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J.C. Penney Takes Macy’s To the Mat In High Stakes Martha Stewart Trial

J.C. Penney, already struggling with falling sales and big losses, just made a big bet on home goods. If it loses, the firm may face bare shelves in its revamped home goods section.

New York State Supreme Court Judge Jeffrey Oing told Penney’s attorneys on Monday that the chain took a risk by ordering towels, cookware and other products from the company that home diva Martha Stewart founded. In fact, Oing said he could force Penney to stop the products from heading to the shelves this spring even as they come off the docks, according to the Associated Press.

J.C. Penney is entangled in a trial with Macy’s over the nature of their relationship with Martha Stewart Living Omnimedia. Macy’s contends that they have the exclusive right to sell Martha Stewart branded products, but Penney’s says they should be allowed to sell goods that are covered by Macy’s agreement as long as they are not sold under the Martha Stewart brand name.

The goods, which were designed by Martha Stewart Living, will be branded under JCP Everyday, which the company is reserving for Martha Stewart’s merchandise. The company also plans to sell products that are not covered by Macy’s agreement under the label “Martha.”

The suit could put J.C. Penney in a sticky position. Attorney Mark Epstein, representing the firm, argued that a decision to block the store from selling the goods would be financially devastating because the company doesn’t have a substitute.

The company has reported four straight quarters of sales declines and big losses. Its turnaround strategy is partly dependent on rolling out small store-in-store shops, and they had planned to use Martha Stewart as the anchor of a revamped home section. A setback could have dire consequences; the company is burning through cash and fighting to reengage customers after CEO Ron Johnson’s disastrous “no-discounting” strategy.