Macy's Reviews Martha Stewart Products in Wake of J.C. Penney Deal

Martha Stewart CEO Lisa Gersh Says Many Marketers Sell in Multiple Venues

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The deal between Martha Stewart Living Omnimedia and J.C. Penney Co. today concludes Martha Stewart's search for a strategic equity investor but also poses some new questions -- not least for Macy's .

Macy's , which stocks hundreds of Martha Stewart products ranging from throw pillows to bath mats, responded to the J.C. Penney Co. pact by saying it has begun reexamining its Martha Stewart lineup. "In light of the proliferation of Martha Stewart-branded product in the marketplace, Macy's is reviewing the Martha Stewart products sold at Macy's for potential changes in the future," said Jim Sluzewski, a Macy's spokesman. "No decisions have been made at this time."

Products in categories such as cookware, kitchen utensils, bed and bath will continue to be sold exclusively at Macy's "until further notice," 36 Sluzewski said. Macy's has consistently used Ms. Stewart in its TV advertising and promotions (see the video below), and features dedicated Martha Stewart content on its website.

In striking up a relationship with Macy's rival, Martha Stewart is betting on a retailer that 's been struggling for relevance. J.C. Penney Co. saw total company sales decrease 5% in the third quarter, while sales at stores open at least a year fell 2% in November, which included Black Friday. Macy's meanwhile reported a 4% jump in total sales during the third quarter and a 5% increase at same-store sales in November.

J.C. Penney has been shaking up its management team and agency roster in the wake of Ron Johnson's appointment as CEO. The Apple alum, who took the helm on Nov. 1, recently brought in former Target CMO Michael Francis as president. J.C. Penney has also recently expanded its agency roster to include Peterson Milla Hooks, long known for its peppy Target work, and PMK-BNC, an entertainment and consumer PR agency. Saatchi & Saatchi is J.C. Penney 's longtime agency.

Martha Stewart CEO Lisa Gersh said today that the J.C. Penney deal would not hurt its relationship with Macy's , pointing out that marketers such as Apple sell their products in multiple venues.

"We're in the fourth year of the deal and it has the potential to go another 11 years," Ms. Gersh said in an interview with Ad Age . "We think this is a great opportunity for all our partners. It's no different than many, many retail strategies, including the Apple strategy. You can go to an Apple store and enjoy those but you can also get those products at Best Buy and Target ."

Macy's and other retailers including JCPenney and Kohl's, however, have all been intensely focused on stocking exclusive and private-label products in recent years as a way to set themselves apart from the competition.

Macy's was not consulted about the J.C. Penney deal, which was arranged through the Blackstone Group under many nondisclosure agreements.

The new agreement puts Martha Stewart products in JCPenney stores for 10 years, long enough for the partners to realize significant returns -- or to become as sour as Martha Stewart Living Omnimedia eventually grew on Kmart. "Have you been in a Kmart lately?" Martha Stewart said on CNBC in 2009, ultimately the final year of her company's Kmart partnership. "It is not the nicest place to shop."

Ms. Gersh said the new J.C. Penney deal carried a typical term. "I wasn't there for the Kmart deal so I can't say whether we were unhappy. But long-term licensing deals are fairly standard, particularly where there's a big commitment from you partner to build distinct Martha Stewart stores in their stores. Ten years isn't uncommon at all."

The deal also calls for J.C. Penney Co. and Martha Stewart to build an e-commerce site, putting Martha Stewart back in a business it abandoned some years ago. Ms. Gersh said the playing field has changed since the early 2000s. "There was no Twitter, no Facebook," she said. "Think about those prehistoric years. We're really excited about the opportunity to build a Martha Stewart store online. We will be combining the content we create online into our e-commerce store. It's another thing we've been focused on doing and this partnership allows us to do this much faster."

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