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J.C. Penney Keeps Rolling

Shares jump after the retailer beats estimates and shrugs off concerns of a consumer slowdown.

Updated from 10:10 a.m. EDT

There's still some shine in

J.C. Penney

(JCP) - Get J. C. Penney Company, Inc. Report

.

The department-store operator posted first-quarter earnings Thursday that topped both its own and Wall Street's expectation, leading the retailer to boost its full-year guidance. Shares, which have been hit by fears of a shopper slowdown, were trading up $4.22, or 5.6%, to $79.94.

The Plano, Texas-based company said its first-quarter earnings climbed to $238 million, or $1.04 a share, from $210 million, or 89 cents a share, a year earlier.

The earnings per share beat analysts' average estimate by a penny, according to Thomson Financial. Penney's own guidance projected earnings of 99 cents a share.

Sales rose to $4.35 billion from $4.22 billion, compared with analysts' forecast of $4.39 billion. Same-store sales, or sales at stores open at least a year, grew 2.2% amid what the company called a "challenging retail environment" for the quarter.

Prior to Thursday, J.C. Penney's stock was off 13% from its 52-week high, set in February, amid ongoing concerns that mid-level customers may be showing signs of cutting back on spending amid the housing slowdown and rising gas prices.

Penney's original forecast for the first quarter was

lackluster, and its monthly sales for the quarter disappointed. April, a

difficult month for many retailers, was particularly weak, with same-store sales falling 4.7% vs. the company's expectation for flat comps.

"We are mindful of the additional pressures consumers are facing in the current economic climate," Chairman and CEO Myron Ullman said during a conference call with analysts Thursday. "However, we don't believe there's been a material change in our consumers' behavior."

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Penney said that private-label items, such as the recently introduced lingerie brand Ambrielle and the Liz & Co. and Concepts by Claiborne lines, helped add strength to the quarter. In addition, the company said new merchandising initiatives improved its product flow, helping it bring "newness" to its assortments and reduce clearance levels.

"This has really been a terrific turnaround," says Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates. "They centralized the merchandizing, which allowed them to improve the merchandise flow. If your turnaround is faster, the inventory is newer and fresher. The consumer wants new stuff, not stuff that's been there for four months."

During the conference call, Ullman ticked off several items that he said separated Penney from its customers, including the new "Every Day Matters" marketing campaign and its commitment to new-store growth.

Davidowitz contrasted J.C. Penney's progress with

Sears Holdings'

(SHLD)

Sears chain, which has been in a prolonged sales slump.

"Sears and Penney are co-anchors in every mall in America," he says. "Sears has tremendous advantages over Penney and yet they've lost market share and Penney has been picking it up. They're in exactly the same real estate, with the same customers, and Penney is beating their brains in."

Sears also recently announced a new marketing campaign to spark sales, which includes the tag line "Sears. Where it begins."

Looking ahead, Penney said it now sees full-year earnings of $5.49 a share, a nickel above its prior guidance and in line with analyst estimates.

For the second quarter, the company forecasts a profit of 77 cents a share, including a 3-cent charge for the early redemption of debt. Analysts, on average, project earnings of 79 cents a share for the period. Same-store sales are expected to increase in the low- to mid-single digits.

J.C. Penney's strong report helped to bolster shares of rival

Kohl's

(KSS) - Get Kohl's Corporation (KSS) Report

, which is due to release its results after the bell. Kohl's was up $1.61, or 2.2%, to $73.57.