Martha Stewart Living, Macy's settle contract dispute

New York TimesJanuary 2, 2014 

Macy’s and Martha Stewart Living Omnimedia have ended their legal battle over whether J.C. Penney had the right to sell certain Martha Stewart branded housewares.

On Thursday, Macy’s and Martha Stewart announced that they had settled the breach-of-contract case, saying the details were confidential and not material to either company. They said their partnership would continue, but declined to comment further.

Macy’s larger suit against J.C. Penney remains. Macy’s said the settlement with Martha Stewart Living would not affect that case.

Macy’s and Martha Stewart Living joined forces in 2006 with an agreement to sell “Martha Stewart” branded products in Macy’s stores, including exclusive items like kitchenware and bedding. The partnership has done well over the years, accounting for $250 million in sales in 2012.

But Martha Stewart Living and J.C. Penney announced a deal in 2011 to sell home décor products out of Martha Stewart store-within-a-store locations at Penney’s stores. The move was part of a broader turnaround effort by J.C. Penney’s previous chief executive, Ron Johnson, who was fired last year as losses mounted at the retailer.

After the deal was announced, Macy’s sued them both, saying it violated the terms of its original contract with Martha Stewart Living. The retailer called for pulling certain items off Penney’s shelves and demanded compensation for loss of profits. Penney and Martha Stewart Living countered that their agreement fell into an exception carved out in the Macy’s contract.

Days before a judge was expected to rule on the Penney case, Penney and Martha Stewart Living backed down, revising their agreement to exclude kitchen, bed and bath products, items that the Macy’s suit said were exclusive. In effect, J.C. Penney gave up many core home décor products and was left with items like rugs and window treatments.

Theodore M. Grossman of Jones Day law firm, lead counsel for Macy’s in the case, said at the time that the new agreement “was a complete surrender.”

With the settlement, Martha Stewart Living puts to rest a costly and contentious case. In October, Martha Stewart Living reported a disappointing third quarter, partly because the diminished relationship with J.C. Penney had cut into revenue. J.C. Penney has shown some signs of improvement in recent months, although it continues to post losses.

Macy’s has been a standout. The company’s earnings per share increased 31 percent over the same period the year before, easily beating analysts’ expectations.

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