Investors are turning up the pressure on J.C. Penney Co. Inc.

This story first appeared in the November 13, 2012 issue of WWD. Subscribe Today.

Shares of the chain dropped 12.9 percent to $17.97 Monday — the worst close since March 2009. The decline followed Penney’s 4.8 percent fall Friday, when the company revealed third-quarter losses of $123 million and a 26.1 percent same-store sales decline.

Chief executive officer Ron Johnson is trying to transform the department store into a collection of shops he describes as a specialty department store. The company’s results suggest shoppers like the new shops-in-shop, but that the branded outposts don’t represent enough of the store to offset broader weakness spurned on by the elimination of coupons and a new pricing program.

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Michael Exstein, an equity analyst at Credit Suisse, downgraded his rating on the stock to underperform from neutral.

Exstein said competitors are responding to Penney’s more-focused merchandising efforts and described the firm’s third-quarter results as “a worst-case scenario.” The analyst has a target price on the stock of $15.

Late Friday, Standard & Poor’s cut the retailer’s credit rating two notches to “B-minus” from “B-plus” on the back of the weak third-quarter results.

“The downgrade reflects recent performance that has remained poor and our view [is] that it will continue to be weak over the next 12 months,” said S&P analyst David Kuntz.

The debt watchdog said the company’s business risk profile was “vulnerable” and that its financial risk was “highly leveraged.”

S&P predicted Penney’s “liquidity will remain adequate,” but noted that if the same-store sales trend continues and margins fall, Penney’s would have to turn to its credit facility to fund operations.

Deutsche Bank analyst Charles Grom said today, “We do not believe there is an immediate liquidity concern, particularly given ‘a few hundred million [dollars]’ of potential non-core asset sales remaining.”

Grom also noted that sales declines could push the company to dip into its credit facility to buy inventory or to cut capital expenditures by opening fewer shops next year than envisioned.

Penney’s said today that it would cut prices on hundreds of items for Black Friday.

“Black Friday is America’s greatest shopping tradition and we’re celebrating the occasion with our only sale of the year,” Johnson said. “All day long, customers will find some of our lowest prices ever and the chance to win amazing gifts, including once in a lifetime trips to great American destinations. It’s our way of kicking off the holiday season and saying, ‘Merry Christmas, America!’”