J.C. Penney Co. Inc. continues to catch flack for the early financial impact of its reinvention.

Standard & Poor’s cut the retailer’s credit rating to “B-plus from “BB-minus.” A rating in the “B” category indicates that adverse business, economic or financial conditions would likely impair a company’s capacity or willingness to pay its debts. The outlook on the rating is negative.

“The downgrade reflects recent performance that has been below our expectations and our view that it will remain weak over the next 12 months,” said credit analyst David Kuntz.

“It is out view that further performance difficulties may result in the loss of market share to other players, such as Macy’s, Kohl’s, Dillard’s or other department stores or specialty retailers,” Kuntz added.

Chief executive officer Ron Johnson has already simplified the Penney’s pricing structure and cut costs, including 350 layoffs at the company’s headquarters this week. And additional merchandising and store layout changes are on tap.

“It will take at least another few quarters for the company’s revised marketing message to stimulate customer traffic and the new merchandising strategy begin to have some positive effects on performance,” the rating agency said.

Additionally, Moody’s Investors Service tweaked its probability of default rating on The Bon-Ton Stores Inc. to “Caa1/LD” from “Caa3.”

That moves the rating up, but the “LD” designation indicates a limited default since Moody’s viewed the company’s deal to swap out $330 million in senior notes due 2017 for the same amount in unsecured notes due 2014 as a “distressed exchange.” The designation will be removed in about three business days.

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