Lundgren’s Time Near, Seen as New Chief Exec For Federated Stores

Speculation was hot last week that Terry Lundgren will soon be named as ceo of Federated Department Stores.

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As previously reported, Lundgren’s contract is set to expire May 1, 2003, so his future has been under intense discussion within Federated. His bargaining position would be strong. He’s obviously someone Federated doesn’t want to lose, particularly since someone of his experience is hard to find, and he could easily be grabbed up by a rival retailer. Across the industry, turnover has been extraordinarily high, especially in the last two months, and whenever there is a high-level retail search, Lundgren is always near the top of the hit list.

However, Lundgren has stuck with Federated, confident in the belief that he would day rise to the top of the retailer, which also operates Macy’s East, Macy’s West, Bloomingdale’s and Burdines.

He’s highly regarded as a talented merchant with fresh ideas. He’s calls it his mission to reinvent the flagging department store format with his "store of the future" program, adding some new technologies and shop concepts to enliven the Federated stores and make them easier to shop.

The strategy is currently being rolled out to dozens of Federated stores, with the exception of Bloomingdale’s. Lundgren was also a major force behind the intensified marketing of Federated’s private labels in recent years, such as INC and Alfani. He thinks the program could ultimately represent about 24 or 25 percent of the company’s total volume, from the current 16 percent, or near 20 percent if you exclude cosmetics and furniture where there is no private label.

And he has opened up the industry dialog on chargebacks and markdowns, attempting to ease the tensions between retailers and manufacturers.

When Allen Questrom resigned as Federated’s chairman and chief executive in May 1997, Lundgren was considered his potential successor, but Zimmerman won out. Since then, Zimmerman has been under pressure to improve Federated’s performance and has taken the heat for Federated’s ill-fated $1.7 billion Fingerhut acquisition in February 1999. However, Federated was able to reduce its losses somewhat by selling off Fingerhut assets and Zimmerman is still considered among the toughest and best retail operators in the country. The Questrom-Zimmerman team that led Federated through the Nineties was one of the most dynamic in the industry, capitalizing on two executives with highly different yet compatible skills. While Questrom is largely praised for getting Federated out of bankruptcy in the mid-Nineties, a large portion of the credit is also owed to Zimmerman, who worked more behind the scenes with banks and creditors on the restructuring. Questrom and Zimmerman also teamed at Rich’s, as ceo and president, respectively.
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