J.C. Penney Company, Inc. (NYSE:JCP) certainly has an easy year for comparables, so is it truly on the way to recovery? Nomura analysts remain cautious on the company, maintaining their Reduce rating on the stock. Overall, they blame the weather for first quarter softness across the retail industry, as a number of retailers said sales improved in April.

J.C. Penney sees easy comparisons

Because sales were so bad last year, J.C. Penney Company, Inc. (NYSE:JCP) will have easy year over year comparisons this year. In a report dated May 27, 2014, analysts Robert Drbul, Jessica Schoen and Madeline Steiner said that overall, their Broadline and Department Store Group saw an average of 1.9% increase in comparable store sales during the first quarter.

J.C. Penney

As you can see, the only retailer in its category that saw better comparable sales than J.C. Penney Company, Inc. (NYSE:JCP) was Tiffany & Co. (NYSE:TIF). However, when looking at two-year comparisons, J.C. Penney has it far more difficult, as comparable store sales have fallen 10% compared to two years ago.

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High-end consumer retail does better

The Nomura team noted that sales in the high-end segment are especially picking up, as Tiffany & Co. (NYSE:TIF) and Nordstrom, Inc. (NYSE:JWN) both posted strong year over year comparisons.

They saw a broad range of trends in gross margins during the first quarter, as a number of retailers said the “promotional environment” in the second half of last year persisted into the first quarter of this year. They noted that improvements at Macy’s Inc. (NYSE:M), Kohl’s Corporation (NYSE:KSS), and Tiffany & Co. (NYSE:TIF) during the first quarter compared well versus declines at lower-end retailers like Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT).

J.C. Penney does well in inventory levels

One area of particular strength for J.C. Penney Company, Inc. (NYSE:JCP) was in inventory levels, which the Nomura team said improved greatly across the board in retail. On average, their Department Store / Broadline group ended the first quarter with an increase of 4.4% in inventories compared to an average of 2.1% sales growth during the quarter.

They note that J.C. Penney Company, Inc. (NYSE:JCP) beat management’s guidance for inventory during the quarter, rising by 1.3% year over year. Currently investors are focused on the department store chain returning to the private brand inventory it carried before things REALLY fell apart. Investors want to see signs that the retail chain is bringing inventory of these brands back to “normal levels,” and J.C. Penney looks to be heading in that direction. Here’s how the department store chain stacked up to other retailers in inventory growth:

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