The chatter suggesting J C Penney Company Inc (NYSE:JCP) was en route to a turnaround a couple years ago seemed credible. 2015’s top line was slightly bigger than the prior year’s, and the company’s losses appeared to be shrinking. Perhaps most important, JCP stock was making forward progress more of than not after a big-time tumble in 2013.

What’s happened in the meantime, however, has been less than impressive.

Sales growth has stalled, and though the bottom line has improved, consistent profits remain elusive. Most alarming of all, investors have given up hope. JCP stock has fallen 47% since December of last year, reaching new multiyear lows in the process.

Are all those sellers right? Is JCPenney just too far gone to salvage?

We’ll have a better grasp on the answer to that question on Friday morning, when the JCPenney earnings report for its first fiscal quarter is scheduled for release. And for better or worse, the bar is set pretty low.

JCPenney Earnings Preview

Any investor that’s confused as to what to believe about JCPenney — and retail in general — isn’t alone.

In March, JCP announced it would be closing nearly 140 stores (presumably because they cost more to operate than they were worth), following in the footsteps of rivals like Macy’s Inc (NYSE:M) and Sears Holdings Corp (NASDAQ:SHLD). In mid-April, Retail Dive reported Q1’s overall retailer profits could slide 6.8% on a year-over-year basis, confirming many suspicions about the fate of the industry.

Around that same time, though, JCPenney announced it wouldn’t be closing the 138 units it said it would shutter just a month earlier. As it turns out, they might be worth keeping open after all.

Investors weren’t overly impressed. JCP stock continued its trek to multiyear lows last month. But it does call into question the market’s doubts about the iconic retailer.

To that end, JCPenney is expected to report a loss of 21 cents per share on sales of $2.78 billion when it posts its fiscal Q1 results on Friday. That loss is narrower than the loss of 32 cents per share booked in the same quarter a year earlier, though that projected revenue figure is down just a little more than 1% from last year’s top line of $2.81 billion.

3 Things to Watch

While the JCPenney story is a complex, multi-faceted one, investors as well as JCP stock are ultimately being driven by three matters right now. Getting a grip on these three pillars will allow current and would-be shareholders to get a grip on the stock’s future.

In no particular order…

Sephora: Right or wrong, JCPenney is going all-in with its Sephora shops-within-a-store cosmetics counters. Last month it announced it would be adding Sephora shops in another 70 stores this year, and would be expanding another 32 existing shops. Although productive, these shops also take up a lot of square footage that could be selling other merchandise. The question is one of optimization.

Online sales: There’s no reason not to talk about the 800-pound gorilla in the room — Amazon.com, Inc. (NASDAQ:AMZN) and other online alternatives are making it tough for JCPenney to remain a first-choice place to shop. To his credit, CEO Marvin Ellison understands than e-commerce isn’t just another channel, but is a business-building tool. It’s still not clear how well consumers are choosing JCP.com as a shopping destination, though.

Positioning Itself to Capture New Business: Finally, it’s admittedly a subjective, philosophical idea, but if JCPenney is every going to thrive again, it’s going to have to win over the customers that other struggling retailers — like Sears — are losing … especially when those other venues close their doors for good.

Of these three key factors, only two are apt to be voluntarily discussed in detail during the earnings call slated for Friday morning … e-commerce, and its Sephora shops. The third issue of remaining ready to capture customers set free by other retail store closures is a difficult one to pin down, though glimpses of the matter may surface during the Q&A portion of the conference call.

Investors may also need to look for third-party commentary to really garner some perspective on the retailer’s readiness to attract those displaced shoppers.

Bottom Line for JCP Stock

While Friday’s earnings report will certainly be an important one in that it will serve as a snapshot of the company’s financial health, investors should bear in mind that it’s a snapshot of what is historically the weakest shopping quarter of the year.

Though it’s usually relatively predictable, between the advent of a new President with high economic-growth ambitions against a backdrop of waning interest in shopping, investors may not want to read too much into the JCPenney earnings report either way.

Nevertheless, the numbers will be part of the longer-term turnaround story… a story that isn’t playing out as well as once hoped.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.