J.C. Penney Company, Inc. (JCP) and Macy’s, Inc. (M)’s Tug of War

According to NBC News, Martha Stewart partnered with J.C. Penney Company, Inc. (NYSE:JCP) to revitalize its own business, which did not grow as expected with Macy’s, Inc. (NYSE:M). Taking advantage of an apparent loophole in the Macy’s, Inc. (NYSE:M) contract, Stewart and Penney planned on opening mini-shops within J.C. Penney stores. The deal has affected Stewart’s relationship with long-time friend, Macy’s CEO, Terry Lundgren, who has not spoken to Stewart since he heard about it.

Conclusion

In the long run, this very public lawsuit may work against Macy’s if the company ends up losing the case. As this issue drags on in the media, the public’s exposure to the JCP Everyday brand, and its link to Martha Stewart, provides free advertising for J.C. Penney. If Macy’s, Inc. (NYSE:M) wins the lawsuit, J.C. Penney would take a $100 million hit that would be detrimental to the company’s stock. That would be more bad news for a company trying to raise $1 billion in cash and struggling to turn around last year’s 25% drop in revenue.

As the fight continues, it’s clear that Martha Stewart is regarded as a strong brand coveted by retailers, despite the company’s recent sales declines and five straight years of losses. With 30% of its revenue riding on its merchandising business, Martha Stewart stands to gain from having relationships with both retailers. If the shop-within-a-shop concept succeeds at J.C. Penney Company, Inc. (NYSE:JCP), this could provide a boost to the stock price of both companies.

The article Tug of War Between J.C. Penney and Macy’s Over Martha Stewart originally appeared on Fool.com is written by Eileen Rojas.

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