Macy’s Inc. won an early victory in its legal battle against Martha Stewart Living Omnimedia Inc. — and delivered a setback to Ron Johnson’s reinvention of J.C. Penney Co. Inc.
A New York State judge granted Macy’s a preliminary injunction, barring the home goods firm from selling Martha Stewart-branded bedding, bath, kitchen textiles, dinnerware and cookware in Penney’s stores. That shuts Penney’s out of some of the brand’s key categories for now.
Macy’s has been exclusively carrying certain Martha Stewart products under a 2006 deal. But the chain was blindsided in December, when the brand inked deal with rival Penney’s to set up shop-in-shops.
Penney’s bought a 16.6 percent stake in the media and lifestyle brand and grabbed two seats on its board as part of the bargain. The deal was one of the first major moves by Johnson, who had just joined as chief executive officer after a very successful stint running Apple’s stores. At the time, he described establishing the brand in Penney’s as a “centerpiece” of his efforts to revive the chain.
Although the Martha Stewart shops in Penney’s weren’t set to open until February 2013, just one month after the brand’s deal with Macy’s was to expire, Macy’s sued for breach of contract in January and maintained that it had the “unilateral right” to extend its agreement with Martha Stewart. Macy’s now claims its agreement with Martha Stewart does not expire until January 2018. Martha Stewart filed counter claims in February, which asserted that Macy’s breached its contract by failing to “maximize net sales” and said that the contract with Macy’s should be deemed “invalid.”
Penney’s did not return calls for comment by press time and Martha Stewart said it would carry on and sell branded goods in Penney’s, but has to stay away from the categories in question until the legal questions are settled.
The ruling is a blow to Johnson’s dramatic reshaping of Penney’s, which includes a new pricing strategy and shop-in-shops from a range of brands. The company lost $163 million in the first quarter and its marketing has failed to date to break shopper habits and get over the elimination of coupons. President Michael Francis left Penney’s after just eight months in June and Johnson took over marketing and merchandising for the firm.
On Friday, Macy’s lawyers argued for both a preliminary injunction and for Martha Stewart’s counterclaims to be tossed out. Presiding Judge Jeffrey Oing agreed with Macy’s on the injunction, adding that “absent Macy’s consent” Martha Stewart should not have entered into other agreements.
The ruling bodes well for Macy’s case, but the verdict is not set in stone.
“The scale tilts in favor of Macy’s,” Oing said, but added that he would not dismiss Martha Stewart’s counterclaims. Instead, the judge advocated that the case go to trial in November.
“I am very happy,” said Macy’s lawyer Theodore Grossman of Jones Day, who hightailed it out of the courtroom once the verdict was delivered.
Jim Sluzewski, a spokesman for Macy’s, gave a more detailed account, offering: “We expect to continue to exclusively sell Martha Stewart-branded merchandise in categories such as cookware, kitchen utensils, bed and bath for the term of our contract, which currently extends to January 2018. Given that this case remains in active litigation, we do not have a further comment to make.”
Sarah Brown, a Martha Stewart spokeswoman, said the ruling “does not change” the company’s plan to roll out its products at Penney’s during the first quarter of 2013.
“Nothing about today’s ruling changes that,” she said. “We will comply with whatever restrictions are placed upon us at this time, but we note it’s a preliminary ruling and we will continue to defend our legal and commercial position. We continue to believe that we have not breached our agreement and that extending our brand to a wide array of retailers is beneficial to all our partners.”
Friday’s four-hour hearing did provide some insight into how both sides intend to proceed.
Arguing on Macy’s behalf, Grossman said Martha Stewart only filed counterclaims as a “knee-jerk reaction” to the initial lawsuit, and up until then the brand and Macy’s had a “trusting relationship.”
The attorney pressed on that Martha Stewart was calculating in its plan to sell products to the rival department store, going so far as to compare Martha Stewart to Yankee baseball player Derek Jeter.
“If Derek Jeter entered into a contract with the Red Sox, I don’t think we’d wait to see if he’s productive in a Red Sox uniform,” he said, implying that the contract had already been breached.
But Martha Stewart attorney Eric Seiler of Friedman Kaplan Seiler & Adelman LLP countered the Jeter analogy, explaining that Martha Stewart already sells a multitude of products to different stores.
“Derek Jeter is playing for 10 teams already,” he said, while also taking a more measured approach.
“We love Macy’s….If we can’t sell MSLO-branded goods, we’d like to fix it or stop [the situation].”
Still, Seiler added that his client has the right to sell its products in branded shop-in-shops, citing that the lawsuit never mentions the contract’s definition of a Martha Stewart store, which 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.”
That argument seemed too nebulous for Judge Oing, who focused more on the fact that two different retailers were making the same product, and thus, causing “confusion” among shared manufacturers, a point that Grossman brought up, which may play a larger role going forward.
“The dual relationship is unworkable,” the judge said. “Exclusivity is at the heart of the Macy’s agreement.”
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)
@Pharrell and his wife Helen Lasichanh were among the stars that came out to celebrate @rimowa’s first pop-up concept shop. The space, which is located on Rodeo Drive in Beverly Hills, draws inspiration from airport luggage carousels and lounge areas – and features the company’s luggage and accessories. If the pop-up is successful it could pave the way for addition temporary shops throughout the world. #wwdfashion (📷: Owen Kolasinski/BFA)
@carineroitfeld celebrated @crfashionbook’s first calendar last night with a dinner party at Spring Place in Manhattan. Photographed by @stevenkleinstudio, the calendar takes on a fitness theme and features @joansmalls, @gigihadid, @danielle_herrington_ – pictured here – and more. “[Carine Roitfeld] wanted me to feel sexy and she wanted me to be myself and feel it out on my own and do what I felt was right,” said Herrington, aka Miss October. #wwdeye
@saintrecords and @virgilabloh last night at @americanexpress’ “A Night With Success Makers” event. “I always bring it back to community because without that I wouldn’t have the courage,” said Knowles when asked how she has gotten where she is now. Read more highlights from their conversation on WWD.com. #wwdeye (📷: @lizdoupnik)
This Just In: Industry sources have told WWD that Anastasia Soare is rumored to be considering selling her beauty business, @anastasiabeverlyhills. According to those sources, Soare has tapped investment bank Imperial Capital to explore sale options for her eponymous beauty brand –– and with at least $340 million in net sales, this would be a big deal. Put in context of other recent transactions for makeup companies, Soare’s price tag could be in the billions if she were to sell the whole thing. #wwdnews #wwdbeauty (📷: @clint_spaulding)
@assouline’s latest book, “The Spirit of Bentley: Be Extraordinary” captures the adventurous attitudes and opulent lifestyles of @bentleymotors’ most creative owners and enthusiasts throughout the U.K. The 292-page hardcover has a section dedicated to showing its team of skilled artisans and photos of its most colorful owners, from George Bamford to designer @alicetemperley, pictured here by Aline Coquelle. #wwdeye
@google released its report on the most popular search terms this year. For fashion brands, the list was led by @gucci, the luxury brand that stunned the market last October when it pledged to stop using fur. Runner ups were @supremenewyork and @fashionnova, along with more established brands like @louisvuitton, @chanelofficial and @ysl. #wwdfashion (📷: @aitorrosasphoto)
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)