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Penney said that the improvement in sales at both its stores and online in September from a year ago was due to better inventory levels in key items and having the sizes its shoppers want. Traffic improved at its stores not located in malls during September's last two weeks, but Penney said that its mall stores are still contending with weak traffic levels. Heavy promotions to get rid of merchandise from the first two quarters of the year are also hurting profitability. And fixing the new home departments has been more challenging than the company anticipated. Under Johnson, Penney had overhauled its home areas in about 500 of the 1,100 Penney stores, bringing in new names like Jonathan Adler and Michael Graves. The home areas were reopened in May. But Penney said in August that the overhauled home areas were not doing well. Penney is now working to have a more balanced mix of modern and traditional home furnishings at lower prices and making the shopping layout easier for shoppers. Penney said Tuesday that it has reopened "all but a handful" of its new home departments. But home sales are still weak at its stores. Ullman said Tuesday that reconnecting with customers and getting them into stores is a top priority for the chain. "We are all dedicated to continuing the momentum underway and restoring J.C. Penney to a leadership position in American retail. It will take time, but we are on the right path with a sound strategy and achievable goals," he said. But analysts remain concerned. Sterne Agee analyst Charles Grom on Tuesday downgraded Penney's rating to "Hold" from "Buy" and cut its price target in half, to $9 from $18. Grom said in a client note that he fears former CEO Johnson may have permanently turned off the retailer's core customer. Citi Research's Deborah Weinswig said she is still concerned that suppliers continue to be on edge. She cited that one supplier, ABS by Allen Schwartz, ended its exclusive deal with Penney last month after five years. Officials at ABS confirmed that it was severing its relationship. The company is slated to report its fiscal third-quarter results next month. Penney's shares rose 9 cents, to $7.80 in late day trading. Shares have lost 82 percent of their value since early February of 2012 when investor enthusiasm was high about Johnson's turnaround plan. Since the beginning of this year, shares have been down 61 percent.
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