Department-store retailer J.C. Penney (NYSE:JCP) is feeling youthful after a restructuring plan it undertook several years ago has worked wonders for its store base and financial performance. And shareholders have been smiling all the way to the bank, with the stock having performed very well over this time frame. So what's in store for tomorrow, when the company reports first-quarter earnings?

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts follow J.C. Penney. Ten are bullish, one is a bear, and six are on the fence with hold ratings.
  • Revenues. On average, they expect to see $4.39 billion in sales, or 4.1% growth.
  • Earnings. Projected earnings are $1.03 per share, or 14.4% growth from last year's $0.90.

What management says:
On April 18, J.C. Penney provided financial guidance for the first quarter and for the 2007-2011 period. It raised first-quarter earnings guidance from $0.99 to $1.02, or a penny below what analysts currently project.

For the longer term, management raised its expansion targets and now plans to open 250 new department stores over the next five years. It also expects annual mid- to high-single-digit total department store sales growth and same-store sales growth in the low to mid-single digits. It is also calling for 12%-12.5% operating margins by 2011 and 16% annual earnings growth between 2008 and 2011.

What management does:
Gross margins have fluctuated considerably over the past six quarters, but operating and net margins have demonstrated a more consistent, improving trend. As of last quarter, the company was already at its long-term operating margin goal; let's see whether it can keep the figure around 12% over the next few years. Return on invested capital also jumped above 20% last quarter, demonstrating that enhanced sales growth and cost-cutting moves are making their way to bottom-line earnings.

Margins

10/05

1/06

4/06

7/06

10/06

2/07

Gross

39.3%

38.3%

39.5%

39.5%

39.7%

39.3%

Operating

8.0%

8.8%

8.7%

8.9%

9.3%

9.7%

Net

4.7%

5.8%

6.0%

6.1%

6.3%

5.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Not too long ago, investors left J.C. Penney  -- and other old-line department store chains, such as Dillard's (NYSE:DDS), Federated Department Stores (NYSE:FD), and Sears Holdings' (NASDAQ:SHLD) Sears -- for dead, as new-and-improved big-box retailers such as Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Costco (NASDAQ:COST) were thought to have won the battle for consumer dollars with fresher merchandise and more convenient locations. But back in 2000, J.C. Penney began a major restructuring plan that started paying dividends in 2003.

Since that time, the company has become known for consistently positive comparable-store trends and double-digit earnings growth. Total sales expansion has remained low, but management looks to be getting more aggressive on opening new stores over the next five years. The stock took a breather after weaker comps last quarter, but at less than 14 times earnings expectations for the coming year, J.C. Penney is looking interesting -- especially if it meets the growth plans it laid out last month.

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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.