NEW YORK -- J.C. Penney is changing its pricing – again.

Just six months after the mid-priced department store chain got rid of the hundreds of sales it offered each year in favor of everyday lower pricing, it is reversing course.

Penney on Feb. 1 began using a three-tier pricing approach that called for consistently lower daily prices, month-long sales and periodic discounts on merchandise throughout the year. But starting Aug. 1, Penney will eliminate one of the monthly sales and bring back the word "clearance." Penney also plans to tweak its advertising to better communicate the pricing plan to customers.

The moves come at a time when shoppers – and investors – have voiced confusion over Penney's pricing strategy, which was spearheaded by CEO Ron Johnson when he took the helm in November. In May, Penney's stock plunged nearly 20 percent in its biggest decline in four decades after the retailer posted a larger-than-expected quarterly loss and a 20-percent drop in revenue on poor reception from shoppers for its pricing strategy.

The change also calls into question how patient Main Street and Wall Street will be with Johnson, a long-time retail executive who has been lauded for being the mastermind behind the success of Apple's retail stores and Target's cheap-chic strategy. The pricing plan is presenting a challenge for Johnson because it's turning out to be a tough sale to shoppers who have come to expect deep discounts and investors who are looking for Penney to turnaround its business quickly.

Brian Sozzi, chief equities analyst for research firm NBG Productions, said since Johnson's strategy is long-term, investors likely will give him at least until 2013 to prove himself.

"With a visionary type of strategy like this you have to take a lot of painful medicine upfront," he said, adding that Johnson "is essentially trying to change the consumer mindset."

Johnson, who asked investors to be patient during a meeting with them in May, said he's confident that the pricing strategy will work. Johnson has acknowledged that Penney has a long way to go to convince shoppers that they don't have to wait for sales to get low prices at Penney, and he said this week that Penney's first-quarter sales drop is "the price we're paying to get integrity back."

"We thought simplifying 590 unique sale events into three types of pricing would be easier, but it turns out ... customers and others found the pricing a little confusing," he said. "Now we're going from 590 to 3 to 1: The first price is the right price."

Under the new system, Penney is keeping "Every Day" low prices that are consistently 40 percent lower than regular prices before the company eliminated sales. That level of pricing has account for about 70 percent of sales since the company began the new strategy, Penney said

It also will keep its periodic discounting events, which make up 15 percent of sales, but increase their frequency to every Friday. The company will also change the name of them from "Best Price" to "Clearance." And Penney will get rid of "Month Long" deals, which account for 15 percent of sales.

Johnson said the new approach should make the pricing plan easier for customers to understand.

"We thought: `Why are we trying to teach customers new language to shop?'" he said. "We're just trying to be straightforward."

To go along with the new pricing, the company will tweak its ads. That will include inserts in newspapers every Friday during the back-to-school season that will highlight specific products like jeans. A TV ad will tout free haircuts that the stores will offer students during the back-to-school season.

The new ads are in stark contrast to the spots that Penney rolled out at first to introduce its new pricing plan. The "fair and square" brand campaign featured TV ads with dogs, kids and bright colors – but little explanation of Penney's pricing.

In one TV spot, for instance, a dog continuously jumps through a hula hoop that a young girl is holding. The text reads: "No more jumping through hoops. No coupon clipping. No door busting. Just great prices from the start."

"In some ways marketing during the first six months entertained versus educated," Johnson said. Now, "the most important thing is to educate consumers on the price changes and make sure the core customer understands J.C. Penney still has products they love, at exceptional value, every day."

Penney, based in Plano, Texas, is hoping the tweaks to its pricing plan and advertising will help stem growing concern about whether Johnson's plan will help the retailer turn around its business.

The first sign that Penney's pricing strategy wasn't resonating with customers came in May when Macy's CFO Karen Hoguet told analysts that sales were rising at her company's stores that share malls with Penney stores.

A week later, J.C. Penney Co. reported that it lost $163 million, or 75 cents a share, in the three months ended April 28, compared with a profit of $64 million, or 28 cents a share, a year earlier. Revenue dropped 20 percent to $3.15 billion for the quarter as customer traffic slipped 10 percent. Meanwhile, revenue at stores open at least a year – a comparison used to measure a retailer's health – fell 18.9 percent. That's much steeper than the 11.4 percent drop Wall Street was expecting.

A day after Penney reported the disappointing results, its stock fell 19.7 percent, or $6.57, to close at $26.75. That's the largest percentage drop for the company since at least January 1972, when FactSet's daily stock price records begin.

Investors, who initially sent Penney shares soaring 24 percent to about $43 after Johnson announced the pricing plan in late January, since have pushed them down about 37 percent since the beginning of the year. On Thursday, shares rose 21 cents to close at $22.21.

And earlier this month, Standard & Poor's Ratings Services lowered the retailer's credit rating into junk status, saying changes have yet to take hold

J.C. Penney reports second-quarter results Aug. 10.

Check out the hottest retailers:
Loading Slideshow...
  • 10. Overstock.com

    <strong>Sales growth in '10 vs. '09:</strong> 23.8 percent <strong>Retail sales in the U.S.:</strong> $1.07 billion <strong>Number of stores in 2010:</strong> N.A. <strong>Stores growth in '10 vs. '09:</strong> N.A. This year, the online retailer started selling discounted hotel rooms, and is considering offering deals on auto and home insurance. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 9. H&M

    <strong>Sales growth in '10 vs. '09:</strong> 29.3 percent <strong>Retail sales in the U.S.:</strong> $1.2 billion <strong>Number of stores in 2010:</strong> 208 <strong>Stores growth in '10 vs. '09:</strong> 10.1 percent Although only 10 percent of its worldwide stores are located in the U.S., the clothing retailer is rapidly growing. H&M; plans to have a running website to sell to American shoppers by the end of this year. Well-regarded designers like Donatella Versace also sell affordable collections at the store during certain seasons. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 8. Netflix

    <strong>Sales growth in '10 vs. '09:</strong> 29.5 percent <strong>Retail sales in the U.S.:</strong> $2.1 billion <strong>Number of stores in 2010:</strong> N.A. <strong>Stores growth in '10 vs. '09:</strong> N.A. Despite price increases for subscribers, Netflix has presented itself as the far superior option to renting DVDs by mail or watching streaming content online (and people are talking with their wallets, here). Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 7. Apple Stores/iTunes

    <strong>Sales growth in '10 vs. '09:</strong> 32.3 percent <strong>Retail sales in the U.S.:</strong> $18 billion <strong>Number of stores in 2010:</strong> 233 <strong>Stores growth in '10 vs. '09:</strong> 7.4 percent Think about which products have excited consumers in the past few years, and you will think of Apple: the iPhone, the iPad, and the soon to be debuted the iCloud. The typical Apple store also generates $4,046 of revenue per square feet, compared to $880 that Best Buy brings in. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 6. Bodega Latina

    <strong>Sales growth in '10 vs. '09:</strong> 32.5 percent <strong>Retail sales in the U.S.:</strong> $722 million <strong>Number of stores in 2010:</strong> 34 <strong>Stores growth in '10 vs. '09:</strong> 61.9 percent The rapidly growing Latino market has boosted sales for the grocery chain, which has seen the the most growth in areas like Southern California, Texas, and South Florida. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 5. Tops Friendly Markets

    <strong>Sales growth in '10 vs. '09:</strong> 33.1 percent <strong>Retail sales in the U.S.:</strong> $2.2 billion <strong>Number of stores in 2010:</strong> 133 <strong>Stores growth in '10 vs. '09:</strong> 77.3 percent After being downsized in the early 2000s, Tops Friendly Markets recently won a bankruptcy court battle to take over 79 supermarkets, and is making waves in the convenience store business. This summer, Top opened a remodeled store and an on-site fueling station in upstate New York. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 4. hhgregg

    <strong>Sales growth in '10 vs. '09:</strong> 36.3 percent <strong>Retail sales in the U.S.:</strong> $2.1 billion <strong>Number of stores in 2010:</strong> 173 <strong>Stores growth in '10 vs. '09:</strong> 32.1 percent The consonant-heavy sounding store name founded by Henry Harold and Fansy Gregg opened its first 10 stores in South Florida with more planned. It passed $2 billion in sales for the first time last year. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 3. Fresh & Easy Neighborhood Market

    <strong>Sales growth in '10 vs. '09:</strong> 37.8 percent <strong>Retail sales in the U.S.:</strong> $766 million <strong>Number of stores in 2010:</strong> 164 <strong>Stores growth in '10 vs. '09:</strong> 13.1 percent Although it initially lost money after opening its first store four years ago, Fresh & Easy is expanding in Southern California, Phoenix and Las Vegas, and just opened two stores in San Francisco. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 2. Amazon.com

    <strong>Sales growth in '10 vs. '09:</strong> 46.2 percent <strong>Retail sales in the U.S.:</strong> $18.5 billion <strong>Number of stores in 2010:</strong> N.A. <strong>Stores growth in '10 vs. '09:</strong> N.A. Online bargains have always been available on Amazon.com and consumers have flocked to the retailer to find deals. In addition, Amazon saw major sales growth after it bought Zappos.com, a highly celebrated retailer known for its stellar customer service. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.

  • 1. Ascena Retail Group (formerly Dress Barn)

    <strong>Sales growth in '10 vs. '09:</strong> 58.9 percent <strong>Retail sales in the U.S.:</strong> $2.3 billion <strong>Number of stores in 2010:</strong> 2,477 <strong>Stores growth in '10 vs. '09:</strong> 58.9 percent Who would have thought Dress Barn would rank at the top of the 100 hottest retailers? The retail group has focused on targeting specific demographics to produce profits. The Ascena Retail Group's Dress Barn targets the 35- to 55-year-old woman. It's Maurices chain targets 17- to 34-year-olds, and another chain Justice's targets 7- to 14-year-old customers. Ascena has been able to target specific segments of the consumer base, and has seen real success. Read more at <a href="http://bundle.com" target="_hplink">bundle.com</a>.