With never-ending losses for Sears (SHLD) in plain sight, which are calling into question the company's liquidity outlook, Moody's decided to drop the hammer on the beleaguered retailer on Wednesday.

The rating agency slashed its speculative grade liquidity rating on Sears one notch to SGL-3 from SGL-2. The new rating reflects the likelihood Sears will continue to need outside financing to stay in business, and that it may require covenant relief in order to maintain orderly access to funding lines. "We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow which is estimated by Moody's to be approximately $1.5 billion this year," said Christina Boni, a Moody's vice president.

But the ratings downgrade takes a backseat to what Moody's had to say about Sears' struggling discount chain Kmart. "The ratings also reflect our view on the uncertainty of the viability of the Kmart franchise in particular given its meaningful market share erosion."

It's not hard to find the source of Moody's bold proclamation that Kmart is probably on a track toward going out of business after years of plunging sales and jaw-dropping losses -- just look to Walmart (WMT) - Get Report , Target (TGT) - Get Report , Dollar Tree (DLTR) - Get Report and Dollar General (DG) - Get Report .  

Second-quarter same-store sales at Kmart fell 3.3%, representing the seventh straight quarterly decline. Sales were pressed in some of Kmart's most important categories, such as pharmacy, groceries and consumer electronics. Year to date, Kmart's operating loss is a staggering $125 million. Last year, Kmart produced an operating loss of $292 million compared to a loss of $422 million in the prior year. The retail chain -- known for its blue light special sales -- hasn't produced an operating profit since 2012, when it delivered a paltry $5 million in profit. 

"Quite honestly, the atmosphere at Kmart is not good -- everyone is stressed over the constant worry of losing their jobs (it was obvious due to lack of sales), management is terrible, and there is no communication, which made the morale and motivation very low among my coworkers," a Kmart worker who was recently let go, and preferred to remain anonymous, explained to TheStreet via email. He added, "We not only were lacking items on the shelf, but the delivery trucks were cut down from two-three times a week, to maybe once, if that."

One could make the argument that executives at Sears already have decided Kmart is no longer viable.

Sears has closed about 80 stores this year, according to calculations done by TheStreet. Of the closings, about 58 have been Kmart stores and the rest Sears stores. In the first quarter alone, Sears exited about 50 stores. Back in May, executives said Sears would close an additional 117 stores, putting it on pace for about 170 store closings this year; so figure there's about another 90 still to come.

Sears operated 883 Kmart stores as of July 30 vs. 963 a year ago.

Sears spokesman Howard Riefs didn't respond to a request for comment on the Moody's report.