By ANNE D'INNOCENZIO

NEW YORK -- J.C. Penney (JCP) reported a bigger-than-expected loss in the third quarter on plummeting sales as customers continue to reject its move get rid of blockbuster sales in favor of everyday low pricing.

Friday's report marks the third consecutive quarter of losses and steep sales declines since the mid-priced department store chain get rid of hundreds of sales it used to offer each year and instead cut prices permanently about 40 percent throughout the store. It's a big blow to Penney, which has suffered in recent years as it's failed to keep its stores fresh and its core middle-income shoppers have been hard hit by the weak economy.

The results underscore the challenges Penney's CEO Ron Johnson, the former Apple executive who came on board a year ago, faces as he tries to change the behavior of shoppers who have grown accustomed in to seeing sales signs of up to 70 percent off. Under Johnson, Penney has been changing everything from its merchandise to its stores. But the centerpiece of his strategy has been to tweak pricing, with the goal of weaning deal-addicted customers off of the kind of heavy discounting that eats away at a retailer's profits.

But customers have not embraced Penney's pricing plan, which it rolled out on Feb. 1. The company has reported mounting losses and sales declines. Investors have sent its shares down nearly 40 percent this year. And critics are questioning whether the chain will ever regain its footing.

Penney, which has acknowledged that it made some mistakes, has done some tweaking. The Plano, Tex.-based company made some adjustments to its pricing in August, just six months after it rolled the plan out. And the company has been changing its advertising to better communicate the plan to customers.

The retailer also has been remaking its stores. It's adding 10 mini-shops with various designers within in stores. The company plans to add 100 shops inside 700 of its 1,100 stores by late 2014. The remaining 400 stores are in small towns and won't feature the full makeover.

Surrounding those shops will be extra-wide aisles that Johnson calls "streets." Along those pathways will be ice cream and coffee bars and wood tables with built-in iPad tablet computers shoppers can use. In the middle of it all, a Town Square will offer activities like Pilates.

Johnson said in September that he's encouraged by sales at the new shops, which are faring better than the rest of the stores.

But Penney still has a long way to go toward revamping its business. The chain said Friday that it lost 56 cents per share, or $123 million in the quarter ended Oct. 27. That compares with a loss of $143 million, or 67 cents per share, in the year ago period. Revenue dropped 26.6 percent to $2.93 billion in the quarter.

Analysts had expected a 15 cent loss on revenue of $3.27 billion.

Revenue at stores opened at least a year dropped 26.1 percent. Analysts expected a 17.6 percent drop. During the first quarter, that measure dropped 18.9 percent, while during the second quarter, it fell 21.7 percent.

On the news of the poor results, Penney shares fell $1.59, or 7.3 percent, to $20.10 in premarket trading on Friday.

• <p> &quot;The first and most encouraging thing to me is I am completely convinced that our transformation is on track. We are making extraordinary progress in everything we're doing.&quot;</p>
• <p> &quot;In haircuts, it's pretty incredible. Today we will cut on our tenth day of this effort to help Americans look better, help the kids look better. <a href="http://articles.baltimoresun.com/2012-08-10/business/bal-consuming-jcpenney-free-haircuts-august-20120810_1_free-back-to-school-haircuts-jcpenney-shops">We'll do our 500,000th haircut</a>, free haircut. And today customers will book their millionth appointment during the month of August to get a haircut.</p>
• <p> &quot;We're reducing the money on television. We'll still run television and we're investing heavily in the traditional traffic driving median, so be in the newspaper and we think that's going to be good.&quot;</p>
• <p> &quot;We're going to go paperless. ... Imagine a retail store without any paper except the signs, because everything will be done digitally through iPods and iPads and those are our priorities and those are all priorities within the next 12 to 18 months.&quot;</p>
• <p> &quot;Well, for the first 10 days with our new marketing, our traffic is down 7% to last year, which is a dramatic improvement.&quot;</p>
• <p> &quot;We're inspired by Selfridges. Selfridges is the leading department store in the world. You ask any retailer what's the number one department store? They will all say Selfridges.&quot;</p>
• <p> &quot;It's a place to refresh and we're going to have coffee bars and juice bars and place to get food, that's 25-square feet of space, but by putting out a few tables that have no cost, where we used to have cash wraps, no one has to leave the store if they want to refresh, they can grab a cup of coffee while someone shops and continue to stay in the store and continue to shop.&quot;</p>
• <p> &quot;We've rolled out Wi-Fi, but we really don't have a lot of use for it.&quot;</p>
• <p> &quot;What happens in a big mall of a 1 million square feet, about 600,000 square feet goes to the anchors and the common area which leaves about 400,000 square feet for the stores and the stores average 3,000 to 4,000 square feet. So, you run the math, you have about 100 to 120 stores in a typical mall we're in. We'll have just as many shops with inside JCPenney and that's what we call it a specialty department store. It's like a mall within a mall.</p>
• <p> &quot;Yeah, we're very anxious to communicate our pricing to our customer and we have failed at that, right? They were confused. Now, we have a pricing strategy that they understand. We have done focused groups around the country over the last 30 days with our new pricing strategy and they all say, we get it, whereas before, they were confused.&quot;</p>
• <p> &quot;At <a class="hidden_link" href="http://www.businessinsider.com/blackboard/apple">Apple</a> our stores were busy when we only had Macs. Then we added the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/ipod">iPod</a>; they got busier. We added the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/iphone">iPhone</a>; they got busier yet. We added the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/ipad">iPad</a>, and they got busier. The same thing will happen here. Next spring it's Joe Fresh, <a class="hidden_link" href="http://www.businessinsider.com/blackboard/martha-stewart">Martha Stewart</a>, all our new partners. It will be just like Apple: boom, boom, boom.&quot;</p> <p> As analyst Bill Dreher of Newedge USA told Johnson on the call, &quot;I want to applaud you for creating one of the most exciting stories in retail write-down.&quot;</p>
• <p> <a href="http://www.dailyfinance.com/photos/10-ways-were-losing-superpower-status-to-china/" target="_blank" title="View this gallery live">10 Ways We're Losing Superpower Status to China</a></p> <p> <a href="http://www.dailyfinance.com/photos/responses-for-you-five-obamacare-rumors-that-are-at-least-partly-true/" target="_blank" title="View this gallery live">Five Obamacare Rumors That Are (At Least Partly) True</a></p> <p> <a href="http://www.dailyfinance.com/photos/aarp-the-magazine-reveals-2012-list-of-top-ten-places-to-live-on-100-a-day/" target="_blank" title="View this gallery live">AARP The Magazine Reveals 2012 List Of Top Ten Places To Live...on $100 A Day!</a></p> <p> <a href="http://www.dailyfinance.com/photos/the-12-dumbest-insurance-scams-of-the-past-decade/" target="_blank" title="View this gallery live">The 12 Dumbest Insurance Scams Of The Past Decade</a></p> <p> <a href="http://www.dailyfinance.com/photos/10-everyday-items-that-cost-more-because-of-us-taxes/" target="_blank" title="View this gallery live">10 Everyday Items That Cost More Because of U.S. Import Taxes</a></p> <p> <a href="http://www.dailyfinance.com/photos/9-bank-of-america-corp/" target="_blank" title="View this gallery live">Nine Great American Companies That Will Never Recover</a></p>