After Federated Department Stores bought Macy’s in 1994, Lundgren became the president in 1997 and then the CEO in 2003. At that point, Macy’s was a $14 billion company with multiple brands and 250 stores.
Lundgren began to test the waters of expanding the Macy’s brand by combining it with other Federated stores.
“Business didn’t go up and it didn’t go down; it just became a non-event,” he says. “It surprised most of us, but we knew it wasn’t a negative.”
During the time of this testing, a prized department store came up for sale — Marshall Field’s in Chicago. Marshall Field’s had a stranglehold on the Chicago market and was powerful in the Minneapolis and Detroit markets as well.
“Those were three markets where we didn’t have any representation,” Lundgren says. “This was a natural opportunity for us to fill in the geography and have key stores in these very important markets.”
Lundgren negotiated to buy Marshall Field’s against one of his largest competitors at the time, The May Co., which was also looking to go national. Lundgren felt confident he had submitted a bid that was in the ballpark, but May Co. ended up offering several hundred million dollars beyond what Marshall Field’s was worth.
Although Macy’s lost to May Co. for the Marshall Field’s stores, Lundgren didn’t lose sleep, because he knew that it would have been wrong to overpay for the stores. He had seen that scenario before.
“We walked away, and that was probably the best decision that the board and my team made because everything changed and the credibility that I developed with my board from that point forward was a game-changer, because I had been CEO only for a year,” he says. “That process turned out to be really positive for all of us.”
One year later, in 2005, The May Co. was in trouble — it had paid too much for Marshall Field’s. The board fired its CEO and Lundgren went in to talk with May Co.’s lead director.
“We did a deal and got great talent merged in with our company,” Lundgren says. “Still today, some of my top leaders are from that May Co. acquisition. It was all good timing, and of course, we got Marshall Field’s through that.”