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Squabbling Retailers: Is Martha Stewart Worth the Penney’s Macy’s Battle?

Retailing giants Penney and Macy’s continue to slug it out in court over who has the contractual right to sell Martha Stewart brand products.

But a clear winner in this ongoing dispute has yet to emerge as the New York Supreme Court hears arguments from both sides and ponders the legalities in this case that may or may not bring profits to the victor.

At the heart of all this bickering in a non-jury trial is a nagging question: What will sales of Martha Stewart products add to the bottom line — if anything — of whatever firm wins the case?

Mark Cohen, a Columbia Business School professor and former CEO of Sears Canada, thinks Martha Stewart has seen better days.  “Martha Stewart is past her sell-by date,” he said. Other analysts have a similar opinion.

J.C. Penney, still smarting from a $4 billion sales loss under recently deposed former CEO Ron Johnson, needs more than the Stewart brand to achieve a turnaround.

Commenting on Penney’s product mix of the hip and the square, Cohen said, “It’s this very strange mix of edgy Joe Fresh and dumb, bland Martha Stewart.  No one with a scintilla of intelligence just presumes an idea like that will succeed.”

Many are concerned that Martha Stewart’s brand has become confusing or lost cachet. Martha Stewart Omnimedia has seen falling sales from 2012 to 2013, and the partnership with JCP may be a case of two sinking ships trying to save each other. The company lost $3 million in Q1 2013, raising the possibility that Martha Stewart may be a trend on its way out. Still, JCP has bet big on the brand, with an estimated $100 million in merchandize sitting in DCs.

Martha Stewart’s licensing business has exploded in recent years, starting with her 2007 Macy’s collection. She now sells crafts at Jo-Ann Fabric and Michael’s, home improvement items at Home Depot, home office supplies at Staples, and pet supplies at Pet Smart. This may have muddied her brand and made her a less valuable asset for a latecomer such as JCP.

Her 2007 agreement with Macy’s is at the heart of the current dispute. That exclusivity contract was recently reviewed by the Manhattan Appellate Court, which temporarily enjoined Penney from selling Martha Stewart brand products, including cookware, bedding and other household goods branded JCP Everyday.

The major issue before the court is Penney’s right to sell the designer’s products under the Martha Stewart brand at seemingly independent boutiques in Penney’s brick and mortar outlets.  In a recent decision related to this issue, the court ruled that Macy’s had failed to prove that Penney caused Macy’s “irreparable harm.”

Macy’s has claimed exclusive rights to the Martha Stewart brand, and contends that an additional deal made between Martha Stewart Living Omnimedia Inc., and Penney to launch in-store Stewart boutiques violates the Macy’s exclusivity contract.

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