Struggling retailer J.C. Penney (JCPN.Q) will report fourth-quarter results on Feb. 26. The company has had a rollercoaster of a year already with a data-bare holiday sales statement that caused shares to plummet followed by an extension of the "poison pill" first enacted last year. And then J.C. Penney finally did provide a look at that holiday data and the numbers suggested that the fourth might become the strongest quarter seen since before Ron Johnson attempted his ill-fated turnaround. 

The holiday shopping season was weaker than expected at competitors including Macy's (M -1.30%) and Nordstrom (JWN -0.28%) but J.C. Penney faces the additional hurdle of having to redo a reinvention. 

What should investors watch for in the earnings release? 

Source: J.C. Penney

Hint at results and the estimates to beat
J.C. Penney released some preliminary fourth-quarter data earlier this month to give investors a glimpse at the chain's holiday performance. Comparable store sales were up 2% for the quarter, which marked the first comps growth since early 2011. Revenue was up about 26% year-over-year from $3.9 billion, which should make the fourth-quarter reported revenue around $5 billion. And that figure would beat analyst estimates of $3.9 billion.

But things look less optimistic on the EPS front. J.C. Penney expects to report a loss per share of $2.35-$3.39 and that's well below the $0.85 predicted by analysts.

J.C. Penney has missed consensus revenue estimates in three of the past five quarters and missed on EPS for all five. 

3 numbers to watch
The comps growth J.C. Penney provided in its holiday data could come with a caveat. Make sure the comps growth isn't primarily driven by the slashing of prices to move excess inventory out the door. At this point, it's OK if that's a contributing factor. But organic growth needs to also make an appearance. 

On the subject of inventory, check how the gross margins have performed compared to the prior year. In the third quarter, margins were 29.5% of sales compared to 32.5% from the prior year's quarter. And J.C. Penney partly attributed the drop to clearance pricing to move inventory hanging over from the previous two quarters.

The inventory issue was bound to happen as returning CEO Myron Ullman worked to move out unpopular products introduced by Ron Johnson while ushering private brands back onto shelves. Management expects this process to complete before spring so it's important to keep an eye on inventory-related measures during the next few releases.

Ullman's turnaround undoing has also led to some restructuring charges. The third quarter featured $46 million that contributed to the operating loss of $401 million. Those charges should wind down now that Ullman's had the reigns back for long enough to implement most of the needed changes. 

Competitor comparison
Nordstrom's fourth quarter report last week included $3.6 billion in revenue-nearly flat year-over-year-and $1.37 EPS. Analysts had estimated $3.72 billion in revenue and $1.34 EPS. Comps were up 2.6% compared to the 6.3% increase in the prior year's quarter and gross profits as a percentage of net sales fell 55 basis points to 37.2% due to markdowns and promotional events. 

Macy's will report Feb. 25-or the day before J.C. Penney's report. Analysts estimate revenues of $9.28 billion and EPS of $2.17. Macy's offered a holiday performance glimpse last month but only divulged that comps rose 3.6% during the holiday shopping months of November and December. The department store chain joined J.C. Penney in announcing cost cutting measures that included a workforce trim.

Foolish final thoughts 

J.C. Penney's holiday preview was stronger than expected and could show that customers have forgiven the retailer for its missteps under Ron Johnson. But watch out for the devil in the details and whether margins took a large hit to get customers out the door with purchases.