Moody's upgrade of Macy's credit ratings to investment grade validates the company's business strategy, CEO Terry Lundgren told CNBC.
"We set out to reinvent the department store five years ago and we’ve had massive changes in our company and, I think, the industry during that period of time," he said Tuesday, a day after Moody's raised the retailer's credit rating to Baa3, the lowest investment grade, from Ba1.
Moody's also said Macy's outlook is stable, but warned it expects the rate of earnings growth to slow in 2012.
Macy's recently raised its fourth-quarter and full-year outlook. The company also said it would double its quarterly dividend to 20 cents a share in April thanks to strong sales during the holiday shopping season, both in stores and on the Internet.
Lundgren said Macy's plan five years ago, when the company's name was Federated Department Stores, was to quickly become a national brand. After buying the May Co., "we changed 400 department stores in one day to the Macy's brand" and completely redesigned the corporate organization a few years later, he said.
With half Macy's business transacted on its co-branded credit cards, Lundgren said he sees the consumer "definitely paying down his and her bills. Our credit portfolios look very healthy. That's the good news."