* Q1 same-store sales down 18.9 percent
* Cuts $0.20 quarterly dividend
* Shares down almost 11 percent in extended trade (Adds details on results, analyst comment, updates stock price)
May 15 (Reuters) - J.C. Penney Co Inc's first-quarter sales came in worse than already-dismal assumptions and the retailer also discontinued its dividend to help fund its ongoing overhaul, sending shares down nearly 11 percent in extended trading.
The results were a splash of reality to investors who were banking on a turnaround plan by a vaunted new CEO who was credited with helping build Apple Inc's retail chain.
In February, Penney began a multi-year transformation that includes eliminating hundreds of sales events in favor of everyday prices on most items, a radical departure that analysts predicted would confuse or alienate its customers.
While Wall Street was braced for disappointing same-store sales, the dividend move came as a negative surprise.
The Plano, Texas-based mall retailer said it was discontinuing its 20-cent-per -share quarterly dividend and that it would use the resulting $175 million in savings to help fund the company's turnaround.
"What the market did not predict was the dividend cut. That is the big shock," said Brian Sozzi, chief equities analyst for NBG Productions.
"The dividend cut makes you lose shareholder support. And it also makes you wonder, do they have the balance sheet to fund this massive transformation of the business over the next two to three years?" Sozzi said.
Chief Executive Ron Johnson said in a statement on Tuesday that "sales and profitability have been tougher" than expected.
Same-store sales, considered a gauge of retail health, dropped 18.9 percent in the first quarter, more than the 12.2 percent decline expected by analysts, according to Thomson Reuters I/B/E/S.
Total sales slumped 20.1 percent to $3.15 billion, below the $3.41 billion Wall Street was expecting, according to Thomson Reuters I/B/E/S.
Penney reported a net loss of $163 million, or 75 cents per share, for the quarter ended April 28, compared with a profit of $64 million, or 28 cents per share, a year ago.
Penney shares fell 10.7 percent to $29.74 in after-hours trading after closing at $33.32 on the New York Stock Exchange. (Reporting By Phil Wahba in New York, Nivedita Bhattacharjee in Chicago and Lisa Baertlein in Los Angeles; Editing by Gary Hill, Richard Chang and Matthew Lewis)