• Retailer liquidates some goods, overhauls inventory management
  • Higher cost of sales to weigh on company’s quarterly results

J.C. Penney Co. plunged as much as 29 percent after warning of a deeper-than-expected loss in the third quarter, bringing fresh woes to a department-store industry in turmoil.

The retailer is embarking on a “comprehensive reset” of its apparel inventory by liquidating less popular items. While the effort will lead to a comparable-store sales gain, it was a costly endeavor, resulting in a loss last quarter, the company said on Friday.

The move spotlighted key problems for the department-store field: hard-to-sell inventory and a reliance on deep discounts to move stock. J.C. Penney also has been shuttering poor-performing stores in a bid to better match supply with demand.

“We took the necessary steps to accelerate inventory liquidation…