J.C. Penney Co Inc on Friday reported a sharper-than-expected decline in quarterly sales at stores open at least a year, with results getting progressively worse under CEO Ron Johnson's attempt to radically transform the department store chain.

Still, Johnson told investors on Friday that he was "100 percent committed" to his plan for the century-old retailer, which includes eliminating most coupons and sales events and converting about 700 of its 1,100 stores into collections of boutiques, such as Levi's Denim Bar.

But the new strategy appears to keep driving customers away, with traffic down 12 percent in the third quarter.

J.C. Penney shares tumbled 9.7 percent to $19.58 in premarket trading.

Same-store sales fell 26.1 percent in the latest quarter, ended October 27, while analysts had expected a decrease of 17.9 percent.

Same-store sales declines have gotten worse each quarter under the new strategy, falling 18.9 percent in the first quarter and 21.7 percent in the second quarter.

Walter Loeb, president of retail management consultant Loeb Associates, expressed concern about Penney's performance during the upcoming holiday shopping season.

"I expect a big drop in sales" Loeb said. "(Johnson) must generate traffic. I think he has to be more promotional."

There have been signs that the first few boutique shops, which include Izod and Liz Claiborne, have won over customers, but they represent only a small fraction of sales.

Johnson is supported by activist investor William Ackman, whose Pershing Square Capital Management is Penney's largest shareholder and who was at the investor presentation on Friday.

In a statement, Johnson, who took the reins at J.C. Penney a year ago, said this was a "tale of two companies," with the old Penney still struggling and the new stores surpassing his expectations.

Penney made some concessions during the third quarter. Last month it offered a $10 gift coupon, and it recently held "30 percent off" clearance promotions. But Loeb said the company needs to do much more.

Penney said its net loss narrowed to $123 million, or 56 cents per share, in the third quarter from $143 million, or 67 cents per share, a year earlier.

Excluding a gain from the sale of noncore assets and other one-time items, Penney said it lost 93 cents a share.

Sales fell 26.6 percent to $2.93 billion.

Internet sales fell 37.3 percent to $214 million. Many retailers are working to increase their online sales.

"The data says J.C. Penney is not a top destination and is nowhere near becoming a top destination in peak seasonal shopping periods," Brian Sozzi, chief equities analyst at NBG Productions, said in a research note.

Gross margin fell to 32.5 percent of sales from 37.4 percent a year earlier, hurt by lower-than-expected sales and increased clearance sales.

(Reporting by Phil Wahba in New York; additional reporting by Brad Dorfman in Chicago; Editing by Lisa Von Ahn and John Wallace)