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.