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Winnipeg Free Press - PRINT EDITION

Stewart defends deal with Penney

Says sales 'static' in Macy's stores

By: Anne D'Innocenzio

Posted: 03/6/2013 1:00 AM | Comments: 0

Martha Stewart (CP)

NEW YORK -- Home decor and food guru Martha Stewart testified in court Tuesday she did nothing wrong when she signed an agreement to open shops within most of J.C. Penney's stores across the country.

Stewart testified in New York state court in a trial over whether the company she founded breached its contract to sell cookware, bedding and other items exclusively at Macy's when she inked the deal with Penney.

During three hours of testimony, Stewart, who founded Martha Stewart Living Omnimedia Inc., denied Macy's allegations she did anything unethical and said she was only looking to expand her brand.

In fact, Stewart said it's Macy's that didn't uphold its end of the agreement to try to maximize the potential of her business. She said her brand had grown to about $300 million at Macy's, but the business was now "static" at the department-store chain. She said she had hoped the business would exceed $400 million.

"We were disappointed," Stewart, 71, testified. "We got to a certain dollar amount and struggled and never got any further."

The trial, which began Feb. 20, focuses on whether Macy's has the exclusive right to sell some Martha Stewart-branded products such as cookware, bedding and bath items.

Penney signed a pact in December 2011 with Martha Stewart Living to open shops at most of its 1,100 stores by this spring. A month later, Macy's renewed its long-standing exclusive deal with Martha Stewart until 2018, then it sued both Martha Stewart Living and Penney.

Macy's is trying to block Penney's from opening the shops. The company also is seeking to stop Martha Stewart from providing any designs to Penney -- whether or not they carry the Martha Stewart label.

Martha Stewart and Penney are using what they believe is a loophole in the agreement between Macy's and Martha Stewart to move forward with their deal. It's a provision that allows Martha Stewart to sell some of the products it offers in Macy's stores at Martha Stewart stores, too.

According to Martha Stewart lawyers, because the Macy's agreement doesn't specify Martha Stewart stores have to be "stand-alone" stores, the mini shops within Penney's stores would not violate the contract. Stewart said in court Tuesday even Amazon.com could be considered a store, given shoppers are shifting more to online buying.

"I don't think you need walls to be a store," she said.

The trial has revealed some of the drama that took place behind-the-scenes between Stewart and the CEOs of Macy's Inc. and J.C. Penney Co.

-- The Associated Press

Republished from the Winnipeg Free Press print edition March 6, 2013 B6

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