If only Sears Holdings (NASDAQ:SHLDQ) would hurry up and go out of business faster, maybe J.C. Penney (OTC:JCPN.Q) would have a better chance itself at surviving. J.C. Penney CEO Marvin Ellison, who just resigned to take over the top executive position at home improvement center Lowe's, told analysts during the first-quarter earnings conference call in mid-May that, "when we see a Sears close, it's a significant benefit to our business."

Of course, Penney's best-performing stores also tend to be in malls that have a Sears, so it's a bit of a conundrum for the retailer, though investors can't be happy that J.C. Penney has seemingly hitched its recovery wagon to a failing rival.

Woman picking up packages at J.C. Penney counter.

Supply chain issues helped sink J.C. Penney margins in Q1. Image source: J.C. Penney.

Not rising to the challenge

Considering how poorly Sears performed in the first quarter, one might think J.C. Penney should have done a lot better. Sears' customers continued to abandon it in droves, with comparable-store sales plunging by mid-teen rates, but J.C. Penney could only scrounge up comps growth of 0.2%, near the very bottom of its guidance of flat to 2% growth.

And this comes even though J.C. Penney is purposefully trying to steal Sears customers by adding appliances to its stores and modifying its home department. Although it reportedly enjoyed 15% comps growth in appliances, it's still only a small component of the retailer's business and couldn't come near to offsetting the declines it experienced elsewhere.

Women's apparel has long been J.C. Penney's money center, generating about a quarter of total revenues, but lately it hasn't been able to move merchandise. Even after liquidating a lot of the inventory last year, the department store chain still had to execute clearance markdowns to address items that weren't selling, which pressured margins. Management had said margins would likely be lower in the first quarter, but the percentage-point drop it posted was worse than expected.

I don't buy it

The retailer puts part of the blame on the weather, but the cooler temps didn't seem to effect Macy's (NYSE: M), which reported truly robust results that had many expecting J.C. Penney would follow suit. Although Macy's did say a few markets were impacted, they were offset by others that were not. That weather should drag down Penney when it has more stores than its rival -- which should have spread out the impact more -- indicates it is more of an excuse than a reason.

That's why J.C. Penney's problems with its online business are a concern. It faced a number of supply chain issues in the period that prevented it from getting product to customers in a timely manner causing J.C. Penney to have to discount merchandise, which was another pressure point on margins.

As consumers increasingly shop online -- Amazon.com is poised this year to surpass Macy's as the largest apparel retailer -- J.C. Penney has sought to better blend its digital business with its physical one, even fulfilling and shipping online orders from it stores. Stumbling over that at the same time it is making an apparent fashion faux pas with apparel will only serve to chase customers further away.

The turnaround that wasn't

But it was J.C. Penney's revised guidance that seemed to worry the market the most. The department store said its full-year earnings could end up anywhere between a $0.07 loss and a $0.13 profit per share, a dramatic change from the previous range of profits of $0.05 to $0.25 per share. While both ranges tend to be wide enough to drive a truck through, it's clear J.C. Penney's position is deteriorating even as rivals like Macy's rebound.

By measuring its performance against Sears, the retailer is taking the approach that it's not as important that it succeeds, but that its competitor fails. Yet even after Sears reported its own dismal earnings results, J.C. Penney still couldn't come up with a win. Rather than being in the midst of another recovery effort, it may actually be preparing for a second trip to the brink.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.