The department store chain reported that comparable sales, which includes online and sales at stores open for at least a year, rose 4.4% during the key holiday season quarter, above Wall Street expectations and at the high-end of its forecast range. Yet that was not enough to report an adjusted profit, which excludes certain expenses. By that measure, J.C. Penny merely broke even, while Wall Street was expecting a profit of 11 cents per share.

The shortfall sent the company’s shares (JCP) down more than 10% in after-hours trading.

The culprit? Its gross profit margin – a measure of the profitability of what it actually sold — rose 5.4 percentage points to 33.8% of sales, but that was still below analyst forecasts. What’s more, Penney doesn’t seem to think its gross margin will improve all that much despite an expected 3% to 5% lift in comparable store sales this year.

At most, it said its gross margin would rise 1 percentage point to 35.8% of sales, still well below from the 39% rate it achieved before the recent recession.

All this shows is that despite an improvement in its business, Penney is still contending with a business that is highly dependent on discounts and that its offerings aren’t special enough to command more in a still tough retail environment.

The company laid some of the blame for that at the feet of former CEO Ron Johnson, a veteran of tech giant Apple whose attempt in 2012 and 2013 to re-invent the 113-year-old retailer into a trendier store with name-brands bombed.

It’s true that Penney is still feeling the effects of the mass exodus of shoppers caused by Johnson’s distaste for coupons and focus on in-house brands like St. John’s Bay. Sales for 2014 rose to $12.3 billion, still a far cry from the $17 billion mark it hit right before Johnson became CEO.

Online revenue, which Johnson decimated when he separated the online and bricks and mortar-buying and planning teams, continued to recover in 2014, reaching $1.22 billion. But it is still far from their $1.6 billion apex 4 years ago.

“We’re still trying to recover from the self-inflicted wounds from the previous strategy,” CEO Mike Ullman told analysts on a call Thursday, referring to Johnson.

But that’s a bit of a cop-out. Since Ullman, who first was CEO from 2004 to 2011, returned in April 2013 to prevent the company from going under, he has largely returned to a promotion-heavy strategy and brought back the Penney brands Johnson dumped. All told, Penney’s in-house brands generate half of its sales, attracting loyal customers but failing to bring in new ones.

That very strategy is that one that led Penney to underperform for years during the last decade, recover more slowly from the recession than Macy’s (M) or Kohl’s (KSS) and ultimately prompted activist investor Bill Ackman to push for Johnson’s installation in late 2011.

This past holiday season, Penney had a much wider assortment of merchandise from its own brands. It also sold most of the backlog that Johnson had brought in that flopped with customers.

As result, gross margin should have improved more. In the previous year, margins had been depressed by managers slashing prices to get ride of the overflow in Johnson-era merchandise.

What’s more, some of the problems haunting Penney predate Johnson, who was CEO for 20 months. Ullman was the boss when Penney decided in 2010 to discontinue sending out catalogues in the belief e-commerce made them irrelevant. That move, Ullman conceded on the call on Thursday, cost Penney “about 10 million customers to our home business.”

Home goods, which help to get shoppers into stores, used to be 20% of Penney’s sales. But now that category only accounts for about 12% of revenue.

Ullman is stepping down in August and will be replaced by president Marvin Ellison, a former Home Depot executive.

In October, Penney projected that its sales would reach $14.5 billion in 2017, raising investor alarm about whether it could ever get back to where it was. Thursday’s results only reinforced that nagging suspicion that Penney’s eventual recovery may be limited.

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