By Karen Freifeld
NEW YORK Oct 21 J.C. Penney Co Inc and
Martha Stewart Living Omnimedia on Monday announced a
revised agreement that eliminates Stewart's products in home
goods categories to which rival Macy's Inc claims
The amended deal calls for the domestic doyenne's company to
design Martha Stewart-branded products for J.C. Penney in window
treatment, holiday and other categories not claimed by Macy's.
Penney also gave up its 17 percent stake in Martha Stewart's
Macy's sued Penney and Martha Stewart Living after the two
announced a partnership in December 2011. Macy's said the
agreement breached its contract with Martha Stewart that
included exclusive rights to Martha Stewart-branded cookware,
bedding and bath products.
"It's a total victory for Macy's," attorney Ted Grossman,
who represents Macy's, said of the revised agreement between
Penney and Martha Stewart. "They obviously knew they had lost
the trial, just as we clearly believed that we had won."
Penney's stock hit a more than 30-year low on Monday,
closing at $6.42 on the New York Stock Exchange after falling as
low as $6.27. An analyst had slashed her price target on shares
to one dollar, citing concern the retailer "may engage in
financial restructuring in 2014."
Former Penney Chief Executive Officer Ron Johnson viewed
Martha Stewart as key to his vision for remaking the struggling
retailer. Johnson, who failed to win over shoppers and
investors, was ousted in April.
"We are happy to be moving forward," Penney Chief Executive
Mike Ullman said in Monday's statement announcing the revised
Johnson, Martha Stewart and Macy's Chief Executive Terry
Lundgren all took turns on the witness stand during the trial in
New York state court.
Justice Jeffrey Oing, who presided over the trial, had set a
Friday deadline for Penney and Stewart's licensing company to
negotiate changes to their agreement before he ruled, according
to people familiar with the case.
Macy's still has claims for damages as a result of Penney's
interference with Macy's contract and Martha Stewart's breach of
contract, the department store said in a statement.
Macy's contract with Martha Stewart runs through 2018. The
company has said Martha Stewart is its No. 1 home brand.
A spokeswoman for Penney and a spokesman for Martha Stewart
declined comment on any potential damages.
The amended contract runs through June 30, 2017, according
to the announcement, shorter than the 10-year deal in the
original agreement. In addition, the statement said Penney will
no longer own 11 million shares of Martha Stewart Living or have
representation on Martha Stewart Living's board of directors.
The original Martha Stewart Living-Penney deal was estimated
at over $200 million. The parties would not comment on the value
of the amended agreement.
Imperial Capital analyst Mary Ross Gilbert cut her one-year
price target on the stock from $5 to $1.
Penney spokeswoman Kristin Hays said Penney expects to end
the year with more than $2 billion in liquidity. Last week, Hays
denied a market rumor that the chain had hired bankruptcy
Penney has been trying to lure back shoppers after Johnson's
failed experiment in 2012 to go upmarket led to a 25 percent
drop in sales. The company incurred huge losses and spent large
amounts of money on store remodels.
The case is Macy's Inc v Martha Stewart Living Omnimedia
Inc, 650197/2012, New York State Supreme Court, New York County.