J.C. Penney Cashes In

Chalk up another impressive quarter for one of the most enduring department store chains out there: J.C. Penney (NYSE: JCP  ) .

100-year-old Penney's lost its retailing way for almost a decade to end the 1990s in an extreme funk. But in 2000, J.C. Penney embarked on a "Long Range Plan" to revitalize its stores and merchandise mix, and find a way to bring shoppers back into its stores.

Well, mission accomplished.

J.C. Penney posted a couple more rough years as its restructuring plan took hold, but since 2003 the company has developed a reputation for posting consistently positive sales and profitability trends. Third-quarter results released this morning were no exception, as total department store sales advanced 7% and same-store sales moved up an impressive 5.2%.

Reported diluted earnings grew 34%, as private label brands and decreased selling costs are driving improving profitability trends, and management's stock repurchases are further enhancing per share results. Unfortunately, year-to-date free cash flow was negative; it was also negative in the third quarter of last year. But the holiday selling season is coming up and can make or break a retailer's year, so I'll withhold judgment on cash flow trends until the company files its annual 10-K early next year.

In any case, I'm very impressed with the way J.C. Penney continues to post solid numbers at existing stores and is once again opening new stores to provide another growth avenue. I had previously stated that investors could do better by going with the new breed of big-box retailers such as Target (NYSE: TGT  ) , Wal-Mart (NYSE: WMT  ) , or even Kohl's (NYSE: KSS  ) , which has seen a comparable store recovery of its own recently. But J.C. Penney has learned to compete with the best of them; if it can keep posting positive results, investors may want to seriously consider placing some shares into their investment shopping bag.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.