Martha Stewart questioned in J.C. Penney, Macy’s brand dispute

By Jay Keller

Martha Stewart took the stand in New York State Supreme Court on Tuesday to testify in the legal dispute between Macy’s Inc. and J.C. Penney Co. over retail rights to sell Martha Stewart products.

Macy’s is suing Martha Stewart Living Omnimedia Inc. for allegedly breaching an exclusive merchandising contract after Stewart’s company inked a deal with J.C. Penney to open in-store boutiques this spring.

Macy’s maintains it has exclusive rights to sell products in certain categories such as cookware, bedding and bath items.

J.C. Penney remains under court order to not sell Martha Stewart products in nearly 700 stores nationwide, dealing another blow to CEO Ron Johnson’s strategy to reinvent the 102-year-old retailer.

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.”

According to the Associated Press, testimony has portrayed Stewart as someone who turned her back on her good friend and Macy’s CEO Terry Lundgren so she could enrich her company.

Analysts and industry experts believe this effort demonstrates a legal strategy to again portray Stewart as the same ruthless business woman that served prison time nearly eight years ago for lying about a stock trade.

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.

Despite a robust transformation plan and strategy that included eliminating sales and coupons, J.C. Penney reported last week a net loss of $985 million in fiscal 2012, a sharp decline when compared with last year’s loss of $152 million.

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, and the AP estimated that Martha Stewart Living expected to receive more than $200 million over the 10-year deal.

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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+.