I think the more telling element of the story was the same-store sales number. Sales in this department dropped 7.5%. Consumers are still being very selective when it comes to the mall. Traffic remains in a challenged state, apparently.

Yet, here's one cool thing. Management said that gross margin increased 50 basis points. As we all know, people are stubborn for deals and markdowns when it comes to department stores. Yet, the earnings release says that JCPenney has stabilized in terms of clearance selling. That's a good thing, and that obviously helped the gross-profit picture. Hopefully the company will be able to keep it up. The trick is to make sure that inventories are lean and reflective of what people want at the moment. Of course, for retailers, that isn't always the simplest task. They're in constant fear of being behind the curve and missing out on a trend. I guess it just goes with the territory.

Now, in terms of cash flow, the company did good and bad. Cash from operations improved dramatically. However, while cash was generated this year as opposed to being used last year, there was still no free cash left over in the current quarter. Capital expenditures did decrease, however.

JCPenney's stock has some great momentum behind it. I don't like the fundamentals, however. I would really love to see some better same-store sales before considering buying. Plus, this news article says that guidance came in below estimates. Oh, but look at the stock! It makes you want to buy on the belief that the momentum will continue after the recent little pullback, doesn't it? As far as I'm concerned, however, I'll let other people bet on JCPenney. I'll look elsewhere for ideas...

Disclosure: I don't own any company mentioned; positions can change without notice.