Should Penney Cut The Apron Strings With Martha?

A report by the New York Post says that J.C. Penney CEO Myron "Mike" Ullman has decided to end the department store’s deal with Martha Stewart, regardless of what a judge decides in Macy’s suit against the celebrity.

Mr. Ullman, according to an unnamed source, said Ms. Stewart’s products are not selling that well and the designs aren’t anything special.

The 10-year, $200 million deal with Ms. Stewart was signed by former Penney CEO Ron Johnson. Earlier this year, a judge ruled that some of the Martha items sold by Penney could not bear her name since it was in conflict with Ms. Stewart’s previous deal with Macy’s. Mr. Ullman has spent much of his time since returning to Penney as CEO trying to undo actions taken by his predecessor.

A spokesperson for Martha Stewart Living Omnimedia disputed the Post report. According to FOXBusiness, Ms. Stewart "has no intention" of ending the deal with Penney.

BrainTrust

Discussion Questions

Should J.C. Penney look to get out of its deal with Martha Stewart? If it does, what will it mean for the Martha brand? Where will it leave Penney in terms of its turnaround?

Poll

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Paula Rosenblum
Paula Rosenblum
10 years ago

I think of this as “Revenge of the Old Boys Network.”

Ron Johnson was from “elsewhere” and Mr. Ullman got dissed in many ways by the board and him. So I think this decision has less to do with sales than it does with his relationship with other CEOs (like Mr. Lundgren). Do I think it’s a good idea? Not particularly—her stuff generally sells.

And what is he going to put in all those shiny new home departments in its place?

What was it someone said a few months ago? Penney’s has gone from worse to worse.

Dick Seesel
Dick Seesel
10 years ago

It’s unclear from the conflicting reports (from two divisions of News Corp.!) whether the deal is on or off. But it’s clear that dropping Martha-branded products (right now, only the party goods shop has her name on it) would represent a tremendous drain of company expense and effort, given the length of the Macy’s trial. Only the lawyers made any money on this one.

The bigger question facing JCP is how quickly and how aggressively to discontinue any home store brands (or softline brands) that aren’t working. There may be contractual agreements in place with some vendors, especially if they helped pay for remodels. On the other hand, JCP could generate cash, traffic, inventory and floor space if it moved more urgently to drop the losers from the Johnson era — despite the short-term margin pain.

John Boccuzzi, Jr.
John Boccuzzi, Jr.
10 years ago

Mr. Ullman is right in trying to end the deal if 1) the sale of product will not more than cover the investment of $200 million and 2) if the fight with Macy’s is going to distract the retailer from focusing on customers and rebuilding the brand.

The Martha brand was an interesting opportunity for Penney, but it may not fit with the core customer Mr. Ullman is seeking to attract.

Gene Detroyer
Gene Detroyer
10 years ago

I think JCP and Martha should continue together. They are both old, boring, and unimaginative, and the brands will die along with their constituency.

Tom Redd
Tom Redd
10 years ago

In simple terms—smart move. The deal was nothing to do with retail. It was Ron looking to upset the market with anything he could find. In retail, deals with vendors are deals, and you do not step into deals that were or are not yours.

Some things in retail—like good business—will not be changed by the Millennials.

Tom…old fashioned? No, just honest….

W. Frank Dell II, CMC
W. Frank Dell II, CMC
10 years ago

For a customer focused retailer, the answer is simple. How are the sales? If sales are increasing in both units and dollars, keep the line. If sales are constant, what can the line be replaced with and will it have increased sales and margin? If sales are declining, start looking for the replacement.

The bigger problem is what JCP does with its equity stake in Martha Stewart. In the department store business, very few lines have a long term. As they say in fashion, some years you are in and some years you are out. If you are out for two years, drop the line. Department store retailing must support the treasure hunt consumer experience, since they invented it.

Mark Price
Mark Price
10 years ago

While it may seem that the Martha Stewart brand deal is a distraction to the organization, the brand has the potential to improve the image of JCPenney as more than just a low-end retailer. Now clearly, if the business under Martha Stewart is not feeding, then of course you should look to cut bait and get out.

There is a temptation with a new “administration” to throw out everything that the former CEO did. This deal could in fact be strategic and should be evaluated carefully, rather than simply tossed out with the rest of Ron Johnson’s mess.

Doug Fleener
Doug Fleener
10 years ago

You would think Martha would have the inside scoop on whether she’s being dumped or not.

I never totally understood the deal to begin with. Why get behind a brand that was so closely associated with Macy’s?

All and all, I think it’s just a case of cost too much, not enough is selling, cut bait and move on to the next lawsuit.

R Seaman
R Seaman
10 years ago

Go into a JCP store and look at the Martha Stewart collection. If you are a merchant, you will quickly realize that the character of Martha Stewart’s merchandise is the reason sales have been slow and a good reason to drop her line.

Will this action impact the Martha Stewart company? It already has.

vic gallese
vic gallese
10 years ago

Mr. Ullman is making a good decision here! You can’t put everyone into a time machine to go back to when Martha was relevant. There are more hip brands, with probably better margin to go after. This move will not, however, make a difference in the JCP turnaround.

Lee Kent
Lee Kent
10 years ago

I’m thinking it may cost more fighting in court than to continue the line. But, once again, Penney’s is jumping too fast, IMHO.

The current ads are back-to-school focused on kids. I haven’t seen much of anything focused on the Home store.

Would they really expect sales of a Home store line to be doing well, with a mixed up consumer, if said consumer doesn’t even know it’s there?

Mark Burr
Mark Burr
10 years ago

To the first question, yes, J.C. Penney should run, not walk from their deal with Martha Stewart. To the second question, it doesn’t matter one bit to J.C. Penney what happens to her brand if they escape.

J.C. Penney’s best opportunity is to look to the likes of Target in their turnaround. A singular brand focused on a core customer seeking value, quality, and a clean experience. They simply will not be competitive against Macy’s, Nordstrom, Lord & Taylor, Younkers, or the like. Unlike in many segments, there is an opportunity to be a value centered retailer with a singular brand such as Target. If that were not so, Target wouldn’t exist. While there are plenty of players in the higher alternative, there really is not a player against Target. Target is not Walmart. J.C. Penney is not Macy’s.

Craig Sundstrom
Craig Sundstrom
10 years ago

“… Ms. Stewart’s products are not selling that well and the designs aren’t anything special.”

What more do you need to know? Case closed. Indeed, of all the moves Mr. Johnson made, the Case of the Purloined Designer is the one which I find impossible to defend.

Ed Dennis
Ed Dennis
10 years ago

Martha Stewart is not J.C. Penney’s problem. J.C. Penney’s problem is that it will spend time messing with stuff like this when it should be focusing 100% of its time and energy on getting consumers back in their stores and making them happy when they get there.

This is a great example of Penney’s problems. Management doesn’t have the chops to focus on the real problem so they put up a straw man and tilt at windmills. Where is the energy going?

Brian Kelly
Brian Kelly
10 years ago

Martha is so post peak, if not creepy. Convicted felon dumps on retailer who helped her out when she was in a jam. Okay, so most consumers won’t clue in on that…

Ullman is taking advantage of the turnaround to cull unproductive dogs from the assortment. And yeah, maybe champagne will be shared at the Big Show.

With a brand unique to JCP, it differentiates itself from mall anchor competition. Here’s the real question, can JCP self source a relevant/compelling home line?

Or as we like to say, retail ain’t for sissies.

Carol Spieckerman
Carol Spieckerman
10 years ago

I’ll say it again, the worst thing Ullman could do is over-correct…and it looks like that is exactly what he’s doing. Paula and Dick have it right. This is revenge of the merchant princes and the many brand deals made under Johnson can’t just be pulled on a whim, and Martha in particular given JCP’s equity stake (which BTW was well underway before Johnson came on the scene—let’s not heap coals).

Focusing myopically on all of this un-doing may be J.C. Penney’s final undoing.

Ed Rosenbaum
Ed Rosenbaum
10 years ago

Obviously I got to read this late in the day. My first thought was who cares what they do with the Martha Stewart deal? That should be one of the least of their problems. They need to find a way to get old customers back and new customers to come in and spend money.

g chu
g chu
10 years ago

All of the negative comments on “Martha Stewart’s products” have everything to do with JCP and nothing to do with the Martha brand. The Martha brand was a crucial success for a Macy’s turnaround, and the same promise holds for a JCP turnaround.

No, the Martha brand issue leaves the JCP turnaround calling for a clean sweep of the JCP board and Ullman, all of whom embody the certain demise of JCP.