Additionally, J.C. Penney has returned to a commission-based sales associate in key categories that will help sales growth in key categories. Finally, the company has a lot of potential in online sales and mobile-driven commerce, Tamminga writes.

However, David Tawil, co-founder and portfolio manager at Maglan Capital, a hedge fund that focuses on distressed companies, is not optimistic about J.C. Penney's future. "We view the turnaround as challenging with a high level of execution difficulty," he wrote in an email to TheStreet. Maglan is not currently invested in or short J.C. Penney's stock. Maglan Capital has $70 million in assets under management.

"Clearly at this point, they are not looking it seems for a [long term] CEO," Tawil speculated in a follow-up interview, referring to the fact that Ullman was re-hired to his old position on an interim basis. "It sounds like they've called off the search there."

Tawil notes recent press reports pointing out the dearth of qualified CEOs that can come in and recreate struggling retailers (Target (TGT) and American Eagle Outfitters (AEO) are also on the hunt for new chief executives) doesn't bode well for J.C. Penney. Especially as the retail sector undergoes a radical shift away from stores as destinations and more towards e-commerce and mobile opportunities.

While Ullman may be "good enough" to reverse the failings of former CEO Ron Johnson, "if I'm an investor, I'm looking for growth," Tawil stated. "The status quo is just not good enough from an investor point of view."

"I just don't think that there is anyone that could go ahead and revitalize this company. As an investor that leaves me with a great deal of pause," he noted.

Retail sales rose a paltry 0.1% for the month of April, below consensus expectations of 0.4% gain and far below the 1.5% improvement in March.  That's likely to not bode well for J.C. Penney, which forecast same-store sales comp growth between 3% and 5% for the quarter compared to falling 16.6% in the first quarter of 2013. Analysts on average expect comps to rise 4% over last year's quarter.

"As for the sequential comp trend, we hold a below consensus stance at 2.0% and believe that following January's down 3.5%: February improved, but was still running negative, March deteriorated given poor weather/the Easter shift, and April improved significantly, but likely not enough to reach guided levels," penned Sterne Agee analyst Charles Grom in a research note. Grom rates J.C. Penney at "neutral."

"We sense the buy-side is anticipating a comp of +4.0%-5.0% following last year's down 17.7% print, which was heavily influenced (~300 bps) by the closing of Penney's home category in ~500 doors. Importantly, a potentially strong Easter selling season (per our own store checks and lateral reads from GPS, ZUMZ, and LB) and momentum into Mother's Day could give the bulls something to hang their hats on," the Sterne Agee note stated.

Sales aside, J.C. Penney's other big test is gross margin levels which should receive a boost from fewer discounted merchandise items J.C. Penney has cleared out.

"After clearing most of the merchandise brought-in by prior [management] to restock with JCP legacy brands, levels of deep discounting should subside" in the first and second quarters, UBS analyst Michael Binetti writes in a May 7 note in which he upgraded the stock to "neutral" from "sell." "We see less risk of substantial SSS/GM misses lapping these one-time disruptions." Binetti expects comps to rise 4% in the first quarter as well as the second quarter. He's also forecasting gross margin improvement of 450 basis points and 400 basis points, in the same time periods compared to prior year quarters.

"The next stock test will be whether JCP can continue to show significant/profitable SSS increases in 2H14 as the benefits of lapping one-time disruptions from 1H13 diminish," Binetti writes. "As these tailwinds abate and SSS compares begin to normalize (SSS compares are -14% in 1H, and only -1% in 2H), we believe investors will increasingly scrutinize current valuation (which we believe assigns a premium to the reasonable LT EBITDA potential for JCP today) if it becomes clear that JCP can't meaningfully outpace broader department store industry SSS averages over several years."

BMO Capital Markets analyst Wayne Hood rates J.C. Penney at "underperform" over concerns that the company could do another dilutive capital raise later this year or early 2015.

"Looking toward 2Q14, we look for the company to build on the rollout of the new home offering, growing comp-store sales about 5% on top of the projected 4% growth in 1Q14. We look for management to give an update on two important initiatives: 1) the rollout of the home offering and the impact store traffic and its halo effect on the rest of the store; and 2) the effect the reintroduction of key basic items and popular brands to the company's assortment late in FY2013 has had on both the company's traffic and average ticket," Hood writes in a May 9 note to clients.

--Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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