JCPenney posts bigger-than-expected loss in second quarter

Six months after JCPenney Co. launched a bold new pricing plan, customers still aren't buying it.

The midprice department store chain reported a bigger-than-expected loss and plummeting sales during the second quarter, as its customers remain confused by the new pricing strategy that ditched hundreds of sales in favor of everyday lower prices. The bleak performance marks the second straight quarter of steep sales declines since the plan was introduced Feb. 1.

The company also withdrew its profit guidance for the year. Its shares tumbled more than 8 percent in premarket trading, but turned positive, rising as much as 9 percent in early trading. Investors appeared to be encouraged by CEO Ron Johnson's soothing words during a 90-minute session that he's seeing some hopeful signs in the business since early August.

Johnson noted that customer counts have improved and that changes it made to the new pricing plan Aug. 1 are starting to resonate with shoppers.

Nevertheless, Penney's poor results, released Friday, underscore how difficult it is for a company to change the way shoppers behave. In a still-struggling economy, shoppers are still looking for racks of "70 percent off" sales signs and coupons. The latest financial performance also tests the patience of investors and adds more pressure on Johnson, former Apple Inc. executive, to turn things around at the retailer.

Under Johnson, Penney is transforming everything from the items it stocks to store design. But the riskiest move has been its pricing, which is turning out to be an even tougher sale to shoppers than previously expected.

Johnson, dressed in navy blue blazer, white oxford shirt and jeans, promised to stay the course, and remained relaxed and confident during his talk with analysts broadcast over the Web.

"I am completely confident that our transformation is on track," said Johnson. "The transition from a highly promotional business model to one based on everyday value will take time and we will stay the course."

He told analysts that he wants to create a new breed of department stores — the specialty department store, which will be carved up with different branded shops to replace the sea of clothing racks typical of the industry and an area in the middle of the store that will offer shoppers services.

Penney's path to reinvention has been rocky.

In May, the company's stock plunged 20 percent, its biggest one-day decline in four decades, after the retailer posted a larger-than expected first-quarter loss and a 20.1 percent drop in revenue because of the poor reception from shoppers.