Macy's & J.C. Penney Trial Resumes as JCP CEO is Forced Out

The month-long court ordered mediation for Macy's, J.C. Penney ("JCP") and Martha Stewart Living Omnimedia ("MSLO") did not come to any resolution so yesterday, the parties headed back to court to resume the trial over rights to sell Martha Stewart branded items.  (Recap? read here).  

Macy's wasted no time letting Judge Oing know that it it believed JCP had violated the injunction as it caught them selling Martha Stewart branded products that Macy's claimed it had exclusive rights to including plastic champagne flutes and acrylic pitchers.  Macy's lawyers requested that the judge block these sales.  MSLO attorney stressed that since these were disposable items, they did not fall into the exclusive categories as Macy's claims.  Judge Oing granted JCP and MSLO some time to look into Macy's accusations and get back to him. 


Macy's is expected to finish its arguments on Wednesday. 

As JCP lawyers defended the company it court on Monday, JCP's board was busy forcing out its CEO, Ron Johnson after 17 months on the job and brought back his predecessor, Myron Ullman.  Johnson's relatively short tenure as CEO brought drastic changes doing away with coupons and sales isolating its core consumer base of bargain hunters.  Sales plummeted 28.4% giving the company the worst loss of the year. 

Johnson's one smart move may have been launching Canadian retailer, Joe Fresh within JCP stores as a "store within a store" concept.  Joe Fresh is still relatively new to the states but is gaining popularity as simple and affordable fashion.  By opening Joe Fresh stores in JCP, Joe Fresh now has a larger presence in the U.S and also a web presense.  Who knows if this benefits Joe Fresh or JCP more but JCP can sure use a boost.

Brian Sozzi, CEO of Belus Capital Advisors, notes that a ruling against JCP may force it into precarious financial situations.  JCP already has loads of inventory it cannot yet sell just sitting in cargo ships waiting to be delivered.  Moreover, JCP invested $38.5 million for a 16.6% interest in MSLO giving it a valuation of 30% higher than it is worth today.   For every day that the case is in trial, JCP loses a little bit more. 

Read More:
WSJ: Penney CEO Out, Old Boss Back In
WSJ: Macy's Says Penney Violates Detente
Yahoo Finance: Macy’s Looking to Finish Off JC Penney in Court