Department-store operator J.C. Penney (NYSE:JCP) continues to be a beacon of strength in an otherwise dour domestic retail environment. Today's earnings release was a fresh breath of air, given what certain archrivals are reporting, and Penney's is showing little sign that it's long-term recovery is wearing thin.

So far this week, Wal-Mart (NYSE:WMT) and Macy's (NYSE:M) detailed their difficulty in growing their top lines. Consumer spending is waning, squeezed by the likes of higher gasoline prices, food prices, interest rates, and subprime woes that are hitting home prices in many U.S. regions.

In stark contrast, consumers heading to Penney's are arriving with their wallets open. The company's seeing strong trends among nearly every operating metric. Total second-quarter sales advanced 3.6%, and same-store sales improved a respectable 1.9%; the company had already posted strong 6.6% comps in last year's quarter. The start of the back-to-school season shifted into the quarter, and management cited particular strength in the Northwest and Southwest regions.

J.C. Penney's private-label business is outgrowing other merchandise categories. Penney's new labels that are proving popular to consumers, include Ambrielle, Liz & Co., and CONCEPTS, in a successful relationship with Liz Claiborne (NYSE:LIZ). Private-label business also allows Penney's to keep more of the profits, which helped boost gross margin nearly 6% for the quarter. Strong inventory management and other cost controls contributed to a 17.5% increase in operating income, even though a higher tax rate slowed diluted earnings growth to 6.6%.

Management expects single-digit sales and comps growth for the upcoming third quarter, and it increased its annual earnings projection by a penny to $5.50 per share. Over the next five years, it's sticking with long-term goals announced in April. Penney's expects double-digit annual earnings growth as it opens or relocates 50 stores each year over this time frame.

At a recent price of $63 per share, Penney's is trading at a very reasonable 11.5 times forward earnings. There will clearly be monthly sales fluctuations, including hot Julys and cooler Junes, but given the overall retailing landscape, J.C. Penney is the one to watch. I remain impressed by how effectively it has revived its business, especially since older-line peers such as Macy's, Dillard's (NYSE:DDS), and Sears Holdings (NASDAQ:SHLD) continue to flounder. And anyone who can beat almighty Wal-Mart at its own game deserves a further look.

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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.

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