Moody's Investors Service on May 31 downgraded the ratings of J. C. Penney Co. Inc., citing more pressure on the department store chain's sales performance in 2019.

The rating agency downgraded the company's corporate family rating to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD, its senior secured asset-based revolving credit facility to B2 from Ba3, its senior secured term loan and senior secured notes to B3 from B1, its secured second lien notes to Caa2 from Caa1 and its senior unsecured notes to Caa3 from Caa2. J.C. Penney's speculative grade liquidity rating was also downgraded to SGL-2 from SGL-1.

IMoody's Vice President Christina Boni said J.C. Penney "continues its aggressive liquidation of inventory as it works to recapture customers in a very competitive environment."

"Further pressure on sales performance in 2019 is expected to result in leverage remaining elevated," Boni added.

The retailer's net sales during the fiscal first quarter fell 5.6% year over year to $2.44 billion after the company stopped sales of major appliances.

Meanwhile, Moody's said J.C. Penney's credit profile is supported by its good liquidity with approximately $1.75 billion to $171 million of cash and approximately $1.6 billion of undrawn revolving credit commitments as of May 4.

The rating agency expects the retailer to generate minimal free cash flow in fiscal 2019 as it works to improve its competitive position, and its debt/EBITDA to be in excess of seven times at fiscal year-end 2019.

Meanwhile, Moody's retained the company's stable outlook, assuming that J.C. Penney will continue to maintain good liquidity.

Moody's said it could upgrade the ratings if the retailer maintains a good liquidity profile and has consistent growth in sales and operating earnings indicating its business initiatives are succeeding.

Conversely, the agency could downgrade the ratings if J.C. Penney's credit metrics weaken.