Stewart should hope to lose the suit and be embraced by Macy’s again, if the powerful retailer will have her back. J.C. Penney’s sales and balance sheet problems are so great that it may not exist as an independent company a year from now. If that happens, Martha Stewart’s deal with J.C. Penney would be close to worthless.
Reuters summed up the essence of the legal battle:
J.C. Penney in December 2011 acquired a 17 percent stake in Martha Stewart Living for $38.5 million as the department-store chain sought to revive sales with new mini-stores dedicated to Stewart and other specific brands.
Macy’s sued New York-based Martha Stewart Living for breach of contract a month later, saying it has the exclusive right to sell goods in certain categories under a 2006 agreement between the two companies. Macy’s sued J.C. Penney in the same court the next month.
Macy’s has said J.C. Penney is trying to reap the benefits of Macy’s work with Stewart, arguing that the retailer contracted with Stewart at a time when she had just been released from prison and was associated with the “significantly downscale” Sears Holdings Corp.’s K-Mart.
One of the ironies of the situation is that the J.C. Penney investment in Martha Steward has lost much of its value, adding insult to injury.
The shares of Martha Stewart Living Omnimedia have tested $2 in the past year. If the J.C. Penney case is lost, the stock price will drop well below that support level.
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