Updated from 9:51 a.m. EDT

For the third time in less than two months, retailer

J.C. Penney

(JCP) - Get Report

warned

investors Thursday that its quarterly earnings would fall short of estimates.

And now the company said it could lose money in the third quarter.

In contrast, retailer

Talbots

(TLB)

said it expects third-quarter earnings to beat analysts' expectations.

The latest consensus among analysts was J.C. Penney was for the company to earn about 10 cents a share, according to market research firm

First Call/Thomson Financial

. However, the consensus when the quarter began was for the company to earn 31cents a share.

The company said disappointing results at its

Eckerd

drugstore chain and "the challenging retail environment" have impacted its earnings, and now expects to either lose money or post a small profit in the current quarter.

One brokerage firm,

PaineWebber

, reduced its earnings estimates Thursday to a loss of 5 cents a share for the quarter, and, in a written report, predicted more earnings disappointments going forward. The firm kept its neutral rating on the company

J.C. Penney began its slow decline about five years ago, driven by its lackluster clothing merchandise, said Walter Loeb, a long-time retail analyst who heads equity research at

Loeb Associates

and publishes the newsletter the

Loeb Retail Letter

.

"It's been stodgy, not keeping up with what young people want to wear," said Loeb, who has rates the company a long-term buy. Loeb does not perform underwriting. "They have a problem of regaining momentum because they don't really have an identity anymore."

He contrasted the company's fortunes with

Kohl's

(KSS) - Get Report

, which has been successful at capturing a portion of J.C. Penny's market share by offering quality, fashionable clothes at reasonable prices. Kohl's trades at close to 65 times earnings, with its shares recently at $58.94, not far off its 52-week high of $66.50. J.C. Penny has much smaller P/E ratio of around 18.

A turnaround for J.C. Penny hinges on the performance of new chief executive officer Allen Questrom, who

recently joined the company after heading

Barneys

department stores.

"I think we have to give him at least a year, maybe more," to revive the company, Loeb said.

Plano, Texas-based J.C. Penney is scheduled to release third-quarter earnings Nov. 14.

At the same time as the warning, the company also reported that comparable store sales -- those stores open for at least a year -- declined 4% in September vs. the same period a year ago, due to price cuts.

Overall, sales decreased 0.9% to $2.832 billion from $2.859 billion in the same period a year ago.

Catalog sales for September, including

jcpenney.com

, fell 2.9% from the same period a year ago.

Talbots Expects to Beat Estimates

Meanwhile, Talbots said it expects third-quarter earnings to range between $1.00 and $1.02 a share. The consensus, according to First Call/Thomson Financial, was for the company to earn 85 cents a share. Talbots is scheduled to release quarterly earnings November 14.

Talbots also said comparable store sales for September were up 24.8% compared to the same month last year.

J.C. Penny finished Thursday regular trading down $1.13, or 10%, at $10.06, while Talbots gained $7.06, or 11%, at $73.