But the 53-year-old Lundgren didn't hide in his office waiting for the ruckus to die down. He flew to Chicago for a face-to-face meeting with Mayor Richard Daley and then took his story to the Chicago media.
His matter-of-fact approach and willingness to face the music tells you a lot about the man, say retail experts who have watched Lundgren over the years.
"He is definitely a tough-minded businessman, or he wouldn't be running the world's largest department store chain," said veteran Chicago retail consultant Sid Doolittle.
He is known for his patrician demeanor, a man who never loosens his tie even when negotiations turn tense. But his ability to make unpleasant decisions and calmly follow through on them is only half the story, they add.
Lundgren is a merchant, first of all, say retail consultants, a guy who recognizes fashion and knows the merchandise. He proved that again this summer at Federated's annual meeting.
Corporate gadfly Evelyn Davis stood up in front of 125 shareholders and reporters and asked Lundgren to name the designer of a bright floral print jacket she was wearing, a recent purchase from Bloomingdale's, one of Federated's chains.
"David Meister," Lundgren replied quickly and correctly.
A native Californian, Lundgren got his retail start in the mid-70s as a lamp and china buyer at the Bullock's department store chain in Los Angeles. He soon became a protege of storied retail executive Allen Questrom and was named president of Bullock's at age 35.
In the late 1980s, he followed Questrom to Neiman Marcus, where he rose to become chairman and CEO after Questrom returned to Federated. Lundgren returned to Federated in 1994 to head its New York-based merchandising group.
By 1997, Lundgren was Federated's president. He was named CEO in 2003 and chairman the following year.
Unlike department store executives who tried to cling to the past, Lundgren has learned that knowing the merchandise and providing good service isn't enough when shoppers can pick up an inexpensive Isaac Mizrahi skirt from Target one day and a bargain polo shirt from Costco the next.
So he has been leading Federated's drive to build two national department store chains under the banner of Macy's and Bloomingdale's. The move will save millions of dollars by allowing Federated to standardize its logos and run national ads.
But it's been painful in areas that are losing their old-line department store nameplates. Gone--or soon will be--is Hecht's in Washington, D.C., Famous Barr in St. Louis and Burdines in Florida.
More pain will come when Federated closes duplicate stores and the regional headquarters of those chains next year, cutting more than 6,000 jobs.
Lundgren says he can't let that stop him. "I pause every day. Then I make a decision and we go on," he said. "I have to protect the business and I have to protect jobs."