Department store company J.C. Penney Co. Inc. (NYSE: JCP) has struggled against the new online retailing paradigm. People increasingly want to shop at companies such as Amazon.com Inc. (NASDAQ: AMZN). However, the most recent quarter gave indication that its senior management might be on track for a successful turnaround. J.C. Penney saw its net sales increase 2% year over year, while its net loss shrunk a whopping 53%. However, its same-store sales increased 3.4% in the most recent quarter, compared to 7.4% the same time last year.

J.C. Penney executed well on its merchandising strategies. It has partially protected itself with its private label brands, which are not available online, according to an article on Investopedia. Despite this, the company’s stock is still down 9% year over year and 25% from its 52-week high. Here are some possible reasons why.

Wall Street still maintains a sour sentiment toward J.C. Penney. According to Thomson/First Call, Wall Street analysts have not budged from their Sell and Hold standings. UBS and Maxim Group still have Sell ratings on J.C. Penney’s stock, and Argus still has a Hold rating on it. Moreover, J.C. Penney’s 2% revenue expansion in the most recent quarter did not meet the Wall Street expectations game.

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Rightfully, the stock market still remains skeptical of J.C. Penney’s ability to return to and maintain profitability. Despite its improvements, the company still posted a net loss of $167 million and a free cash flow deficit of $226 million in the most recent quarter.

In contrast, the market favors online retailers such as Amazon, despite its questionable fundamentals. The market believes Amazon continues to benefit greatly from the consumers’ increasing preference to shop online. Amazon’s stock price is up 30%, compared with 5% for the S&P 500 year-over-year.

J.C. Penney’s management maintains an optimistic attitude toward the company’s future. They lifted J.C. Penney’s fiscal 2015 guidance on same-store sales. They now expect same-store sales to increase from “4 percent to 5 percent versus 3 percent to 5 percent previously.” J.C. Penney also expects greater improvement in gross margins and for free cash flow to break even.

It is no wonder the market isn’t buying into J.C. Penney’s turnaround when things simply go from worse to bad. Maybe market sentiment will improve when J.C. Penney can demonstrate consistent profitability and growth momentum.

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