TODAY   |  March 01, 2013

JC Penney reeling from disappointing sales

The department-store chain is in the midst of a four-year transformation plan, but the changes they’ve made may have cost them their most loyal customers. NBC’s Diana Alvear reports.

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>>> jcpenney is reeling from disappointing fourth quarter sales. the store's ceo admits they have made mistakes but that's not enough for some investors. diana alvear has more from los angeles .

>> jcpenney is in the middle of a four-year transformation plan but that plan has cost them some of their most loyal customers and has been a very costly process. the ads have been everywhere, direct appeals to all kinds of shoppers, courting them to come back to jcpenney. they need the business, analysts say, badly. fourth quarter results stunned the market, $427 million in losses. sales for 2012 were down overall. 25% for in store, 33% online. in its earnings call with investors, ceo ron johnson took responsibility.

>> experience is making mistakes and learning from them. and i have learned a lot.

>> the problem that jcpenney is dealing with right now is that it has really alienated its core consumer.

>> who loved their jcpenney deals, discounts and coupons. last year when the store announced lower prices in lieu of discounts, johnson says he's sticking to his strategy.

>> we had one of the oldest and poorest customers in the industry. over time a little more younger and more affluent.

>> it's been a costly gamble but jcpenney is betting that their recent pain will pay off in the long run. also making legal headlines, signing a deal with martha stewart to sell her products in one of their mini in-store boutiques, which triggered a lawsuit from macy's, which already sells stewart's products.