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Martha Stewart Dishes From Lofty Perch of Witness Stand in Macy's-JCP Trial

Posted by Dale Buss on March 5, 2013 06:36 PM

One more day of Martha Stewart on the stand in the Macy's-JCPenney trial over her brand and wares, and neither retailer may not want her anymore.

Testimony by the 71-year-old Diva of Domesticity on Tuesday at times sounded like something from Les Miserables or A Tale of Two Cities, leaving her views of the differences between Penney's and Macy's customers abundantly clear.

Penney customers "have 30 percent less income than Macy's shoppers," she said near the end of her testimony, according to the Twitter coverage from the courtroom by Ashley Lutz, who covers retail for Business Insider. "They're going to buy different things."

Not long after, a Macy's attorney in the landmark court case called her out for saying that JCP has different customers than Macy's, the lawyer noting that the Macy's contract prohibited her brand from collaborating with "downscale" partners, presumably because it would tarnish the value of the Stewart marque for Macy's.

Her testimony came almost eight years to the day after she was released from prison for insider trading—for which she never testified, so this was her first time on the stand, a spokeswoman told New York Times retail reporter Stephanie Clifford—and 15 months after her company's "strategic alliance" with JCPenney was announced.

The deal with Stewart was the first big announcement by JCPenney CEO Ron Johnson, the former Apple retail head who Stewart praised for his "vision" on the stand today, and who testified on Friday and Monday about how he wooed Stewart after reading about her company's financial woes.

Johnson has spent the last year fruitlessly attempting to move the struggling retail brand upscale by trying (unsuccessfully) to wean customers off "sales" that remain the lifeblood of competitors such as Target and Kohl's and instead developing a new "store-within-a-store" format for Penney that would star the Stewart brand and merchandise.

But in two sessions on the witness stand in Manhattan today, Stewart (and her prominent ego) went to great pains to explain a primary reason she saw her company's deals with each retailer as compatible: Penney is distinctly "downscale" from Macy's by targeting a lower-earning echelon of customer, so the Penney partnership wouldn't step on the terms of her contract with Macy's. She explained other details why she didn't believe that a Stewart-branded space for her homeware collection inside Penney stores (supposed to launch in February but on hold until the trial concludes) would violate her Macy's deal.

During four hours of testimony, in which she remained calm and controlled while answering questions about her contractual agreements with both retailers, Stewart painted a picture of the Macy's deal not being as lucrative as she'd been promised, which was one reason she was willing to entertain Johnson's pitch.

She testified that the end of her friendship with Macy's CEO Terry Lundgren (they traveled to Haiti together) over her decision to affiliate with Penney left her "flabbergasted" and stunned, even though she gave him less than 24 hours notice of the deal. "I did not get into (specifics) because he hung up on me before he heard" any details, as Clifford tweeted about Stewart's description of her phone call to Lundgren the night before her JCP deal was announced.

Clearly not concerned about burning bridges, Stewart wasn't hesitant to express her disappointment in her Macy's arrangement, which she said she had hoped would be a $400 million business by now (the partnership is currently valued at $300 million). Stewart commented, per Clifford: "A $300 million business is not enough to sustain a company like ours... We want to grow our business."

JCP's deal, meanwhile, projected a $200 million business based on Martha Stewart-branded goods and included investing $38.5 million in her company in return for a 16.6 percent stake, although Johnson testified that he also told Stewart in an email that MSLO could generate up to $500 million in Penney sales.

Sharing the spotlight with Macy's other name-brand partners has been another sore point for Stewart. "Amongst ourselves we were not always thrilled with the fact that Macy's wasn't increasing our exposure in stores," she added. She also expressed dissatisfaction with the department store's ads for her branded wares, saying she liked them "for the most part," and also implied a lack of vision for building the Martha Stewart collection and brand.

After all, this is as much about Stewart's brand as it is about Macy's and JCP. As Stewart stated on the stand, "Why do you think the headlines are pitting me against J. C. Penney’s and Macy’s? They’re fighting over something, and it’s not just home. It is our amazing product." And, as the chief ambassador of her eponymous brand, Stewart herself.

Even so, she admitted to being irked that she's no longer the star in Macy's stable of designer/branded collaborations, complaining that her role has been "diminished." As an example, she said Macy promised that she would be its only celebrity chef and then went on to pit her against New York-based celebrity chef Marcus Samuelsson. Never mind that Stewart's brand is more of a lifestyle brand that goes beyond cooking these days, or that she appeared in a Macy's TV spot with Samuelsson.

JCP, in contrast, wooed her with promises of making her the star of its burgeoning in-store boutique brigade of big names, offering her a store-within-a-store (an idea that Kmart also promised but never delivered, she said).

Tastefully dressed in a taupe Lanvin outfit, Stewart also made it seem that she doesn't understand her mass market customers. "Wouldn't buying knives at Penney mean a shopper wouldn't also buy knives at Macy's?" she was asked about creating similar products for both retailers. "The customer might have two houses; they might have two kitchens," Stewart replied.

In fact, some of her richest testimony came when Stewart described how her brand initially got on the shelves of Kmart stores in 2007, and what became of her because of that association—her only retail partner at the time.

"I paid the price for going mass v(ery) early on," she stated, according to Clifford. "The garden club of Greenwich [Ct.] canceled my speaking engagement." The Kmart deal, she commented on her first mass market tie-in, was "a very difficult deal for me to sign. I lived in a pretty house with a pretty garden; I wrote about upscale things."

Despite being socially shunned by the housewives of Connecticut, she said she was eager to take her brand to the masses in order to elevate what was available at Kmart at that time (and boost her cash flow). “They were buying polyester; they were buying designs that were really, really sad,” she said of the retailer, adding that she was warned: "'Oh, poor people don't do their laundry as often as rich people so they don't want light colors.'" Holding her ground by offering white towels along with sea-green and other colors, she said her white towels became a bestselling item in her first year at Kmart.

One of her own attorneys, according to Clifford, asked Stewart how she does her time, as in how she divides her schedule between her business endeavours. Stewart's retort, referring to her five-month prison term for insider stock trading: "I did my time." After exiting the courtroom, she turned the tables on photographers by snapping a photo of the them.

Stewart's own Twitter feed, meanwhile, didn't help matters, posting a single (no doubt pre-programmed) tweet today:

Comments

Sheelah Na Gig Canada says:

This should be a TV show.

March 5, 2013 07:52 PM #

Martha My Dear United States says:

Priceless. Ice wouldn't melt in her veins!

March 5, 2013 08:07 PM #

Alexander Whang United States says:

This will have a big impact on how these deals are structured, and for other designers or brands producing masstige or diffusion lines. Also, it's not like her brand isn't elsewhere: Home Depot, Michael's, Staples...

March 5, 2013 10:33 PM #

IM Retail United States says:

So what does Brandchannel think the impact will be upon brands and the consumers who buy them?

March 6, 2013 01:55 PM #

Billy United States says:

So many great quotes, so little time: here's some more --

"There were categories that were non-exclusive to Macy's that we could sell in other department stores."
Stewart said she did business with lots of other stores.
"I don't know if you can consider Petsmart a department store for pets," she said. "Michaels is kind of a department store for crafts."
The attorneys for Macy's repeatedly tried to tar Stewart as cut-throat businesswoman willing to let others assume the risk even as she raked in profits, a characterization that Stewart rejected.
"We take tremendous risk," she said. "Our first obligation is to our consumer."

gma.yahoo.com/...8--abc-news-personal-finance.html

March 6, 2013 08:51 PM #

Billy United States says:

More priceless bon mots from the lips of Martha:

"I have shopped at Macy's since I was a young child. It's been a fixture in our home. Macy's has been a nice partner."

"We've lived up to our obligations under the contract. Macy's has lived up to most of their obligations under the contract."

"My dream was within a year of signing with JCP was to have the Martha Stewart Home Store within 700 stores."

adage.com/.../

"I am the über designer" (comparing herself to Ralph Lauren!)

"We were working like little beavers" (creating lines for Penney & Macy's)

"I haven't used my big vocabulary" (to the court stenographer)

money.cnn.com/.../index.html

March 6, 2013 08:58 PM #

Katie Bee United States says:

So now they're heading into mediation. But is the damage done??

nymag.com/.../...nneys-to-talk-about-problems.html

March 9, 2013 02:33 AM #

Comments are closed

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