Shares of J.C. Penney Co. (JCP) gapped ahead Thursday morning after it reported that its fourth quarter wasn’t as bad as analyst predicted, lending support to the embattled retailer’s turnaround efforts.

For the fiscal fourth quarter ended February 1, Plano, Texas-based Penney’s reported net sales of $3.78 billion, compared to $3.88 billion in the year prior quarter. Fiscal 2013 was comprised of 52 weeks, whereas Q4 fiscal 2012 included 53 weeks. Net income for the quarter was $35 million, or $0.11 per share, versus a net loss of $552 million, or $2.51 per share, in last year’s quarter. Excluding one-time items, such as an income tax benefit and restructuring costs, the company posted an adjusted net loss of $206 million, or $0.68 per share.

The results exceeded Wall Street expectations of an adjusted net loss of $0.82 per share, but came up just short of revenue predictions of $3.84 million.

Online and same-store sales buoy turnaround

Most of the earnings report showed J.C. Penney could be turning the corner after languishing in recent years.  Not counting the 53rd week last year, online sales at jcp.com were up 26.3 percent to $381 million.  =Same-store sales, a key growth metric that measures revenue from locations open more than one year, improved 2.0 percent compared to last year and 680 basis points quarter-over-quarter. It has been nearly two years since JCP had improving same-store sales.

Gross margin was 28.4 percent, up 460 basis points from the fourth quarter of fiscal 2012. Gross margin would have been better if it were not for a negative impact of 190 basis points related to discontinuing brands that aren’t part of the company’s future. JCP said that home, men’s apparel, women’s accessories and Sephora inside JCPenney were the best performing divisions.

Expenses were also trimmed, with selling, general and administrative costs dropping 17 percent in Q4 to about $1 billion.

"JCPenney achieved what it set out to do on a number of important fronts in 2013. We stabilized our business, both financially and operationally, and restored our process disciplines, promotions, inventory levels and focus on the customer,” said Mike Ullman, chief executive at JCP, in a statement.

Liquidity

Ullman added that the company ended the year with more than $2 billion in total available liquidity.  This is a bright spot as analysts were skeptical in 2013 about Penney’s liquidity and thought it would be diluting to raise more money. On a call with analysts, Ullman said that the most expensive part of the turnaround is now behind the company.

Looking ahead, JCPenney sees same-store sales improving in the “mid single digits” this year and total liquidity to hold in excess of $2 billion.

According to CNBC’s Carl Quintanilla, shares of JCP are having their best day in 46 years with their run this morning. Shares have gained about 22 percent at $7.30 in morning action, after closing Wednesday at $5.96.

Some earlier thoughts on the technical merits of JCP at the beginning of February can be found here.