UPDATE 1-Macy's CEO awarded $5.4 million in 2008

* CEO Terry Lundgren paid $5.4 mln in 2008

* Total payout down about 37 pct from $8.7 mln in 2007

* Decline in stock price affects 2008 payout

NEW YORK, April 1 (Reuters) - Macy's Inc (M.N) Chief Executive Terry Lundgren took a 37 percent cut in compensation to $5.4 million in 2008 as declines in the value of stock awards outweighed a slightly higher salary.

The department store operator has faced declines in sales and profits as shoppers cut spending and focus on necessary purchases.

Macy's sales fell to $24.9 billion in fiscal 2008 from $26.3 billion in 2007. Its stock price fell 57 percent in 2008 and has dropped about 8 percent so far this year.

It addition to a $1.5 million salary in 2008, up $8,333 from 2007, Lundgren got $5.03 million in option awards, $900,000 in non-equity incentive compensation and $496,423 in other compensation.

His 2008 compensation was reduced by a $2.49 million loss on stock awards, reflecting accounting rules and a decline in Macy's stock price, according to Macy's proxy filing with the U.S. Securities and Exchange Commission.