JCPenney's holiday sales send stock surging

Strong holiday sales are helping to boost shares of JCPenney (JCP). The department store reported sales increased 3.7% in November and December. News of the growth sent the stock soaring, jumping 20% in after-hours trading.

Yahoo Finance’s Jeff Macke thinks the uptick in sales is good news for JCPenney but warns the retailer still has work to do. “JCPenney did not become awesome merchants. If you go to the store, you’re not dazzled. They’re still JCPenney. We know who they are and 3.7% for them is great.”

JCPenney CEO Mike Ullman says he’s proud of the results and believes the company will continue to grow.

Macke isn’t quite sold on where the department store is heading. “JCPenney is all the way back to where it was when they warned three months ago. This is still a pretty inconsistent turnaround story.” In October, JCPenney lowered their third-quarter sales outlook, resulting in investors pulling back and the stock falling and rekindling concerns about the company’s recovery.

As for what it means for trading, Macke says, “It’s hard to get long on a bunch of target shares expecting a 20% pop. Most retailers are given the benefit of the doubt in surviving additional quarters the way JCPenney is.”

[Get the Latest Market Data and News with the Yahoo Finance App]

JCPenney is the first big retailer to report sales for the holiday season. Penney’s numbers are still lower than several holiday season predictions. Later this week we’ll see reports from Costco (COST), Gap (GPS), and L Brands Inc. (LB), which owns Victoria’s Secret.

Macke expects other retailers to fair better. “That translates into maybe a 4% for Gap, maybe a good number for Target and a decent number for Macy’s. Everyone else wins, except for Sears (SHLD). Which is still kind of the feasting ground.” Sears aside, this year’s holiday season should be one of the best in years.

The National Retail Federation is forecasting the biggest holiday sales growth in three years. Macke agrees that sales will be up. “We’re probably in the 5% range. It’s the best Christmas season in multiple years. Is it fantastic? Not really. It’s the economy as what we thought it was. Which is not bad.”

More from Yahoo Finance

January's tidal wave of events will keep trading choppy

Coach-Stuart Weitzman deal: A 'Hail Mary' pass?

Expect the Fed to take a hike this year