Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.Mandatory Credit: Photo by Mark Lennihan/AP/REX/Shutterstock (7734407a)Macy's flagship store is shown in New YorkMacys, NEW YORK, USA - 05 Jan 2017

Macy’s Inc.’s lot in corporate life — as a department store in a world that seems to need department stores less — is weighing on its credit rating.

Moody’s Investors Service downgraded Macy’s senior unsecured credit rating to “Baa3” from “Baa2.” The outlook on the rating was changed to stable from negative.

The debt watchdog said the move reflects “the continued secular shift in apparel demand to alternative channels such as off-price and e-commerce is increasing the risk profile of the department store space.”

Moody’s said the weakness in Macy’s brick and mortar business, despite a generally strong consumer, suggests the retailer will have to make “meaningful changes to its operating strategy” to “reignite growth.”

“Macy’s continues to take formidable steps to ensure it has the optimal omnichannel platform to reach consumers,” said Christina Boni, vice president and senior analyst at Moody’s. “Its plan to close approximately 100 stores and restructure its operations by reducing 6 percent of its workforce are critical to rightsizing its cost structure and redeploying assets to its higher growth areas such as digital. Weak 2016 holiday results highlight the need to accelerate efforts to stem market share erosion.”

Macy’s fourth-quarter income fell to $475 million from $544 million a year earlier on a 4 percent drop in sales, to $8.52 billion.

Moody’s also noted that Macy’s, with its $25.8 billion in sales, has many strengths as well.

“Macy’s size and solid position in the department store sector, as well as its integrated approach to its store and web sites, will enhance its ability to mitigate pressures facing the industry,” Moody’s said.

The retailer has been working to focus its business as well as closing stores as it drives more web sales, much like many other retailers.

Macy’s is a product of decades of consolidation in the department store space, having come together through the 2005 merger of Federated Department Stores and May Co.

Now the consolidator is the target and Hudson’s Bay Co.’s Richard Baker is said to be trying to buy Macy’s to add to his empire, which already includes Hudson’s Bay, Saks Fifth Avenue, Lord & Taylor, Galeria Kaufhof and more.

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