JCPenney Could Suffer A 'Fatal Blow' If Martha Stewart Deal Falls Through

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Aimee Groth, Business Insider

JCPenney has a lot to lose if its planned Martha Stewart line falls through.

Macy's took Stewart and JCPenney to court after she announced a home goods line with the retailer. Macy's says that Stewart's contract with them was exclusive, and a line with JCPenney would hurt sales of her existing products.

“I’m very concerned that this could be a fatal blow to JCPenney,” Walter Loeb, a retail analyst, told the New York Times. "Ron Johnson has never been a chief executive, and I can only assume this reflects his naïveté and lack of experience."Advertisement

Johnson has openly said that Stewart is a key part of his turnaround plan, which has been floundering.

For now, JCPenney has agreed to halt plans on the line until the trial resumes in April. The judge recommended that the two sides go to mediation before then.

Stewart impressively argued her case on the stand earlier this week. She said that Macy's failed to maximize her potential there, and that she would have her own shop at JCPenney.

But despite her dazzling testimony, it's unlikely that her products will ever hit shelves at JCPenney, top fashion contracts lawyer Steve Gursky told us.

"I haven't seen Stewart or JCPenney present anything that would change a reasonable person's mind," said Gursky, who has represented Michael Kors and Paula Deen. "Even as someone who is on the designer's side of things, her argument is pretty weak." Even presiding judge Jeffrey Oing said he wasn't "so sure there's any ambiguity in this contract." That doesn't bode well for JCPenney. Advertisement

Stewart's argument that having her own shop at JCPenney is different from having a line is a "red herring," Gursky said.

"This is a case of Martha Stewart wanting to have her cake and eat it too," Gursky said. "She had an exclusive agreement, and she's clearly broken it."

"I don't see how her products will ever legally make it on the shelves at JCPenney," he said. Advertisement