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JCP Unwinds Deal with Martha Stewart; Macy’s Declares Victory

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Retail behemoth J.C. Penney (JCP) is still struggling to craft a winning turnaround strategy, which increasingly means unraveling the misguided business arrangements of the last two years. To that end, JCP just announced that it will be restructuring its relationship with Martha Steward Living Omnimedia, ending some aspects of their collaboration.

From the beginning, the relationship between JCP and Martha Stewart was fraught with complications. Once the centerpiece of former CEO Ron Johnson’s plans to revive the ailing retailer, the deal between JCP and Martha Stewart immediately stirred controversy. Macy’s took J.C. Penny’s to court over the arrangement to sell Martha Stewart’s products exclusively, charging that it constitutes an infringement on its own previously existing contract with the home goods giant. As it stands now, J.C. Penny’s is allowed to sell the products under the generic label “Everyday” without explicitly advertising the brand as affiliated with Martha Stewart.

An anonymous J.C. Penny’s executive claims that many top managers were always quietly hoping that the Martha Stewart deal tanks. “Let’s just hope we lose the lawsuit, then we can turn that space into something that will actually make us some money,” one manager purportedly said.

Now that the merchandising agreement between JCP and Martha Stewart has been significantly diminished, Macy’s is taking a less than inconspicuous victory lap. Jim Sluzewski, speaking to the Wall Street Journal said that the reconfiguration of ties between the two companies amounts to an implicit admission that their arrangement was illegal.

A spokesperson for Martha Stewart said she “couldn’t comment on what the judge will do but we believe the revised agreement resolves concerns and hope it resolves the issues brought by Macy’s.”

JCP CEO Mike Ullman offered only a brief comment: “We are happy to be moving forward.”

The new arrangement doesn’t completely sever ties between JCP and Martha Stewart. At least through 2017, Martha Stewart will still sell a limited assortment of merchandise through JCP stores including hardware, rugs and lighting. However, JCP will surrender a place on Martha Stewart’s board.

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