Terry Lundgren’s Testimony Questions Future of Macy’s Without Martha

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Testimony by Macy’s CEO Terry Lundgren this week helped answer one of the questions raised by his company’s determined pursuit of perceived justice in its suit against J.C. Penney and Martha Stewart Living Omnimedia: Why does this dispute seem so personal? Macy’s helped the company after Stewart got out of prison eight years ago and Lundgren had come to consider her a friend.

But Lundgren’s remarks on Monday about the centrality of the Martha Stewart deal to Macy’s business raised another, more important question for all three brands: Why is the Martha Stewart imprimatur so important to the dean of department-store chains and why does Penney believe her brand has so much appeal that it’s willing to allow its CEO to share company secrets in court about its tremendous potential?

As first of the three most important people in the trial to actually take the stand, Lundgren left no doubt about how important sales of Stewart-branded merchandise have become to the chain. While the home department is usually the least profitable section of a Macy’s store, because of its long lead time and slow turn of products, he testified according to Advertising Age, 40 percent of Macy’s advertising is attached to the home business. And that’s largely because Macy’s wants consumers to know it’s got Martha’s stuff. [more]

“We are totally committed to the business with” Martha Stewart Living Omnimedia, or MSLO, Lundgren said. “We had a record year” even after the Macy’s-Penney lawsuit became public last year. Growth in sales of the Martha Stewart line outpaced the overall home business at Macy’s and doubled sales growth of the entire store. Macy’s has renewed its contract with MSLO through 2018—despite the affront of her deal with JCP and the potential for it to eat into Macy’s business—and keeps using Stewart in advertising.

“I don’t have an answer as to what to do without Martha Stewart,” Lundgren said. The Martha Stewart Collection “is a reason that consumers come to our store. It’s exclusively ours.”

Even more mystifying is why the domestic doyenne’s brand image and merchandise continues to be in such demand by American department-store customers eight years after she got out of prison for lying about a stock sale. The number of other designer brands that offer home goods continues to grow; the economy has been bad; the housing sector has been especially bad until lately; and MSLO executives kept telling Macy’s that the rest of their own company’s business outside the Macy’s partnership was bad.

As for Macy’s other celebrity partners ranging from Donald Trump to Taylor Swift: Can’t any of the rest of them outsell the timeworn persona of a tiring pitchwoman across the entirety of the nation’s leading department-store chain?

Maybe more court proceedings will answer that question. For now, however, remember that the first Martha Stewart collection was basically what kept Kmart afloat for many years before it succumbed to its current doomed ownership by Sears. Penney CEO Ron Johnson has proven willing essentially to stake his strategy for turning around the retailer on succeeding with its own upcoming Stewart collection, because it is the centerpiece of his prolific store-within-a-store strategy that, in turn, is supposed to be the reason that American shoppers will end up flocking to J.C. Penney stores that have all but eliminated traditional sales promotions.

Johnson is expected to testify on Friday. Maybe he can explain all of this.

Image at top via Pinterest. Lundgren and Stewart during happier times in Haiti, searching for artisanal goods to bring back to the U.S.

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