Moody's on Dec. 20 affirmed Seven & i Holdings Co. Ltd.'s A1 senior unsecured debts rating but lowered its outlook to negative from stable, citing weak prospects for the company's superstore and department store segments.

The agency also affirmed the 7-Eleven parent company's (P)A1 senior unsecured shelf ratings.

Moody's said that while Seven & i generates strong cash flow from its core domestic convenience store operations, it faces execution risks in turning around the profitability of its larger sites and department stores.

"Despite years of restructuring to close stores and reduce headcount, the company has not reversed the effects of a decline in their business models, due to stiff competition from other retailers, including online shopping," said Akifumi Fukushi, vice president and senior analyst at Moody's.

The agency said further deterioration in Seven & i's superstore and department store business or losses from setbacks in other growth strategies could lead to a build-up in downward pressure. An upward ratings pressure is unlikely given the company's negative outlook, according to the agency.

Moody's said it could change Seven & i's ratings outlook to stable if it can sustainably boost the operating margin of its superstore and department store segments by 2% to 3%.