Shares of Macy’s (M) are on the rise after Citi analyst Paul Lejuez upgraded the stock to Buy, saying the company is “doing the right things” to alleviate the structural challenges to department stores, which are likely to continue. Furthermore, he told investors that he sees the company’s upcoming quarterly results as potential catalysts.

“STRONGER HORSE” IN THE RACE: Citi’s Lejuez upgraded Macy’s to Buy from Neutral but kept his price target on the shares unchanged at $44. While the analyst believes the long-term structural challenges to department stores are unlikely to disappear, he told investors that the company is “doing the right things for the business” to help alleviate pressures in the medium term. Macy’s attractive free cash flow and dividend yield make the risk/reward also attractive at current levels, he contended, noting that the company’s 4.4% dividend yielding trails only Kohl’s (KSS) and Abercrombie & Fitch (ANF) among the retailers he covers. Lejuez called Macy’s “one of the stronger horses in the race” and told investors he sees upcoming quarterly results as potential catalysts. The retailer’s sales/gross profit equation was the most negatively impacted in the fourth quarter of 2015 and the first quarter of 2016, which presents a “big opportunity” for improvement over the upcoming quarters, he added.

STORE RATIONALIZATION: With e-commerce pulling traffic away from stores, Lejuez said he continues to believe many retailers, especially department stores, have too many stores, which magnifies the challenges. However, Macy’s “gets it,” he said, with the company rationalizing its store fleet much faster than most of its peers. After closing 40 stores last year, the retailer plans to close an additional 100 stores in 2016, the analyst noted. Lejuez believes this is a positive move as it puts the company in a better position to compete and shows management is thinking “the right way” strategically about how to enhance shareholder value.