Discount retailer J.C. Penney (NYSE:JCP) has tried the patience of investors with its long series of turnaround attempts, but in its fiscal third-quarter financial report, Penney's results were actually somewhat encouraging. Nevertheless, with Nordstrom (NYSE:JWN) becoming the latest victim of this week's collapse for the retail industry, in general, even solid results from J.C. Penney weren't enough to keep its shares from plunging 15% Friday following its morning earnings announcement. Let's take a closer look at J.C. Penney, and whether traders were wrong to send the stock stumbling.

J.C. Penney enters the holidays with some momentum
J.C. Penney's fiscal third-quarter numbers showed considerable progress. Sales rose 4.8%, to $2.90 billion, which was better than the $2.88 billion that most investors had expected to see from the discount retailer. Penney's loss of $137 million was 27% less than the amount it lost in the year-ago quarter, and the resulting loss of $0.45 per share was $0.10 better than the consensus forecast on how much red ink the company would produce this quarter.

Other business metrics continued to show promise. As Penney preannounced earlier in the week, comparable-store sales climbed 6.4% for the quarter, which was even faster than most investors had expected. Gross margins rose slightly, and the company chopped three full percentage points off its overhead expenses as part of its broader cost-cutting efforts. Penney said that those savings came largely from efforts to reduce unnecessary expenses at the individual store level, as well as being more efficient with its advertising, and reaping more revenue from its private-label credit cards.

J.C. Penney said that it enjoyed success almost entirely throughout its store network. All of its merchandise divisions enjoyed positive comps, with the company calling out the Men's, Home, Footwear, Handbags, and Sephora areas as the greatest contributors to growth. From a geographical standpoint, Penney saw sales growth across the country, pointing to the South and West as the best-performing regions.

CEO Marvin Ellison took the positive news in stride, arguing that it represents "ongoing progress toward achieving the company's long-term financial targets." As Ellison sees it, "We are well-positioned to compete effectively during the key holiday shopping period," and Penney "remains determined to regain our status as a world-class retailer."

Why did Penney stock suffer?
J.C. Penney also boosted some of its full-year guidance. The retailer still thinks comps will grow between 4% and 5%, but it boosted its bottom-line estimates, calling for adjusted pre-tax operating earnings of $645 million, or $25 million higher than its previous guidance suggested.

Still, all the good news that Penney gave wasn't enough to convince investors that it wouldn't be vulnerable to some of the same trends that other retailers are facing. Nordstrom, for instance, suffered a similar 15% hit to its stock Friday after it announced much less encouraging results.

Nordstrom sales climbed 6%, but comparable-store sales grew at a lackluster 0.9% rate, and a combination of falling net income and scary guidance for the remainder of the year made Nordstrom investors nervous about the coming holiday season. Similar news from other retailers, especially close Penney rival Macy's, pointed to weakness among consumers generally.

As encouraging as J.C. Penney's third-quarter results were, the real test for all retailers comes in their holiday quarters. If Penney can ride its momentum into the holiday shopping season and take away business from competitors like Nordstrom and Macy's, then it could defy the drop in the retail sector generally. If it proves vulnerable to the same adverse trends that higher-end store chains are reporting, though, then the decline in Penney shares today could be just the beginning of another wave down for the stock.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Nordstrom. 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.