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NEW YORK — Macy’s Inc. has fired back at Martha Stewart’s counterclaims, which alleged that the retailer breached its contract by failing to “maximize net sales” of her branded product.
This story first appeared in the February 29, 2012 issue of WWD. Subscribe Today.
In its answer to Martha Stewart Living Omnimedia Inc., filed late Monday, Macy’s said that from 2007 to 2011, sales from third-party licenses, including Martha Stewart Collection, “actually increased.”
Furthermore, the department store said that the proportion of sales for Macy’s-owned private label has “essentially remained the same.”
This contradicts Martha Stewart’s assertion in court papers filed three weeks earlier, that Macy’s used Martha Stewart Collection products to “draw customers” into the retailer, where its own private label brands “take center stage.”
Martha Stewart claimed that its collection helped the retailer’s private label brands “generate higher profits for Macy’s without the burden of paying royalties to a licensor like MSLO.” Martha Stewart also claimed that Macy’s turned down additional product designs, leaving “untold profits on the table.”
Macy’s countered that assertion, stating that Martha Stewart “acquiesced” to all of its decisions, and that the process was a “collaborative” one.
The back and forth between both parties comes after Macy’s sued Martha Stewart in New York State court in January for breach of contract. Central to the lawsuit is whether Martha Stewart violated her 2006 agreement to make and sell certain branded products exclusively to Macy’s by inking a deal to sell branded products to J.C. Penney Co. Inc.
Lawyers for Martha Stewart have contested that their client has the right to sell its products in MSLO-branded shops-in-shop, citing that the lawsuit never mentions the contract’s definition of an MSLO store, which it says is “any retail store branded or operated by MSLO or an affiliate of MSLO or that otherwise prominently features Martha Stewart marks or Stewart property.”
In December, Martha Stewart sold a 16.6 percent stake in its business to Penney’s and signed a 10-year agreement that will create outposts devoted to the brand in Penney’s, beginning in February 2013. That’s right after the five-year deal with Macy’s expires. Macy’s, though, maintains that it has the “unilateral right” to extend its five-year agreement with Martha Stewart. It exercised that right on Jan. 23, the same day it sued Martha Stewart. Macy’s now claims its agreement with Martha Stewart does not expire until January 2018.
But Martha Stewart’s lawyers have argued that the retailer’s recent “attempt” to renew its agreement is “null and void and of no force and effect.” As a result, they say the Macy’s agreement will therefore expire in 2013 and cannot be renewed.
Both sides are due back in court on March 8.