To be sure, some of the decline stemmed from its decision to get rid of its catalog order business in 2011, but most of it was from misreading its customers.
Initial reaction has been positive. Citigroup upgraded the stock on Tuesday because it expects the new home sections will lift sales. Penney shares have risen since it gave an upbeat 2014 forecast last month but are still 55 percent below a yearly high hit last May.
"They went astray when they brought in $10 cake mix," said Kathy Gersch, a former department store executive and co-founder of Kotter International, a consulting firm that helps companies implement strategies. "The question remains whether they can get that customer back."
Penney will have to win back shoppers who drifted to competitors. At HomeGoods, owned by TJX Cos., sales nearly doubled to $2.8 billion between 2007 and last year, while Target and Kohl's saw steady growth.