Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.

The basic stuff is covered. It's now time for the heavy lifting at J.C. Penney Co.

Flash Sale
J.C. Penney's shares plunged by as much as 12% in pre-market trading Friday, eventually turning positive as investors digested its lower-than-expected earnings
Source: Bloomberg
Intraday times are displayed in ET.

The department-store chain's shares plunged as much as 12 percent in pre-market trading on Friday, after it released lower-than-expected third-quarter earnings and cut its full-year sales-growth forecast to 1 percent to 2 percent, down from a previous range of 3 percent to 4 percent. Its sales in the latest quarter fell by 0.8 percent from a year ago, versus a prediction of 2.7 percent growth. 

Stalled Sales
Sales growth at J.C. Penney turned negative in the latest quarter
Source: Bloomberg

The losses seemed even more dire considering third-quarter sales at competitors Nordstrom, Macy's and Kohl's -- while also not stellar -- at least turned out better than expected.

Still, the flash selloff in J.C. Penney shares was an over-reaction.

Declining sales growth is certainly no good thing for J.C. Penney, still in the middle of turning itself around. But one quarterly miss does not mean CEO Marvin Ellison's plan to "save the company" and return it to growth has failed. The chain will not suddenly revert to the double-digit losses that gutted it in 2010 and 2011, when Apple Store mastermind Ron Johnson took the helm. 

Instead, Friday's shock suggests it's time for a shift in strategy.

The company has pulled off an impressive feat in stabilizing itself and bringing customers back. All the market share it gave away to its competitors over the years has returned, and the day-to-day details of running the chain seem to be on course. And investors have been rewarded -- J.C. Penney's shares are up 32 percent this year, making it the highest-performing department-store stock of 2016. 

Rocky Ride
J.C. Penney's shares are up 32% year to date
Source: Bloomberg

But Friday's results are a reminder the honeymoon is over. Stopping the bleeding at a company that was eating itself from the inside is one thing. Figuring out how to grow a company beset by major structural shifts in retail and consumer spending is another. Plus, quarterly sales are now coming up against comparisons with strong year-ago numbers, making it harder to post big gains. 

J.C. Penney seemed aware of this at its investor day earlier this year, when it laid out its plan to notch $1 billion in profits this year for the first time since 2012. And it continues to take all the right steps: Its plus-size business is outperforming. It's widening its offerings beyond the challenging clothing category. It's revving up its appliance sales to take advantage of defecting Sears customers. Its continued push into the all-important category of beauty and salon services will keep drawing customers at a time when mall traffic is hemorrhaging. And a focus on online sales is essential. 

Still, the company has to fight even more aggressively for market share in the next few months, now that its competitors are finally taking it more seriously. The holiday season, when shoppers are most open to trying out new retailers, is the best time for such a push.

It's an opportunity for J.C. Penney to show the third-quarter's sales dip was a one-time blip and not the start of a trend. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at

To contact the editor responsible for this story:
Mark Gongloff at