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Macy's Wins Martha Stewart Case over JC Penney But No Damages

Zacks Equity Research

At last Macy's, Inc. (M) has heaved a sigh of relief. Market reports reveal a New York state judgement that J. C. Penney Company, Inc. (JCP) had interfered with the exclusive pact between Macy's and Martha Stewart Living Omnimedia Inc. (MSO). However, what came as a setback for Macy’s was that it was declined claims to any damage or attorney’s fees from J. C. Penney due to lack of convincing evidence disclosing that the latter's action has hurt it. On the other hand, the judge asked the companies to settle their issues through a judicial officer or a referee.

Shares of Macy’s dipped 0.3% yesterday, while that of department store retailer, J. C. Penney nudged up 0.4%. The biggest gainer among the three retailing companies was Martha Stewart, whose shares jumped 8.5% the day before.

Macy’s, which competes with Dillard's Inc. (DDS), did not welcome the licensing deal signed between J. C. Penney and Martha Stewart in Dec 2011. The company claimed that Martha Stewart’s agreement to sell certain home and lifestyle merchandise at J. C. Penney’s stores violated the exclusive pact that it shared with Martha Stewart. Consequently, it filed a lawsuit in the New York State Supreme Court against Martha Stewart for the breach of contract. It also dragged J. C. Penney to court over the deal.

Macy's and Martha Stewart settled their legal dispute over the latter’s deal with J. C. Penney. However, none of the companies disclosed the terms of the agreement. Under a settlement, J. C. Penney was forbidden to sell any products under the Martha Stewart brand but was allowed to sell selected products designed by Martha Stewart under its ‘Everyday’ label. However, Macy’s legal dispute with J. C. Penney was far from over.

Last year in October, J. C. Penney agreed to return the 11 million shares (purchased for $38.5 billion) – which represent a 16% stake – it had acquired at the time of entering the deal with Martha Stewart. After the stock sale, J. C. Penney was no longer part of Martha Stewart’s board of directors.

Macy's and J. C. Penney carry a  Zacks Rank #3 (Hold) each, while Martha Stewart Living Omnimedia holds a Zacks Rank #2 (Buy).

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