JC Penney could wind up with empty shelves

Associated Press

NEW YORK (AP) — J.C. Penney, which is struggling with big losses and steep sales declines, could face another challenge: empty shelves.

New York State Supreme Court Judge Jeffrey Oing told Penney's attorneys on Monday that the chain took a risk by ordering towels, cookware and other products from the company that home diva Martha Stewart founded. In fact, Oing said he could force Penney to stop the products from heading to the shelves this spring even as they come off the docks.

"That's the risk your client took," Oing said. "Ultimately, you guys played it out."

Oing said he will hear oral arguments on Friday over the issue of whether Penney can sell goods like towels designed by Martha Stewart Living that are covered by Macy's exclusive agreement but are not sold under the Martha Stewart brand name.

The judge's statements came during the start of the third week in a trial that pits J.C. Penney Co. against rival Macy's Inc. over their relationship with Martha Stewart Living Omnimedia Inc. At issue is whether Macy's has the exclusive right to sell some of Martha Stewart branded products such as cookware, bedding and bath.

In a statement Monday, Penney said that it would not have proceeded with its agreement with Martha Stewart Living if Penney thought it would interfere in any way with Macy's pact with the media and merchandising company.

"Macy's is attempting to gain through the lawsuit more rights than it actually has under its written contract with" Martha Stewart Living, the company said in the statement.

Macy's has argued that Penney breached its long-standing contract when it signed a deal in December 2011 to open Martha Stewart mini shops in most of its stores this spring. Macy's, which has been the exclusive carrier of some Martha Stewart products including towels and pots since 2007, is trying to block Penney from selling those products. It also wants to stop Martha Stewart from providing any designs to Penney — whether or not it carries the Martha Stewart label.

Last July, Macy's won a preliminary injunction against Martha Stewart Living that would prevent it from selling Martha Stewart branded housewares and other exclusive products at Penney. In August, the judge granted permission for Penney to open Martha Stewart shops as long as the items under the exclusive contract with Macy's are not sold in them.

But Penney plans to sell products that are part of Macy's exclusive agreement in May. The goods will be branded under JCP Everyday, a new brand reserved for the home diva's merchandise. Penney also plans to sell products like curtains and stationery that are not a part of the exclusive Macy's contract under the label "Martha."

Mark H. Epstein, representing Penney, argued that a decision to block the department store from selling goods like towels and bedding that don't carry the Martha Stewart label would be devastating because the company doesn't have a substitute.

Oing said even though he understands the financial repercussions, his decision can't be influenced by financial matters.

"These three companies are the fabric of America," Oing said. "I haven't decided what I am going to do. I'm keeping the cat in the bag."

The stakes are high for all three companies. Macy's CEO Terry Lundgren testified last week that the Cincinnati-based department store chain built the Martha Stewart brand to become the biggest name in the home area, and having a rival carry similar products would hurt business.

Martha Stewart Living, based in New York City, is trying to fatten merchandising revenue as it struggles to offset declines in its broadcast and publishing business, a segment that accounts for more than 60 percent of its total business. Martha Stewart is expected to testify Tuesday.

But perhaps the company with the most to lose is Penney. The company, based in Plano, Texas, is in the middle of a turnaround plan that's faltering: The company has reported big losses and sales declines for four straight quarters since it started a strategy to get rid of most of its sales in favor of everyday low prices last year. Penney, which started to roll out shops last fall, has been counting on a reinvented home area to attract shoppers. It had planned to use the Martha Stewart brand as the anchor.

Brian Sozzi, a retail industry analyst with NBG Productions, said that if Penney ends up being forced to give up the JCP Everyday line of products, it could have a "mushrooming effect" just as worries abound that the company is burning through cash.

"The company invested large sums of money," Sozzi sad.

View Comments (286)

Recommended for You

  • US billionaire says WWII Japanese ship found in Philippines

    Microsoft co-founder Paul Allen said Wednesday he had found one of Japan's biggest and most famous battleships on a Philippine seabed, some 70 years after American forces sank it during World War II. Excited historians likened the discovery, if verified, to finding the Titanic, as they hailed the…

    AFP
  • U.S. may review 1959 airplane crash that killed Buddy Holly

    (Reuters) - U.S. transportation safety investigators said on Wednesday they are reviewing a request to reopen a probe into the 1959 airplane crash that killed musicians Buddy Holly, Ritchie Valens, J.P. Richardson, better known as "The Big Bopper," and their pilot. The original investigation 56…

    Reuters
  • France, Cameroon wouldn't take foreigner later shot by LAPD

    LOS ANGELES (AP) — A homeless foreigner shot to death by Los Angeles police was in the country illegally after serving time for a bank robbery but couldn't be deported because no country would take him, U.S. immigration authorities said Wednesday.

    Associated Press48 mins ago
  • 175-Pound Pit Bull Hulk Shatters Misconceptions About the Breed

    This dog just may be the world's largest Pit Bull. Only 18-months-old, Hulk weighs a hefty 175 pounds. He's also best friends with a 3-year-old boy.

    ABC News
  • Iranian president says Israel 'greatest danger'

    Iranian President Hassan Rouhani on Wednesday said Israel creates the "greatest danger" in the region, after Israeli Prime Minister Benjamin Netanyahu warned against a nuclear deal with the Islamic republic. In a speech on Capitol Hill, Netanyahu said Tuesday the nuclear agreement US President…

    AFP
  • Former marine reported killed in Syria

    A former Royal Marine has become the first Briton to be killed while fighting with Kurdish forces battling Islamic State jihadists in Syria, leaving his family "devastated" Wednesday. Konstandinos Erik Scurfield, 25, died on Monday in a battle with IS militants, a source in the Kurdish People's…

    AFP
  • Killers sought in deaths of 300,000 chickens in South Carolina

    By Harriet McLeod CHARLESTON, S.C. (Reuters) - Revenge may be the motive for the killings in South Carolina of more than 300,000 commercial chickens worth about $1.7 million over the past two weeks, authorities said on Monday. Birds have been found dead of unnatural causes in 16 chicken houses at…

    Reuters
  • Americans Love K-Cups, but Their Creator Regrets Inventing Them

    Now it seems that John Sylvan, the inventor of the tiny containers, is firmly on Team #KillTheKCup too. “No matter what they say about recycling, those things will never be recyclable,” said Sylvan.

    Takepart.com
  • Australians on Indonesia death row arrive on execution island

    Two Australian drug smugglers were taken Wednesday to an Indonesian island where they will be executed despite frantic diplomatic efforts to save them, as Prime Minister Tony Abbott said Australia was "revolted" by their looming deaths. Andrew Chan and Myuran Sukumaran, the ringleaders of the…

    AFP
  • View

    Hello kitty and kitty and lots more kitties on Japanese island where cats rule (17 photos)

    An army of feral cats rules a remote island in southern Japan, curling up in abandoned houses or strutting about in a fishing village that is overrun with felines outnumbering humans six to one. Originally introduced to the mile-long island of Aoshima to deal with mice that plagued fishermen's…

    Yahoo News
  • 'Thousands' of Russian troops in east Ukraine: US envoy

    The United States' senior envoy to Europe alleged Wednesday that Russia had deployed "thousands and thousands" of troops to neighboring Ukraine. Speaking to a congressional foreign affairs committee, Assistant Secretary of State Victoria Nuland also told US lawmakers that Russia was flooding…

    AFP
  • Couple plead not guilty to locking up kids 22 hours a day

    ASHTABULA, Ohio (AP) — A husband and wife in Ohio pleaded not guilty Wednesday to charges that they kept three of their adopted children locked up 22 hours a day, gave them little to eat and beat them with a paddle that became stained with blood.

    Associated Press
  • Mom convicted of killing son, 5, by poisoning him with salt

    WHITE PLAINS, N.Y. (AP) — A woman who blogged for years about her son's constant health woes was convicted Monday of poisoning him to death by force-feeding heavy concentrations of sodium through his stomach tube.

    Associated Press
  • Georgia police officer killed in shootout

    By David Beasley ATLANTA (Reuters) - A Georgia police officer was killed in a shootout with a suspect in suburban Atlanta early on Wednesday, authorities said. Officers went to investigate reports of shots in a suburban neighborhood and came under fire about 1:30 a.m. EST, according to the Fulton…

    Reuters
  • Afghan forces kill dozens of militants in hostage rescue operation

    By Sarwar Amani KANDAHAR (Reuters) - Afghan security forces have killed dozens of militants in a military operation aimed at freeing a group of civilian hostages in southern Afghanistan, an army official said on Wednesday. Eyewitnesses said most passengers belonged to the ethnic Hazara minority, a…

    Reuters
  • View

    Turkish jetliner skids off on runway (9 photos)

    A Turkish Airlines jet landing in dense fog in the Nepalese capital Wednesday skidded off a slippery runway but there were no serious injuries, officials said. Officials at Kathmandu's Tribhuwan International Airport said the plane with 238 people on board was coming from Istanbul when the…

    Yahoo News
  • Hundreds of starving koalas killed in Australia

    Close to 700 koalas have been killed off by authorities in southeastern Australia because overpopulation led to the animals starving, an official said Wednesday, sparking claims of mismanagement. Victoria state Environment Minister Lisa Neville said the koalas were euthanised around Cape Otway near…

    AFP
  • Father says no proof his son is 'Jihadi John'

    The father of "Jihadi John" said in an interview published Wednesday that there was no proof that his son was the Islamic State executioner, adding there were a number of "false rumours" circulating. "There is nothing that proves what is being circulated in the media, especially through video clips…

    AFP
  • View

    Ukraine mine explosion (18 photos)

    Dozens of miners were trapped underground and feared dead after a blast on Wednesday at a coal mine in the eastern Ukrainian rebel stronghold of Donetsk, with rescuers saying the chance of finding many survivors was slim. Mine officials said the explosion was not linked to fighting at the nearby…

    Yahoo News