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How Terry Lundgren plans to end Macy’s slump

Macy's CEO Terry Lundgren said Friday that the consumer is taking longer than anticipated to return to clothing stores, but that he sees a light at the end of the tunnel.

In an interview on the sidelines of the Global Retailing Conference in Tucson, Arizona, Lundgren laid out several growth strategies, including competing with fast fashion and partnering with Alibaba in China.

Sales at department stores and fashion brands have slumped during the past year as consumers either sock away money or spend in big-ticket sectors like home improvement and autos, Lundgren said.


"They're not in our categories to the degree that we would have expected them to be at this point in time, and we're seeing that throughout the fashion retail industry," he told CNBC's "Squawk on the Street."

"It's just a matter of time. When they've got their house, they've got their room extension, they've got their automobile, they're still going to have savings left over, so we forecast our own sales to be positive into the fourth quarter," Lundgren said.

For its latest reporting period, Macy's same-store sales were down 4.3 percent. At the time, Lundgren pointed to the negative impact of warm winter weather on apparel sales and lackluster tourist spending at its flagship store as the dollar strengthened.

In January, the retailer said it would cut thousands of jobs in a bid to reduce costs after a disappointing 2015. Shares of Macy's are down 40 percent over the past 12 months.

The company is also facing competition from fast-fashion stores like H&M that specialize in up-to-the-minute styles at low prices.

Lundgren said Macy's would compete on that front with several new "lower price, great value" lines, but would maintain a "certain quality standard" to set them apart.

He noted that Macy's continues to see strength in athletic apparel and footwear, particularly among millennials.

The retailer also has aimed to crack the Chinese market by partnering with e-commerce giant Alibaba. In August, Alibaba entered into an exclusive agreement with Macy's Chinese joint venture to operate an online flagship store on its Tmall Global portal.

Lundgren said he envisioned opening large retail stores in China 10 years ago, but decided to take a digital-first approach on the strength of mobile and internet shopping in the country.

"This is where the eyeballs are. This is where the people are, and not only for the business we're going to do there, but the eventual tourists that are going to be coming to America," he said. "Getting them exposed to the Macy's brand is part of our vision and part of our strategy."

Macy's has answered shareholders' calls to unlock value in its real estate holdings by hiring a president for real estate and naming a REIT specialist to its board. But Lundgren said the turnaround remains dependent on growing revenue in Macy's core business.

"Certainly we're going to maximize those opportunities with real estate, but the most important thing that's going to drive our … stock price is our business top-line sales," he said. "When we grow on the top line, we're very good at converting that to the bottom line."