J.C. Penney ratings downgraded by Moody's

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NEW YORK Moody's Investors Service is cutting its long-term ratings for J.C. Penney (JCP) one step lower into non-investment of junk grade status.

Moody's lowered the department store chain's corporate family and probability of default ratings to "B3" from "Ba3." The outlook is "negative."

Moody's says the downgrades reflect its expectation that J.C. Penney's fourth-quarter profitability will take a big hit as a result of the need to clear excess inventory.

Combined with continued sales declines in the fourth quarter, J.C. Penney will end up with significantly lower profits and ultimately a 2012 credit profile that warrants an even lower "Ca" rating, Moody's says.

Earlier this month, J.C. Penney reported a wider-than-expected third-quarter loss on a revenue drop of nearly 27 percent.