Same-store sales fell 21.7 percent during the second quarter, steeper than the 17.4 percent drop analysts were expecting, according to Thomson Reuters. Revenue tumbled 22.6 percent to $3.02 billion, also below Wall Street's low expectations.

In February Penney eliminated the use of coupons and discounts in favor of everyday low prices. The move has cost the 102-year-old retailer many shoppers.

Penney, whose customers are typically more price sensitive than those of Macy's Inc (M.N), reported a net loss of $147 million, or 67 cents per share, for the second quarter, ended July 28, compared with a profit of $14 million, or 7 cents per share, a year ago.

The company said it no longer expects to meet its earlier full-year profit forecast but did not give an updated estimate.

Penney last week debuted its Levi's stores, beginning the next prong of a transformation that will eventually see each of its stores carved into 100 separate boutiques.

Despite the dire second-quarter results, Chief Executive Ron Johnson said Penney "will stay the course."

(Reporting by Phil Wahba in New York; editing by John Wallace)

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