J.C. Penney ratings downgraded by Moody's

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."

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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.