J.C. Penney Shines

The retailer beats earnings targets and boosts its full-year outlook.
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Updated from 9:28 a.m. EST

J.C. Penney

(JCP) - Get Report

got an early dose of holiday spirit Thursday as the department store operator announced a 23% rise in third-quarter profits and raised its full-year earnings forecast.

The retailer earned $287 million in the third quarter, up from $234 million last year. On a per-share basis, Penney had a profit of $1.26, well above last year's 94 cents. The earnings per share were above Penney's already raised projection last week of $1.22, and were 3 cents ahead of Thomson First Call's average analyst estimate.

"Obviously we're very gratified with our results," said Myron Ullman, chairman and CEO, during a conference call.

Penney now expects earnings of $1.94 in the fourth quarter and $4.82 a share for the year. The company previously forecast earnings of $4.61 a share for the year; analysts are calling for EPS of $1.91 in the quarter and $4.77 for the entire fiscal year.

In the third quarter, Penney's revenue rose to $4.78 billion from $4.48 billion a year ago. Total department store sales were up 7%, while same-store sales increased 5.2%.

The company said the strongest merchandise results were in children's men's and family shoes, while the best regional performances were in the Southeast and Northeast.

Penney's shares recently were up $1.93, or 2.5%, to $80.13, and earlier in the day hit a 52-week high of $81.40. The stock has jumped more than 50% since this time last year, as the mid-market retailer hits its stride in finding the right mix of fashion and staving off competition from the likes of

Wal-Mart

(WMT) - Get Report

.

"They're finally getting significant female shopper acceptance and loyalty to their women's clothing," said Richard Hastings, retail sector analyst at Smyth-Bernard Sands. "In the last 12 to 18 months this has really started to crank and now it's very strong. It's mostly through their private brands or exclusives."

In the quarter, J.C. Penney opened 25 new stores and launched Sephora cosmetics counters in five stores and online. The company announced a new brand of lingerie, Ambrielle, and the creation of two new lines with

Liz Claiborne

(LIZ)

.

Direct sales increased 5.3% in the quarter and sales at the Web site jumped about 27%.

"Their online business is enormous," Hastings said. "They have a very robust mutli-channel concept. They're further along than other retailers. Customers are very comfortable previewing things online."

Hastings said the introduction of Sephora brings a brand into J.C. Penney that the discount stores will never see.

"This opens up yet another direction for J.C. Penney and puts them in a position to go toe-to-toe with Macy's," he said.