| NEW YORK
NEW YORK Feb 25 Macy's Inc Chief
Executive Terry Lundgren said he was shocked when Martha Stewart
told him in 2011 that she was starting a new alliance with
rival J.C. Penney Co Inc.
Lundgren, testifying on Monday in the trial of two Macy's
lawsuits over the alliance, said Stewart told him of the deal
the night before J.C. Penney announced it. He said he was so
appalled he hung up on her.
"I was completely shocked and blown away," Lundgren said. "I
was literally sick to my stomach."
J.C. Penney announced on Dec. 7, 2011, that it would launch
Martha Stewart boutiques in about 700 of its department stores
in 2013. It also bought 17 percent of her company, Martha
Stewart Living Omnimedia.
Macy's, which has its own deal with Martha Stewart, sued her
company in January 2012 for breach of contract, and later sued
J.C. Penney as well. Macy's says it has the exclusive right to
sell Martha Stewart products in certain product categories,
including cookware and bedding.
The two cases were consolidated for a non-jury trial before
Justice Jeffrey Oing in New York state court in Manhattan.
Lundgren, 60, said Stewart sounded like she was reading from
a document prepared by lawyers when they spoke, and that he cut
off the conversation when the home goods doyenne claimed her
deal with J.C. Penney would be good for Macy's.
"I think that's when I hung up," said Lundgren. "The thought
this was going to be good for Macy's was so far from anything I
Lundgren said that at the time he considered Stewart a
friend, and he has not spoken to her since.
Macy's is still committed to the business relationship it
developed with Martha Stewart Living Omnimedia, however. The
Martha Stewart brand at Macy's grew 8 percent last year, growth
that is twice that of Macy's as a whole, Lundgren said.
"This is an extremely important brand and we are going to
continue to highlight the brand in our stores," Lundgren
Macy's built Martha Stewart into its No. 1 home brand after
Stewart came out of prison in 2005 after serving time for lying
about a stock sale.
J.C. Penney CEO Ron Johnson is scheduled to take the stand
on Friday. Martha Stewart also is expected to testify, but it is
Martha Stewart shops in J.C. Penney stores, set to open in
May, are the centerpiece of an improved home goods section that
Johnson has called crucial to returning Penney to growth.
The cases are Macy's Inc. v Martha Stewart Living Omnimedia
Inc., 650297/2012, and Macy's Inc. v J.C. Penney Corp.,
652861/2012, New York State Supreme Court, New York County.