Chairman, president, and CEO, Federated Department Stores
Education: University of Arizona, BA, 1974.
Family: Married Nancy Lundgren (divorced); children: two.
Career: Federated Department Stores, Bullock's division, 1975–1987; Bullocks Wilshire, 1987, president; Neiman Marcus, 1988–1994, chairman and CEO; Federated Merchandising Group, 1994–1996, head; 1997–2001, chief merchandising officer; 1997–, president; 2002, COO; 2003–, CEO; 2004–, chairman.
Address: Federated Department Stores, 151 West 34th Street, New York, New York 10001; http://www.federated-fds.com.
■ In early 2004 Lundgren became the first executive in the 75-year history of Federated Department Stores to simultaneously hold the titles of chairman, president, and CEO. Previously, all three positions were held by separate people. Lund-gren earned a reputation as a visionary; he was one of the first executives in the business to call attention to the department store industry's dated image, citing change as a paramount strategy necessary for survival. In each of his positions he made an immediate impact, surprising industry insiders. By early 2004 he oversaw a $15.4 billion company that operated 460 stores in 34 states, Guam, and Puerto Rico. The fast-track executive, with his model good looks, was in over his head.
Tough breaks forced maturity upon Lundgren during his formative years. He was the only child out of six to attend college, mostly because his parents did not have the money. He joined a fraternity at University of Arizona and became president of his pledge class. But his grades were not good, and one day his father called with news that he would no longer pay
for tuition. The New York Times reported that his father said, "Your life is in your hands. It's entirely up to you and you'll figure it out" (December 14, 2003). After some initial sulking, Lundgren found employment cracking oysters and peeling shrimp at a local Tucson restaurant. He was eventually promoted to waiter, then headwaiter, and then head manager of the restaurant. He was proud of having paid his way through college and graduating without any debt. "That's when I figured out what my parents were telling me, and appreciated the life lesson."
Most of Lundgren's career was tied to Federated Department Stores. He first joined the Bullock's division in Los Angeles in 1975, rising to become president of the Bullocks Wilshire specialty operations in 1987. When Macy's purchased the Bullock's division from Federated in 1988, Lundgren jumped to Neiman Marcus. The CEO of Neiman left for Federated a few years later, and Lundgren was thrust into the CEO position at age 37. It was an inopportune time to take over, as Lundgren was charged with the task of leading the high-end chain through a recession.
Industry insiders wondered whether the young executive had the industry know-how and experience to succeed. Stanley Marcus, the merchant whose grandfather was one of the founders of Neiman Marcus, bet Lundgren $100 that he would miss sales targets. Marcus lost the bet. In fact, Neiman emerged from the recession stronger than many of its industry peers. The New York Times reported that Stanley Marcus said, "I had the feeling that he needed a few more years of seasoning because his only experience was at Bullock's. I was wrong. He waded right in and didn't miss a beat" (November 10, 1994).
When Lundgren left for Federated Merchandising in 1994, he once again shocked the industry by making an immediate mark on the business. Shaking up the company's purchasing strategy, he shifted from central-buying teams, which controlled most of the company's decisions about what was sold in stores, to a more autonomous approach in which regional teams could decide what was best for their customers. The goal was to improve merchandising that often seemed sorely out of sync with its customers. Lundgren observed, for example, that a china pattern that appealed to those in the Midwest would flop with those on the East Coast.
Lundgren's primary objective was to reinvent the department store, a business model that many saw as a dying breed. Key to this strategy was giving customers a product selection that they would not find anywhere else. In late 2003 only 23 percent of Federated's inventory was proprietary, including private brands, joint ventures, and exclusives from vendors. Lundgren hoped to increase the percentage of merchandise unique to Federated stores to about 50 percent. He introduced "H," an upscale line of men's and women's sportswear from Tommy Hilfiger, which was sold only in Federated stores. He wanted to make shopping easier, so he borrowed the idea of shopping carts. The retail analyst Jeffrey Stein said in the Daily News that the idea "may work, it may not. You don't know unless you try. Lundgren is trying to be proactive in turning around deficiencies. He's more proactive than his competitors" (July 28, 2003).
A lot rested on Lundgren's mission to rescue the department store. In 2003 big chains like Federated accounted for just 11 percent of the nation's retail sales, down from about 20 percent in 1987. On Wall Street, the department-store sector hovered at the bottom of the retail pecking order, with companies such as Federated, Saks, and May Department Stores posting disappointing sales month after month. Lund-gren understood the challenge and did not back down. He said in a Wall Street Journal report that "the problem isn't that no one is in our stores. We have plenty of traffic. The key is having the right product at the right price point in an environment that's different and easy" (July 8, 2003). While the out-come of Federated's future rested clearly in Lundgren's hands, rivals and skeptics understated him at their peril.
See also entry on Federated Department Stores Inc. in International Directory of Company Histories .
Branch, Shelly, "Forget 'May I Help You?,'" Wall Street Journal , July 8, 2003.
Dillon, Nancy, "Federated CEO Sees Success in New Ideas," Daily News (New York) . July 28, 2003.
Lundgren, Terry, as told to Eve Tahmincioglu, "Executive Life: The Boss; A Career Conversation," New York Times, December 14, 2003.
Strom, Stephanie, "A Loner Is in Federated's Hot Seat," New York Times , November 10, 1994.