Even in a good economy, staying afloat in a competitor-saturated industry takes talent. But with the downturn draining consumers' confidence as if through a sieve, J.C. Penney (NYSE:JCP), with its more than 1,100 department stores, continues to stay above water through conservative business practices and savvy inventory management.

It hasn't been an easy fight, though. Much like Macy's (NYSE:M) experienced in its latest quarter, J.C. Penney's same-store sales fell 9.5% from levels achieved last year, while overall net sales dropped 7.9% to $3.9 billion. The company posted a net loss of just $1 million, giving the company break-even earnings per share -- better than the ($0.01) loss analysts had expected, but still far below what it earned one year ago.

Making do
Although those results may not seem like anything to write home about, J.C. Penney made some notable achievements. It stayed on the ball by keeping inventory in line with sales trends, which allowed it to sell more merchandise at regular price instead of having to sell items on clearance. That resulted in wider gross margins.

Perhaps the most impressive aspect of its quarterly results was the fact that total inventories decreased by nearly 12% year-over-year despite the lower sales. Cash flows were also very strong; the company retired $113 million in debt and paid its dividend as usual. With a reasonable amount of debt on the books, J.C. Penney has an enviable cash position.

Company

Market cap (millions)

Quick Ratio

Debt/Equity

J.C. Penney

7,160

0.83

0.84

Kohl's (NYSE:KSS)

15,798

0.64

0.29

TJX (NYSE:TJX)

14,511

0.37

0.49

Saks (NYSE:SKS)

843

0.03

0.64

Macy's

6,438

0.23

1.92

Sears Holdings (NASDAQ:SHLD)

9,247

0.22

0.35

Dillard's (NYSE:DDS)

772

0.22

0.52

Source: Yahoo! Finance; Capital IQ, a division of Standard and Poor's. Market cap as of Aug. 14.

The company did hit a few snags, though. Cost-cutting didn't keep up with sales losses, and a pension-plan charge hurt earnings. Moreover, while the company gave higher earnings guidance of $0.75 to $0.90 per share for the full year, it fell short of the $0.95 figure that analysts had hoped to see.

Boss of the woods
J.C. Penney has been around since 1902, and its management knows a thing or two about staying competitive in the retail business. During the recession, it has adapted quickly to external changes, with innovations like a new Manhattan store, its Sephora cosmetics expansion, and the upcoming Cindy Crawford Style launch seeking to capture market share from competitors.

In its class, which isn't for overly risk-averse investors, I think that J.C. Penney has some of the best prospects. With an attractive valuation at just 14 times earnings, it's also a relative bargain. Whenever the recovery comes, J.C. Penney looks poised to capitalize.

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Fool contributor Chris Jones owns no shares of any company mentioned in this article. The Motley Fool's disclosure policy can't wait to bust out its new Justin Timberlake Trapper Keeper on the first day of school.