Before the open this morning, department store operator J.C. Penney announced that third-quarter earnings dropped 9.1% to $261 million, or $1.17 per share, from its year-ago profit of $287 million, or $1.26 a share. Total sales during the quarter slipped 1.1% to $4.73 billion. Analysts had predicted a profit of $1.01 per shares on sales of $4.76 billion.

Looking ahead to the fourth quarter, the firm forecasts total department store sales to be flat to up slightly and comparable department store sales to decrease by mid-single digits, on a percentage basis. The company expects fourth-quarter earnings of $1.65 to $1.80 per share and full-year earnings of $4.63 to $4.78 per share. J.C. Penney had said previously that it expected fourth-quarter earnings of $2.41 a share and full-year earnings of $5.50 a share.

The shares are poised to gap lower this morning on the somewhat lackluster earnings report and outlook. The stock has suffered a steady slide lower since late February, shedding more than 46%. However, investors are extremely enthusiastic toward the shares. The Schaeffer's put/call open interest ratio rests at 0.54, which is lower than all but 2% of the readings taken during the past year. Meanwhile, short sellers have abandoned the stock, as its short-interest ratio rests at a paltry 1.6 times the stock's average daily trading volume. It looks like JCP is vulnerable to more downside as the bulls continue to unload their long positions.