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What: Shares of J.C. Penney Company (NYSE:JCP) were wowing the market this morning, climbing as much as 20% after its first-quarter earnings report soared past expectations.  

So what: After sales had plummeted sharply under former CEO Ron Johnson's botched transformation, the department-store chain has gotten back to basics and seems to finally be on the track toward recovery, as same-store sales jumped 6.2% in the quarter. Management noted that the metric improved each month, a further sign that J.C. Penney is looking up. That improvement in organic sales drove a 6.1% gain in total revenue to $2.8 billion, better than the $2.71 billion analysts expected. Further down the income statement, Penney saw improvement in nearly every category, as gross margin jumped 230 basis points to 33.1% and SG&A expenses fell 390 basis points.

Now what: As a result, J.C. Penney saw its operating loss shrink 49%, and reported a net loss of $1.15 per share the quarter, beating expectations at $1.25. Looking ahead, management sees for the full year mid-single-digit growth in comparable sales, significant improvements in gross margin, and breakeven free cash flow. Clearly, the company has made meaningful improvements, but that wide per-share loss demonstrates how big of a hole the company is in. This report clearly shows Penney is making progress, but I'd still question whether it can return to profitability.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.