Dive Brief:

• J.C. Penney reported Q3 revenue and same-store sales beating estimates, thanks to sales in home goods, footwear, and at its Sephora beauty concessions. 

• Revenue grew to $2.90 billion from $2.76 billion, and same-store sales grew 6.4%, topping FactSet analyst estimates of a 5.7% increase. CEO Marvin Ellison said Q3 gross margins and earnings "exceeded our expectations."

• But shares fell nevertheless as investors seem to be taking a dim view of department store prospects this holiday season.

Dive Insight:

Despite a relatively strong showing, J.C. Penney is taking it on the chin thanks to weak performance by department stores in general in Q3.

The Q3 reports from Macy’s and Nordstrom don’t bode well for those retailers as holiday shopping begins in earnest. Kohl’s, a closer competitor to J.C. Penney in their discount space, also fared better than mid-tier Macy’s and upscale Nordstrom’s.

Wall Street has clearly become leery of the department store model, which seems a bit at sea these days.

Much will be revealed this holiday season, but those retailers may have to depend mightily on discounts to pare down bloated inventories and get shoppers into their stores. Macy’s CEO Terry Lindgren said as much this week: “We're going to take markdowns. Consumers are going to have a field day, because we're going to have lots of values out there. But we're going to get rid of the inventory; have to do that before Christmas."

But Nomura Research retail analyst Robert Drbul Nomura's told CNBC that shoppers will indeed show up to buy in stores this season. 

"You look at a lot of the macro backdrop, the consumer has a reason to spend money this holiday season,” he said.