Former Macy's CEO Says Consumers Are The Winner
The real winner in the competitive retail landscape is the consumer, Lundgren said.
This creates tremendous pressure on companies to satisfy consumer needs through technology and innovation, he said.
The consumer also emerged as a winner during the trade war at a time when prices were supposed to go up, the former retail CEO said.
Instead, apparel prices have remained steady as companies continuously find ways to cut costs, be it in the production process or supply chain, the retail exec said.
If retailers can't demand that suppliers eat part of the higher cost, they can do so themselves by accepting a smaller margin, he said.
Lundgren: Too Much Retail Space
Part of the problem plaguing the retail segment as a whole is the overabundance of physical retail space in America, Lundgren said.
The U.S. has 23 square feet of retail space per capita versus less than 5 square feet in most of Europe and 16 in Canada, he said.
Americans tend to buy more than their counterparts worldwide, but 23 square feet per capita is "simply too much," and there "has to be a contraction," he said.
Some companies will voluntarily reduce their square footage, while others are forced to do so "as a need," Lundgren said.
"If you have a strong balance sheet, you are in good shape," he said. "If you don't, you are going to have a tough next few years."
What's Next for Macy's?
Macy's is among the few retailers that is voluntarily shrinking its square footage, but the next step remains to be seen, Lundgren said.
A five-year strategy or outlook is an "excellent question" for current CEO Jeffrey Gennette to answer at the investor meeting in February, he said.
Macy's is still earning money and has cash on its balance sheet, but its stock trades at a notable discount at just five times earnings versus premier retailers at around 24 times, Lundgren said.
"You have to decide as an investor whether you think this is a good time to buy or not."
Macy's shares were down 2.72% at $16.08 at the close Thursday.