NEW YORK ( TheStreet) - J.C. Penney ( JCP - Get Report) shares gained 2.6% to $7.91 after the department store chain's comparable sales in September were an improvement from August, fueled by online sales. The company gave indications sales trends were expected to continue for the rest of the year.

J.C. Penney said September comparable store sales rose 580 basis points over August numbers, but were still down 4% compared to September 2012. Sales on jumped 25.3% last month, on top of a 10.8% rise in August. Online sales have risen 18.6% so far in the third quarter.

The comparable sales trend is expected to continue for the rest of the year, the company said in a press release early Tuesday.

It's been quite a year for J.C. Penney. From ousting its former CEO Ron Johnson over poor store performance under his leadership and changes to dealing with activist investor Bill Ackman of Pershing Square Capital to as of last week, filling the coffers once more through an equity offering, the stock has been on a roller coaster.

Investors were cheering the incremental improvement early Tuesday. However, the stock as of Monday's closing price is trading at a 28-year low.

Investors seemed to shrug off a downgrade by Sterne Agee's equity analysts on Tuesday to "neutral" from "buy," based on the retailer's ongoing struggles. "While we always framed the JCP call as 'not for the faint of heart,' the combination of: uninspiring observations from our recent store checks, today's more challenging apparel/retail backdrop, and most important,our fears that the former CEO Ron Johnson may have permanently 'fired' JCP's core customer, lead us to downgrade to neutral," Sterne Agee analyst Charles Grom writes in a research note on Tuesday. "Net, while we tried to fade consensus, recent developments leave us less comfortable sticking our necks out."

J.C. Penney reiterated in the release a number of strategic initiatives it is pursuing in order to return to profitability. J.C. Penney's women's and men's apparel, fine jewelry and women's accessories categories are performing better than the company's average. The struggling retailer said women's apparel, its largest business, reported positive sales for the month of September.

Despite the improvements, gross margins "continue to be impacted" by lower clearance margins due to the overhang of inventory from the first half of the year, higher levels of clearance units sold during the period, as well as the company's transition back to a promotional pricing strategy during the second quarter, it said. "Reconnecting with our customers and getting them into our stores is a top priority," CEO Myron 'Mike' Ullman said in a statement.

"Our enhanced messaging is reminding shoppers that JCPenney's offering of trusted private brands, key national brands and unique attractions sets us apart from the competition," Ullman continued. "Over the last six months, we have made significant strides and are now seeing positive signs in many important areas of the business, in spite of what continues to be a difficult environment for consumers and retailers in general. While pleased with the improving trends and more predictable performance, we are still in the early stages of the turnaround and will maintain a relentless focus on achieving our long-term goals for the benefit of our customers, associates and shareholders."

Ullman had talked about the need to refresh J.C. Penney's online commerce as one of the company's biggest problems - and easiest fixes - so that customers could find the same merchandise online as in stores, he said during the company's second-quarter conference call.

Despite an iffy environment for mall retailers, J.C. Penney said that customer traffic trends have improved during the quarter "including positive off-mall traffic for the last two weeks of September, though traffic in the company's mall-based stores continues to be difficult."

The company "remains current in its payments to vendors and we are grateful for the strong support and confidence they have shown as we continue to make progress in our turnaround," Ullman said.

While apparel and accessories may be seeing improvement, J.C. Penney's re-launch of its home business has been a disappointment. Merchandise assortment has not resonated with customers and sales remain weaker in stores.

"The company is working aggressively to create a more balanced assortment between modern and traditional home furnishings, with opening price points and an easy shopping environment, which includes remerchandising the home store by classification in key areas," it said.

The company reports third-quarter earnings on November 19. Analysts, according to Thomson Reuters, expect the company to post a loss of $1.78 a share compared to a loss of 93 cents in the year-earlier quarter. Revenue is expected to fall 5% for the quarter to $2.79 billion.

"Although there remains significant work to be done, the experience, talent and drive of our team is allowing us to confront our challenges head on and take swift and effective actions to address them," Ullman said. "We are all dedicated to continuing the momentum underway and restoring JCPenney to a leadership position in American retail. It will take time, but we are on the right path with a sound strategy and achievable goals."

-- Written by Laurie Kulikowski in New York.

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