What happened

Shares of J.C. Penney (JCPN.Q) were moving higher today after the company reported holiday sales last night, and gave an update on its current position. Despite weak results over the holiday season, which included a comparable-sales drop of 3.5% on a calendar-shifted basis, investors still found something to like; they sent the beaten-down stock up 11.2% as of 3:28 p.m. EST.

Check out the latest J.C. Penney earnings call transcript.

So what

There's no question that J.C. Penney's comparable sales over the holiday season, the busiest time of year for retailers, were disappointing, especially considering the overall strong consumer environment and other reports that retail sales surged during the gift-giving season. On an unshifted basis, comps sank 5.4%, following an identical slide in the third quarter. Meanwhile, Penney's peers like Macy's and Kohl's have been posting comparable-sales gains.

The exterior of a J.C. Penney department store

Image source: J.C. Penney.

Despite the weak numbers, the retailer said it was still on track for positive free cash flow for the year, and would reduce inventory by $225 million from a year ago, or 8%, a positive sign for increased profitability. It also said it would end the year with more than $2 billion in liquidity, giving it some room for adjustments and investments under new CEO Jill Soltau.

Separately, the company said it would begin three preliminary store closings and evaluate its store portfolio for more potential closings. It will update those during its fourth-quarter earnings report, set for Feb. 28.

Now what

Closing more stores seems like the right move, considering the retailer's ongoing struggles to generate a profit and the broader shift in the industry toward e-commerce. J.C. Penney has one of the lowest sales per square foot in retail, at $131. And the company is likely overstored, with around 872 locations, even after closing 141 in 2017.

It's hard to consider the holiday sales update good news in any way. But considering how far the stock has fallen and how cheap it is, investors seem to see an upside in the store-closing plan, and confirmation that J.C. Penney will still deliver positive free cash flow for the year.