Nice Quarter at J.C. Penney

Meanwhile, gross margin expanded 150 basis points, thanks to less clearance merchandise for sale and improved sell-through of seasonal items. Expenses decreased 110 basis points.

Looking ahead, August department store sales have come in above expectations thus far, Penney said, and operating profit in the third quarter should continue to be boosted by improved gross margins and expense management.

"A number of external factors, including higher oil prices and concerns over terrorism, could impact future consumer spending patterns, but we remain confident that our third quarter sales and operating profits will improve," Questrom said.

The company expects to have a profit of 35 cents to 40 cents a share in the quarter, within range of analysts' average estimate of 37 cents a share. Penney noted that the expected results have been reduced by 11 cents a share due to one-time charges associated with the planned retirement of debt.

Penney earned 25 cents a share in the year-ago third quarter.

Shares of Penney were moving up 26 cents, or 0.7%, at $39.01 in Tuesday premarket trading.