He took it nationwide

In Terry Lundgren's second stint, he has taken his stores from upscale exclusive to national powerhouse.

Associated Press
Published March 1, 2005

CINCINNATI - Now on his second tour of duty with Federated Department Stores Inc., chief executive Terry Lundgren has an opportunity to spread the company's operations into virtually all of the United States.

Lundgren will preside over Federated's acquisition of rival May Department Stores Co. and will run the combined company, a $30-billion retailer in 49 states with names including Macy's, Bloomingdale's, Lord & Taylor and Marshall Field's. The $11-billion merger announced on Monday is to close in the third quarter.

It will expand Federated's operations from 34 states into 49 states, plus Guam, Puerto Rico and the District of Columbia.

Lundgren told reporters and analysts that he relishes the chance to reach new markets, become a national advertiser and put the companies' combined buying power to work in getting better deals on merchandise purchases. It will make Federated more valuable to its shareholders, he said.

"We concluded that growth through acquisition was the best way to increase value for our shareholders," he said.

Lundgren, 52, originally from Long Beach, Calif., became president of Federated in 1997. He added the title of chief operating officer in 2002 before becoming CEO in 2003 to succeed James M. Zimmerman, who was retiring.

Lundgren started with Federated in 1975 at its Bullock's division, now a part of Macy's West. He became vice president and general merchandising manager of the Los Angeles-based Bullock's division in 1985. In 1987, he became president of Bullock's Wilshire, then a specialized fashion group owned by Federated.

He left Federated after its acquisition by Campeau Corp. in 1988 to work for Neiman Marcus in Dallas, rising to become chairman and CEO. Lundgren returned to Federated in 1994 as chairman and CEO of its merchandising operations.

When Federated bought R.H. Macy & Co. out of bankruptcy in 1994, Lundgren oversaw the integration of Macy's merchandising and product development functions into Federated.

He has led an effort to boost Federated's sales of private-label clothing brands including Alfani, I.N.C. and Charter Club.

Lundgren faces challenges in his new role. If the deal is approved, it would give Federated control of more than 950 department stores and an additional 700 bridal and formal wear stores.

The Federal Trade Commission and the Justice Department are the two federal agencies that handle antitrust issues. Historically the FTC has taken the lead in retail matters. Both agencies declined to comment.

The most noise about the deal will likely come from the individual states where the two companies do business, said John D. Harkrider, a partner with the law firm Axinn, Veltrop & Harkrider in New York. The office of California Attorney General Bill Lockyer already has indicated that it is providing information about its local markets to the FTC, and other states may join in.

Harkrider said the FTC will be concerned with markets where the merging stores are each other's so-called "next-closest substitute." For example, if consumers can't get what they want from a Marshall Field's store, they can shop at a nearby Macy's. But now that both stores have the same owner, that extra competitor is gone, he said.

"The chances are good that other state attorneys general are going to want to protect their consumers - it's a high-profile issue for voters," he said. "But my sense is that this deal gets done."

May shares fell 84 cents, or 2.4 percent, to close at $34.51 in Monday trading on the New York Stock Exchange. Its stock has been rising in anticipation of a deal. The stock has ranged in price from $23.04 to $36.48 during the past year.

Federated shares initially rose $1.21 to $58 in trading Monday morning, but later fell 34 cents, or 0.6 percent, to close at $56.45. Federated has traded between $42.80 and $59.91 the past year.