NEW YORK (AP) -- Fitch Ratings on Thursday downgraded its credit rating on J.C. Penney Co., saying revenue could remain a problem as the department-store chain enters the back-to-school and holiday shopping seasons.
Penney shares fell 56 cents, or 2.7 percent, to close at $20.46.
Fitch cut Penney's default rating to "BB-" from "BB+" and gave a "Negative" outlook, which could foreshadow another downgrade.
Under a new CEO, Penney has tried to move away from constant sales to a simpler pricing strategy of lower everyday prices and fewer promotional events. Shoppers have been slow to embrace the change, and traffic in the stores has fallen.
Fitch said it worried that revenue is "likely to remain materially negative" heading into the back-to-school and holiday seasons when retailers use promotions to draw customers.
The agency said announcements that Penney is tweaking its strategy could hurt traffic more, and profit margins could suffer if the stores must clear out leftover merchandise. It also noted the weak market for mid-priced department stores.
"The jury remains out on whether J.C. Penney has done some irrevocable damage or whether it can begin to turn around faltering sales and sustainably improve the profitability of its business" after a transition year, Fitch said.
Plano, Texas-based Penney swung to a loss of $163 million in the first quarter as revenue fell 20 percent and customer traffic dwindled by 10 percent. Ron Johnson, the former Apple Inc. executive who became Penney's CEO in November, admitted the results were worse than expected and has said 2012 will be a tough year but that the chain will get through it.