the Isaac Mizrahi-designed Liz Claiborne New York brand, which went to QVC.

Also this fall, Penney became the only department store selling MNG by Mango, a European clothing brand, a big coup as fast-fashion players have been a big threat to department stores.

Meanwhile, Penney announced Thursday it plans to collaborate with Hearst Magazines on two new online ventures as it starts a new unit devoted to finding new revenue streams.