J.C. Penney cut prices to clear slow-moving goods in the third quarter.

J.C. Penney Co. Inc. warned of sharp third-quarter losses on Friday, sending its stock reeling and providing further evidence — if any was needed — that the ground under broadline retailers is shifting rapidly.

The financial red flag sparked a department store sell-off on Wall Street and capped off a week that also saw Richard Baker’s Hudson’s Bay Co. agree to sell its Lord & Taylor Fifth Avenue flagship to WeWork — with plans to shrink the L&T retail footprint and turn the rest into temporary office space. The move renewed questions about the future of multibrand retail giants in a digital world.

Shares of Penney dropped as much as 32 percent on Friday before closing down 14.8 percent to $3.12, leaving the company with a market capitalization of just $967 million. The hit sparked a broader retreat. Among the decliners were Macy’s Inc., down 7.7 percent to $19.69; Sears Holdings Corp., 5.1 percent to $5.75; Kohl’s Corp., 4.6 percent to $42.58; Hudson’s Bay Co., 4.3 percent 11.06 Canadian dollars, and Dillard’s Inc., 3.4 percent to $52.48.

(The outlier was The Bon-Ton Stores Inc., which saw its stock jump 33 percent to 97 cents on a report that it has held talks with private equity firm Sycamore to sell some of its assets. A spokeswoman for Bon-Ton and a spokesman for Sycamore both declined to comment).

Penney liquidated slow-moving apparel in the third quarter in order to focus the business and put more money behind its enhanced casual and contemporary offering for women.

Marvin Ellison, chairman and chief executive officer, said: “Based on the encouraging results from a third-quarter reset in women’s apparel, which expanded our casual and contemporary offering, we made the strategic decision to accelerate a wider transformation of the entire women’s department by clearing slow-moving inventory primarily in women’s and other apparel categories. Following this comprehensive reset, we saw an improvement in performance, particularly in our women’s division, confirming these actions were necessary to drive growth in our women’s apparel business.”

But that switch came at a steep price.

Penney’s said third-quarter comparable-store sales would increase by 0.6 to 0.8 percent, but that the cost of goods sold would also rise 300 to 320 basis points, leading to adjusted losses per share of 40 cents to 45 cents.

That led to a forecast for the full year of adjusted earnings per share of 2 cents to 8 cents, well below the 40 cents to 65 cents previously projected.

The company also said it took steps to combine its pricing and planning teams under its chief financial officer in order to streamline pricing, promotion and markdown strategies.

Cowen analyst Oliver Chen gave Ellison credit for “bold, necessary steps,” but also cut his target price on Penney’s stock to $4 from $6.

“The comprehensive reset, integration of departments, and focus on growth areas are necessary, but painful steps to solidify the retailer for success,” he said.

“We are pleased by the steps J.C. Penney has taken to revamp its women’s offering, including providing a much needed reset, with a greater focus on casual and contemporary, as well as athletic and ath-leisure, while simultaneously scaling back careerwear, traditional and other underperforming areas/brands,” Chen said.

Ellison, a veteran of Home Depot, has been working to reimagine Penney’s — although not as dramatically as Ron Johnson, who famously led the company through a near-death experiences by changing formats without testing.

One element of Ellison’s plan has been to focus more on appliances, adding showrooms for big-ticket items such as refrigerators, stoves, washers and dryers. The idea, in part, is to diversify the chain away from fashion.

We have to be prepared when mother nature does not cooperate with our apparel calendar,” Ellison told WWD in June.

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