J.C. Penney Co. (JCP) rose the most in more than six months after Chief Executive Officer Ron Johnson said his overhaul of the department-store chain is “on track” amid quarterly losses and plunging sales.

J.C. Penney climbed 6.7 percent to $23.58 at 9:55 a.m. in New York and earlier added as much as 11 percent for the biggest intraday gain since Jan. 26. The shares dropped as much as 12 percent in pre-market trading after the company reported a $147 million second-quarter loss and said it wouldn’t meet its profit forecast for the year.

Johnson, the former Apple Inc. (AAPL) retail chief who joined as CEO in November, is tweaking his pricing strategy after the previous plan confused customers by reducing sales events and coupons. Second-quarter revenue slid 23 percent to $3.02 billion, the company said today. That trailed analysts’ $3.18 billion average estimate and is the lowest (JCP) quarterly sales since at least 1989, according to data compiled by Bloomberg.

“I’m completely convinced that our transformation is on track,” Johnson told analysts and investors at a presentation today in New York. When unveiling plans for the overhaul in January, “we said this would be a really tough year. Somehow, I don’t think that message got through.”

The fiscal second-quarter net loss of 67 cents a share compares with net income of $14 million, or 7 cents, a year earlier, the Plano, Texas-based company said in a statement. Excluding some items, the loss was 37 cents a share. The average estimate of nine analysts surveyed by Bloomberg was for a 14- cent loss.

Profit Forecast

J.C. Penney said it no longer expects to meet its previously issued profit forecast for its fiscal 2012. The company, which didn’t provide a new projection, in May said profit excluding some items may be $2.16 a share in the current fiscal year.

“Near-term results may be far worse than anybody anticipated in the beginning of the year,” Bernie Sosnick, an analyst at Gilford Securities in Melville, New York, said in a telephone interview before the report. He rates the shares hold.

Part of the sales decline was due to the retailer exiting its outlet business, J.C. Penney said. Sales also were hurt by a cut in marketing toward the end of the quarter as the company adjusted its pricing strategy and outlined its back-to-school shopping strategy, J.C. Penney said.

Comparable-store sales fell 22 percent in the quarter while Internet sales plummeted 33 percent to $220 million.

Cutting Marketing

The company’s gross margin (JCP) narrowed to 33.2 percent from 38.3 percent a year earlier as the company recorded $102 million of markdowns to clear inventory for the back-to-school season.

J.C. Penney said it will end the fiscal year with more than $1 billion of cash (JCP) following $800 million of capital spending to support the transformation and repaying $230 million of debt due this month.

Johnson said in January that his transformation of the 110- year-old retailer will take four years and reiterated last month that such changes are “not a sprint.”

The CEO has revamped the company’s executive team, mainly with former colleagues from Apple and Target Corp. (TGT), where he helped develop the chain’s “cheap chic” persona. He also has announced more than 1,000 job cuts to reduce expenses and last month said 350 positions would be cut at the company’s headquarters.

The retailer said in June that then-President Michael Francis, the former Target marketing chief whom J.C. Penney hired in October, was leaving and didn’t give a reason for the exit. Johnson said at the time that he would take over marketing and merchandising efforts.

The company is switching to a two-tiered pricing system of everyday low prices and clearance items and has said it would promote price matching for the first time. The previous strategy had three tiers, consisting of regular prices, monthlong sales on seasonal items and two “best prices” promotions each month.

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net