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Not so fast! A deeper look at Penney's sales boost

The excitement was palpable.

J.C. Penney's shares soared nearly 27 percent in after-hours trading on Thursday, after posting its second-consecutive quarter of comparable-store sales gains—a welcome sight following a string of same-store sales declines that date to third quarter 2011. (Track JCP shares here.)

But while analysts commended the department store's performance, they did so with a bit of reservation.

"J.C. Penney has a long way to go," Retail Metrics president Ken Perkins said. "They still have to figure out a way to make money."

Ben Torres | Bloomberg | Getty Images

Despite gaining traction among consumers—including April's feat as its first month of positive traffic in two and a half years—the 6.2 percent same-store sales gain "did not come close to making back the 16.6 percent drop in comps in last year's first quarter," Perkins wrote in a note.

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What's more, about half of the gain came from improvements in the store's home category—a department that was under construction in about 500 of its 1,100 stores in the same quarter last year and accounts for about 10 percent of the company's total space, noted Wells Fargo analyst Paul Lejuez.

"Digging into the drivers of the comp, results seem much less impressive," he said.

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Still, there were positives from the company that were hard to ignore. Citi analyst Jenna Giannelli noted that the brands it discontinued in wake of former CEO Ron Johnson's ousting, which failed to gain traction among its shoppers, have been entirely removed from its mix.

As a result, the penetration of its private-label products is back near historical levels at 50 percent, she wrote in a note to investors. This helped the retailer boost its gross margin for the quarter.

CEO Mike Ullman also said there are no planned management changes for 2014, after prior indications that his stay in the role would be temporary. Ullman rejoined the retailer last April, following Johnson's failed attempt to remake Penney's as a store filled with designer labels but no coupons.

"It is clear that our efforts to re-merchandise many areas of the store and revamp our messaging to the customer are taking hold," Ullman said in the report.

Belus Capital Advisors analyst Brian Sozzi said the company's return to promotions and an "infusion of flare" in departments such as teen and athletic wear "could bring the company to the land of profits for the upcoming holiday season."

"Believe me, it's almost unimaginable to utter such words after having a sell rating on the stock for two years," he said. Sozzi now has a hold rating on the stock, with a price target of $9.

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Perkins, however, expressed doubt that Penney's, which still posted a loss of $1.16 per share for the quarter, would churn out a profit in any quarter this year.

What's more, as 2014 progresses, the retailer's comps will become more difficult to top, as it laps Ullman's return.

Morgan Stanley analyst Kimberly Greenberger also sounded a hesitant note. She called Penney's results "encouraging," but said, "we remain skeptical on J.C. Penney's longer-term outlook."

J.C. Penney shares were about 15 percent higher, near $9.60 on Friday.

—By CNBC's Krystina Gustafson.

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