J.C. Penney Co. raised investor concerns about how much more profitable it can be after the department story operator said many of its expenses would stay flat as a percentage of sales this year.

Analysts also questioned how well Penney’s price-conscious shoppers will contend with higher gasoline and clothing prices.

“Nobody knows what the headwinds will be as far as pricing and consumer behavior go,” said Morningstar analyst Paul Swinand.

The company said on a conference call Friday that selling, general and administrative expenses as a percent of sales would be flat this year, even as it expects same-store sales and profit would continue to improve in 2011. It also expects gross margins to stay steady, after years of improvement.

Its shares were down 5.3 percent in afternoon trading.

Penney Chief Executive Myron Ullman told Reuters last month that it will be harder for Penney to pass higher cotton costs on to shoppers for basic items such as white T-shirts, which make up a larger portion of Penney’s business than at Macy’s Inc.

For its fiscal fourth quarter that captured holiday spending, Penney reported on Friday sales at established stores rose 4.5 percent. But the retailer had to cut prices to lure shoppers.

The company’s largest shareholder and newest board member, Pershing Square Capital Management’s William Ackman, said last month that Penney has long underperformed rivals including Kohl’s Corp. and he has pressured it to improve its business.

Annual revenue in fiscal 2010, ended Jan. 29, rose 1.2 percent, but were still 10.6 percent below pre-recession levels.

Penney also announced a $900 million share repurchase plan, equal to more than 10 percent of its market capitalization. It said it would begin buying back shares in March.

In recent weeks, Penney shares have gained strongly, hitting a 12-month high last week.

The stock trades at 23 times future earnings, compared to 14 times for Kohl’s and 10 times for Macy’s, suggesting the are shares are pricey, Morningstar’s Swinand said.

It reported net income for the fourth quarter rose 35.5 percent, to $271 million, or $1.13 a share, from $200 million, or 84 cents a share, a year earlier.

Penney earned $1.09 per share from continuing operations, beating Wall Street expectations by 1 cent, according to Thomson Reuters I/B/E/S.

After stumbling in the recession, as many shoppers traded down to discount chains, Penney’s sales have improved. Same-store sales rose 4.5 percent in the holiday quarter. The company said its exclusive Liz Claiborne line and its in-store Sephora cosmetics boutiques, among other exclusives, helped sales and would continue to.

Penney said it expects more improvement, forecasting same-store sales will rise by a low-to-mid-single-digit percentage in fiscal 2011.

Its forecast is slightly above that of Kohl’s, which expects growth of 2 to 4 percent, and Macy’s, which expects a 3 percent increase.

Penney forecast fiscal 2011 earnings of $2 to $2.10 per share. For the current quarter, it expects a profit of 18 cents to 23 cents per share,  below Swinand’s forecast.

Under pressure from Ackman, Penney in January said it would close five underperforming locations and two of its five remaining call centers and finish winding down its catalog operations.

Ackman, who took a 16.5 percent stake in Penney last fall, was elected to the company’s board this week, sparing Penney from the kind of bruising proxy fight he waged three years ago with discount chain Target Corp .