Category Archives: CEO

JC Penney Scales Back Partnership with Martha

What a difference a CEO makes!

Ron Johnson, former CEO of JC Penney who initiated the partnership with MSLO, was counting on Martha to be the centerpiece of JC Penney’s reimagined housewares department. As the retailer struggled under his leadership, he was replaced by the current CEO, Mike Ullman. Unfortunately, Ullman either doesn’t share Johnson’s faith in the Martha brand, or he thinks that the national retailer should be focused elsewhere–or both. The expensive lawsuit that JC Penney’s has been fighting with Macys in a NYC courtroom is  almost certainly influencing his decision, as well

So, he has decided to scale back significantly JC Penney’s partnership with Martha. Here’s what’s changing:

– JC Penney’s will discontinue selling products in those categories that prompted the lawsuit from Macys.

– JC Penney’s will sell back its share  ($37 million worth!) of MSLO stock purchased as part of the partnership.

– JC Penney’s will no longer have representation on the MSLO Board of Directors

Not great news for Martha and MSLO, where a great portion of revenue is generated by licensing the “Martha Stewart” name. Martha was hopeful that the products offered at JC Penney’s would reach audiences currently unserved by the products sold at Macy’s.

Still, the JC Penney’s partnership will continue, though CEO Ullman seems less devoted to Martha and her products. And the partnership with Macy’s will continue, though Macy’s CEO Terry Lundgren became furious with Martha when she told him of her new relationship with JC Penney’s. Of course, neither CEO would be interested in continuing his partnership with Martha if she and her products were not so popular with the public.

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Martha vs. Macy’s: Judge Schedules Sept. 25 Hearing on Report Penney’s Will Drop Contested Items

jcpeverydaypans

The judge in the Martha vs. Macy’s trial has scheduled a hearing for September 25, though he did not give a reason for the hearing. According to the Dallas Business Journal, the hearing is in response to the NY Post article that claimed JC Penney was dropping its plan to carry Martha Stewart-designed items–branded “jcp everyday”–in its stores. Obviously, if JC Penney voluntarily quits carrying the contested products, the lawsuit is ended in Macy’s favor.

After the original article ran in the NY Post, a spokesperson for MSLO stated “J.C. Penney remains one of our many retail partners. Our agreement with them is in force, and we have no intention of ending it,” indicating they would not be receptive to an early termination of the agreement. Unless there is specific language in the contract that allows JC Penney to do so, it is expected that MSLO may itself sue JC Penney for breach of contract.

From the Dallas Business Journal:

Oing oversaw the lengthy non-jury trial on a claim by Macy’s that Penney’s 2011 deal with Stewart violated her 2006 agreement with the Cincinnati-based retailer. Oing’s decision in the suit is expected soon. A source told Bloomberg that Oing intends to ask Penney’s lawyers if the story is true because it could affect his ruling on the contract.

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JC Penney Appears Poised to End Partnership with Martha

Mail Online Seminar - Celebrities and the Media - Cannes Lions International Festival of Creativity

Things just got more complicated for Martha and Co.

To most following the Martha vs. Macy’s trial, it looks very unlikely that Martha and JC Penney will prevail. In a nutshell: Although Martha’s contract with Macy’s did, in fact, allow for Martha to open stand-alone Martha Stewart stores that offer products in categories–housewares, bedding, bath, and cookware–that would compete with those items offered at Macy’s, the idea that Martha’s “store within a store” actually qualifies as a “stand alone” seems dubious, at best. Ron Johnson, the JC Penney CEO who developed the “store within a store” idea and created the partnership with MSLO, was ousted in April 2013. His predecessor, Mike Ullman, was reappointed to take over the company and has shown little to no enthusiasm for the plan.

Yesterday, reports surfaced that Penney’s was planning to discontinue offering products designed by Martha Stewart in those categories deemed exclusive  in Martha’s contract with Macy’s, effectively throwing in the towel to end the ongoing lawsuit. More worrisome are reports that JC Penney was also ending its entire partnership with Martha, and would not be selling any Martha Stewart products, even in categories that did not impinge upon the Martha-Macy’s contract. According to one insider, CEO Ullman has said, “Her designs aren’t that great. They’re not selling, and they’re nothing that your normal Joe Schmoe can’t come up with.”

Further complicating the matter is the fact that, as part of its partnership with MSLO, JC Penney purchased a 16.6-percent stake in MSLO, infusing the cash-strapped company with $38.5 million. Obviously, MSLO would prefer to see their partnership with JC Penney continue. A MSLO spokesperson has released as statement saying, “J.C. Penney remains one of our many retail partners. Our agreement with them is in force, and we have no intention of ending it.”

If JC Penney does end its partnership with Martha, it is expected that MSLO will sue JC Penney to enforce the contract, unless there is specific language in the contract allowing JC Penney to end it at any time. MSLO had projected its merchandising agreement with JC Penney to generate $200 million dollars in much-needed revenue for the company over the next several years. MSLO has become increasingly dependent upon revenue generated through licensing and merchandising agreements, as sales through its magazine divisions have slowed and Martha’s presence on television has diminished. MSLO stock prices sunk when the news of the end of its JC Penney partnership was leaked.

From the NY Post (as is the above photo):

Ullman, a former Penney CEO who returned to the helm in April to repair damage from a disastrously unsuccessful turnaround effort by Johnson, began to broadcast the split with the beleaguered domestic diva to workers in recent weeks, insiders said.

However, Ullman was determined to give Stewart the boot from the get-go, insiders said.

As reported by The Post, Ullman initially reached out to Macy’s CEO Terry Lundgren to settle the lawsuit, which had already gone to trial with dramatic testimony from Lundgren, Johnson and Stewart herself.

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martha_boxing

There was some good news today for Martha in the trial with Macy’s.

First, it may be useful to back up a bit: The case is actually made up of several different claims, including breach of contract, breach of confidentiality, unfair competition, and tortious interference. In some claims, Macy’s has won injunctions, which are essentially temporary smaller rulings in Macy’s favor while the larger issues are resolved permanently in the courtroom. For example, in one injunction, the judge ruled that Martha may NOT sell items in JC Penney stores until the issue of exclusivity has been resolved completely. Macy’s asked the judge to broaden that existing injunction to include items that were designed by MSLO designers but did NOT have Martha’s name on them. These items are instead branded as “jcp Everyday”. Martha insists that these items–$100 million worth of them are already at distribution centers awaiting shipment to JC Penney stores–do NOT violate the exclusivity clause of her contract with Macy’s. Good News: Today, the judge sided with Martha, so these “jcp Everyday” items will begin appearing in JC Penney stores very soon!

However, the judge ruled that the trial would continue on to the next phase. You see, up to this point, Macy’s has been doing all the talking, as they present their case that MSLO violated the exclusivity clause of their contract. Today, the judge took into account all that Macy’s has presented thus far and agreed that may in fact be true. That’s the bad news. The good news is that the trial now shifts to a new phase; one in which MSLO gets to present THEIR side of the story to counter Macy’s claim. Go get ’em, Team Martha!

It is important to note that the judge in this case is still imploring the three parties involved to reach a settlement among themselves, without a judge’s ruling. Contract disputes such as this one are not entirely uncommon, and are often resolved with a financial settlement. In this case, JC Penney and MSLO could buy-out Macy’s contract (or just the exclusivity clause of the contract) although that seems unlikely, given the degree to which Macy’s seems to rely on the Martha Stewart Collection to generate traffic in its stores. By allowing the trial to go forward, and relying on the judge’s ruling, either party risks losing entirely.

Martha vs. Macy’s: Judge Rules JC Penney May Begin Selling Some Items

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Martha vs. Macy’s: Judge Orders Mediation, NY Times Article on Why the Case Matters

Martha in Court

Yesterday, the New York Times had an article on the subject underlying the current court case between Macy’s and MSLO: that it is essentially “a schoolyard fight between two boys — the chief executives of Macy’s and J. C. Penney — over the most popular girl on the playground.”

If you have been following MSLO lately, you would not be blamed for worrying about the current state of the company–the stock price has plummeted and stabilized at the low end, the company is heavily vested in traditional media (which is undergoing much tumult industry-wide) and has suffered layoffs, it has all but lost its television presence, and there is unsettled leadership (former CEO Lisa Gersh stepped down after only five months at the helm). The one fiscal bright spot at the company of late has been its merchandising. Simply, Martha is still seen in the eyes of the public as an arbiter of good taste and high quality, and most importantly, consumers trust her. If Martha says it’s a good thing–you can be sure it’s a good thing.

It is Martha’s reputation for producing good products that the two retail giants–Macy’s and JC Penney’s–are hoping to leverage in their stores. Indeed, embattled JC Penney’s CEO Ron Johnson’s job may depend on his Martha Stewart-anchored plan to resuscitate that company’s housewares department. And, as the Associated Press reported:

“[Macy’s CEO Terry] Lundgren said Macy’s has spent 40 percent of its overall marketing on the Martha Stewart brand and other labels in the home area, even though the home category represents 17 percent of total sales. That’s because even though the home area is typically slow turning, it drives shoppers to the store. “I need the Martha Stewart business to be exclusive,” Lundgren said. “I don’t have a substitute.”

The judge ordered the three companies into mediation on Friday, in an attempt to have them resolve the issues themselves without a court-ordered judgement. So, even as the courtroom drama continues, one thing is for certain: the Martha Stewart brand is still as strong as ever in the eyes of consumers. And that is most definitely a good thing for MSLO.

Check out this very flattering quote from the New York Times article :

It is easy to forget that Ms. Stewart altered the way that people live by decoupling class and taste. Part of the reason that she seems embattled — her media empire is shrinking fast — is that she won her corner of the culture war. When you go into Target or Walmart and see a sage green towel that is soft to the touch, it may not carry her brand, but it reflects her hand. Her tasteful touch — in colors, in cooking, in bedding — is now ubiquitous; she just doesn’t get to cash all the checks anymore.

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MSLO CEO Lisa Gersh is Stepping Down (Already)

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After only 5 months in the CEO position at MSLO, Lisa Gersh is stepping down. Gersh joined the company in June 2011 as president and COO but was named CEO in July. Before joining Martha Stewart Living, Gersh co-founded Oxygen Media LLC where she was president and COO from 1998 until 2007 when it was acquired by NBC Universal.

Two things:

1. Gersh’s television background doesn’t really fit with MSLO since Martha’s cable TV show was cancelled by Hallmark. Now, Martha’s only regular television presence is on PBS, where she hosts “Martha Stewart’s Cooking School”. Of course, being a commercial-free channel doesn’t exactly make PBS the best place to promote Martha’s own products and those of her sponsors.

2. Word on the street is that there was tension between Gersh, an experienced media executive, and Martha herself. Uh-oh.

Wall Street was not happy with the news of Gersh’s departure: Shares of MSLO fell as much as 9.7% in early trading after the news surfaced.

FOMs: Whew! With all the changes that occurred in 2013, MSLO is positioned to have a stellar 2013. There are lots of new projects on their way: a new vegetarian EDF cookbook in January, resolution of the Macy’s lawsuit in January, the new store-within-a-store at J.C. Penney in March, Martha’s “Living the Good Long Life” book in May. Full speed ahead!

From Bloomberg.com:

Martha Stewart Living Omnimedia Inc. (MSO), the company founded by home-decor guru Martha Stewart, said Chief Executive Officer Lisa Gersh will step down, part of an effort to bolster its merchandising business.

After sluggish advertising sales in its media business contributed to four straight years of losses and declining revenue, Martha Stewart Living is focusing more on selling merchandise through retailers. The company entered an agreement in late 2011 with J.C. Penney Co., a deal that will start boosting revenue by early 2013, according to the statement.

“We are now increasing our capabilities in merchandising and plan to take full advantage of that opportunity for the benefit of our shareholders,” Stewart, who serves as non- executive chairman, said in the statement.

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