Martha Stewart: J.C. Penney deal no violation of Macy’s contract

By Jay Keller

Martha Stewart took the stand in New York State Supreme Court on Tuesday to explain why a newly-inked contract to sell products at J.C. Penney doesn’t violate an existing contract with Macy’s.

Macy’s filed suit against Martha Stewart Living Omnimedia Inc. for allegedly breaching an exclusive merchandising contract.

Stewart was cool and clever during testimony on the witness stand, saying growth for Martha Stewart Living Omnimedia was a priority and J.C. Penney offered the best opportunity.

Stewart said more freedom existed with the J.C. Penney deal and that she was frustrated by a “diminished” role at Macy’s.

“Amongst ourselves we were not always thrilled with the fact that Macy’s wasn’t increasing our exposure in stores,” Stewart said in New York State court Tuesday. “My dream was to have my own store at J.C. Penney and Macy’s never offered us that despite the fact that we had thousands of products.”

The home-décor maven and food guru told the courtroom that she was taken aback when she called longtime friend and Macy’s CEO Terry Lundgren to alert him about the J.C. Penney deal.

“When he hung up on me, I was flabbergasted,” Ms. Stewart said.

Macy’s maintains it has exclusive rights to sell products in certain categories such as cookware, bedding and bath items, a deal worth about $300 million.

J.C. Penney CEO Ron Johnson told Stewart during negotiations that he believed the in-store boutiques at nearly 700 stores nationwide could be worth around $500 million.

The embattled Johnson has faced widespread scrutiny over his renewed strategy to reinvent the 102-year-old retailer, especially after the company reported a net loss of $985 million in fiscal 2012, a sharp decline when compared with last year’s loss of $152 million.

Johnson said on Friday in testimony that he understood that doing a deal with Stewart would create a conflict with Macy’s.

“Martha could be the foundation of a reinvented home,” Johnson wrote in the email obtained by Reuters. “Macy’s deal is key. We need to find a way to break the renewal right.”

Martha Stewart Living continues to pursue further merchandising deals with retailers like Home Depot, which offers a collection of cabinets and paints, and the pet-supply chain Petco.

According to the company website, nearly 30 percent of revenue at Martha Stewart Living comes from its merchandising.

For Macy’s, sales in 2012 for the Martha Stewart brand doubled the net sales increase for the entire company with an eight-percent gain.

J.C. Penney invested $38.5 million for a nearly 17-percent stake in Martha Stewart Living, according to news outlets and court transcripts.

Related News Articles:

Martha Stewart questioned in J.C. Penney, Macy’s brand dispute (March 5, 2013)

J.C. Penney comeback tested after 2012 losses, slumping sales (Feb. 28, 2013)

About Jay Keller

As a journalist of nearly 18 years, Jay Keller examines and reports on the retail headlines of the day. His extensive background as an editor, reporter and digital strategist includes tenures at large-scale, top-100 news outlets and websites like The Washington Post, U.S. News & World Report and Examiner.com. Have a news tip, question or concern? Send an email or ping him on Google+.