J.C. Penney Company, Inc. (JCP) and Macy’s, Inc. (M)’s Tug of War

The Martha Stewart brand is being pulled left and right by retail giants J.C. Penney Company, Inc. (NYSE:JCP) and Macy’s, Inc. (NYSE:M). The battle is over which retailer has the contractual rights to sell certain branded and unbranded products designed by Martha Stewart.

Rights to Martha Stewart’s brand

According to Bloomberg, in a recent court hearing, Supreme Court judge Jeffrey Oing ruled against an earlier injunction filed by Macy’s to prohibit J.C. Penney Company, Inc. (NYSE:JCP) from selling Stewart-designed products in certain categories under the label “JCP Everyday.” The judge ruled that Macy’s had not proven its business had suffered irreparable harm due to the product sales by its competitor. Macy’s, Inc. (NYSE:M) earlier injunction prohibits J.C. Penney from selling Martha Stewart-branded products exclusive to Macy’s, such as bed and bath items, cookware, and tableware. The Stewart line at Macy’s is worth about $300 million.

According to Reuters, Macy’s has appealed the judge’s decision and cites the judge had ‘erred in several significant respects.’ Until 2018, Macy’s has an exclusive agreement with Martha Stewart to sell her products. When J.C. Penney acquired a 17% stake in Martha Stewart in 2011, Macy’s, Inc. (NYSE:M) sued Martha Stewart, claiming it had exclusive rights to sell her products. Three months later, Macy’s also filed suit against J.C. Penney Company, Inc. (NYSE:JCP).

Martha Stewart ’s company filed a motion to dismiss the suit, claiming it had not violated its contract terms with Macy’s by designing products under a different label and for a different retailer. The motion was not granted and the court urged both sides to settle their issues outside the legal system. However, mediation efforts were unsuccessful between the two parties.

Brand’s impact on J.C. Penney

According to Reuters, Penney’s inventory of Stewart-designed merchandise could be valued around $100 million. The stake in Martha Stewart was one of several bold business moves made by former J.C. Penney Company, Inc. (NYSE:JCP) CEO, Ron Johnson, in his quest to reinvent the struggling retailer.

In addition to its Martha Stewart-designed products, J.C. Penney has introduced various new brands, such as Joe Fresh and Pantone Universe, in its stores to attract new customers. If these brands are successful, the possible $100 million loss of the Martha Stewart products would be minimized. So, it’s in Penney’s interest to go after consumers outside of Stewart’s target demographic.