JC Penney Breaks Up With Martha Stewart
Amid recovery efforts, struggling retailer abandons celebrity’s line of home products
JC Penney has decided to sever ties with Martha Stewart prior to a judge’s ruling in a court case involving both parties. Macy’s is suing JCP in a dispute regarding exclusive rights to sell Martha Stewart home products. This news bumped JCP stock up more than 5 percent on Thursday, while Martha Stewart Living Omnimedia’s stock price dropped 6+ percent.
This is the most recent move by Mike Ullman, interim CEO of JCP, to fix the damages done by his predecessor, Ron Johnson. Johnson envisioned JCP as an upscale retailer, selling high-end merchandise without discounting or coupons. Since Ullman took the job in April, he has been re-instating basic merchandise and the discounting trends JCP has been known for in its 111 year history.
Ullman inherited a lengthy contract with Martha Stewart, signed by Johnson in 2011 as part of Johnson’s recipe to reinvent the retailer. Very shortly after, Macy’s, holding a long-standing agreement with Martha Stewart, sued her company, along with JCP, in an attempt to block the deal. Macy’s also sought monetary compensation. Closing arguments of the case were made on August 1, with a final decision expected to be made in the coming days. JCP was ordered to remove Stewart’s name from most items in her line of products in 2012. JCP complied, and began selling the Martha Stewart items under the “JCP Everyday” branding. However, at this point is uncertain how JCP’s decision to drop Martha Stewart will affect the case. It is also unknown if Martha Stewart Living Omnimedia will take any action against JCP for breach of contract, or if there was any language allowing JCP to cancel.
During a second quarter earnings call, Ullman didn’t mention Martha Stewart products specifically, but stated that JCP’s home goods department was underperforming, and some merchandise in it was too expensive. This resulted in Ullman’s efforts to revamp the already revamped home department, including adding discounts on current merchandise ranging anywhere from 20 to 50 percent. Despite Ullman’s diplomacy during the earnings call, he was a bit more frank with a source of the New York Post. “Mike said her designs aren’t that great,” according the insider. “He says they’re not selling, and they’re nothing that your normal Joe Schmoe can’t come up with.”
Ullman may ultimately be right in his decision to part ways with Martha Stewart, the bump in stock price supports his decision. After all, it really doesn’t make sense for a department store chain famed for discounting, to sell home goods at a premium that look like they’d be available at a less exclusive retailer.