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Penney faces risk of empty shelves



Published: Tue, March 5, 2013 @ 12:00 a.m.

Associated Press

NEW YORK

J.C. Penney, which is struggling with big losses and steep sales declines, could face another challenge: empty shelves.

New York State Supreme Court Judge Jeffrey Oing told Penney’s attorneys Monday that the chain took a risk by ordering towels, cookware and other products from the company that home diva Martha Stewart founded. In fact, Judge Oing said he could force Penney to stop the products from heading to the shelves this spring even as they come off the docks.

“That’s the risk your client took,” Judge Oing said. “Ultimately, you guys played it out.”

Judge Oing said he will hear oral arguments Friday over the issue of whether Penney can sell goods such as towels designed by Martha Stewart Living that are covered by Macy’s exclusive agreement but are not sold under the Martha Stewart brand name.

The judge’s statements came during the start of the third week in a trial that pits J.C. Penney Co. against rival Macy’s Inc. over their relationship with Martha Stewart Living Omnimedia Inc. At issue is whether Macy’s has the exclusive right to sell some of Martha Stewart branded products such as cookware, bedding and bath.

Penney, in a statement released Monday, said that it would not have proceeded with its agreement with the media and merchandising company if Penney thought it would interfere in any way with its pact with Martha Stewart Living.

“Macy’s is attempting to gain through the lawsuit more rights than it actually has under its written contract with” Martha Stewart Living, the company said in the statement.

Macy’s has argued that Penney breached its long-standing contract when it signed a deal in December 2011 to open Martha Stewart mini shops in most of its stores this spring. Macy’s, which has been the exclusive carrier of some Martha Stewart products including towels and pots since 2007, is trying to block Penney from selling those products. It also wants to stop Martha Stewart from providing any designs to Penney — whether or not it carries the Martha Stewart label.

Mark H. Epstein, representing Penney, argued that a decision to block the department store from selling goods such as towels and bedding that don’t carry the Martha Stewart label would be devastating because the company doesn’t have a substitute.


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