NEW YORK (AP) ? It's been a tough week to be Ron Johnson.
J.C. Penney's CEO was in the hot seat again on Friday in New York State Supreme Court after facing investors this week over a dismal quarterly earnings performance.
This time he was being scrutinized by Macy's lawyers for a stack of emails that he wrote that they claim show he repeatedly pushed home diva Martha Stewart to try to break an exclusive deal with his rival so Penney could be the sole department store distributor of the domestic diva's goods.
"I need to propose a deal so she can go to Terry Lundgren at Macy's and break the agreement," according to one email Johnson wrote to an executive at Penney in August 2011.
Lundgren is CEO of Macy's.
Penney ended up signing a pact in December 2011 with Martha Stewart Living Omnimedia to open shops at most of its stores in spring 2013. But one month later, Macy's renewed its long-standing exclusive deal to sell some of Martha Stewart's products such as cookware and bedding. And then immediately sued Martha Stewart Living and Penney.
The trial, which began Feb. 20, focuses on whether Macy's has the exclusive right to sell some of Martha Stewart branded products such as cookware, bedding and bath items.
Macy's is seeking to block Penney from opening Martha Stewart mini shops in its stores. The shops are part of Johnson's big plan to reinvent the shopping experience at the beleaguered chain. The stakes are high for all three companies but particularly for Penney.
Penney's shares have now lost nearly 60 percent of their value since early last year when Johnson revealed his plan to scale back most sales in favor of everyday low prices. The stock drop is the latest indictment that Johnson's turnaround is failing Wall Street as much as on Main Street. Johnson is counting on the shops, particularly Martha Stewart's, to bring back shoppers who have fled to rivals like Macy's.
Johnson, who is expected to be questioned by Penney attorneys later Friday, acknowledged that getting a deal with Martha Stewart was critical and acknowledged that he knew the deal was exclusive with Macy's but stopped short in saying he wanted to break the exclusive. "I knew there had to be an amendment" to a deal between Macy's and Martha Stewart.
Johnson's appearance comes four days after Lundgren testified in court that the company had built the Martha Stewart brand to be the biggest name in home items since it began to start carrying the products in 2007.
Martha Stewart, who founded Martha Stewart Living, is expected to testify Tuesday.
Johnson's testimony marks a culmination of a legal battle between the three companies that started shortly after the Penney-Martha Stewart deal was announced in December 2011.
Macy's renewed its 2006 pact with Martha Stewart Living in January 2012 but then immediately sued the company, saying it breached a long-standing contract when it penned the 10-year deal with Penney. Penney also invested $38.5 million in a nearly 17 percent stake in Martha Stewart Living. In a separate lawsuit, Macy's sued Penney, claiming it had no regard for the Macy's contract and that Johnson had set out to steal the business that it had worked hard to develop.
Macy's also contends that Johnson "knowingly and purposely demanded and received confidential information" from Martha Stewart about the contract and crafted a deal that was more lucrative than the terms of the Macy's agreement.
The two suits were consolidated for the bench trial. Supreme State Court Judge Jeffrey Oing is presiding over the trial, which is expected to last three weeks.
Penney is aiming at what it believes is a loophole in the agreement between Macy's and Martha Stewart. It's a provision that allows Martha Stewart to sell goods in categories like bedding in Martha Stewart Living's own stores.
According to Martha Stewart, because the Macy's agreement doesn't say the goods under dispute can be sold "only in "stand-alone" stores, the mini shops within J.C. Penney stores do not fall under the exclusive agreement.
Macy's Inc., based in Cincinnati, disagrees. Lundgren argued that a typical definition of a store is that it has a parking lot, is part of a mall or has a sidewalk in front.
Macy's claims substantial damages and said the maneuver by Penney "threatens to inflict incalculable further harm on Macy's." The company claims that "billions of dollars of sales are involved."
But according to a memo filed by Penney, Macy's rights to Martha Stewart aren't nearly as sweeping as it suggests. Under Macy's interpretation of the contract, Martha Stewart Living is "little more than an in-house designer for Macy's," according to Penney.
Last summer, Macy's won a preliminary injunction against Martha Stewart Living that would prevent it from selling housewares and other exclusive products at Penney. Judge Oing granted Penney permission to open Martha Stewart shops, as long as the items under the exclusive contract with Macy's are not sold in them.
Penney plans to open shops featuring designs from Martha Stewart on May 1, but spokeswoman Daphne Avila said that the products like bedding that Macy's has deemed exclusive have been stripped of the Stewart name and instead feature the label "JCP Everyday." Window treatments and paper products like stationery, which are not included in the exclusive arrangement with Macy's, will bear Martha Stewart's name.
But Macy's is also trying to stop Martha Stewart from providing designs to J.C. Penney ? whether or not it gets rid of the Martha Stewart name.
The stakes are high for all three companies, but particularly for Penney.
Investors were bracing for a bad fourth-quarter report from Penney, but the staggering losses and revenue drops were far worse than feared.
Penney reported on Wednesday after the markets closed that its quarterly loss widened to $552 million, or $2.51 per share. Revenue fell 24.8 percent to $12.98 billion.
Results for the full year were even more jaw-dropping. For the fiscal year, Penney lost $985 million, or $4.49 per share.
Macy's, one of the best performing department stores, turned in a solid fourth quarter. Lundgren says home items a key business. Having another major department store sell Martha Stewart towels, pots and other merchandise could hurt its sales in that area.
For its part, Martha Stewart Living is trying to fatten merchandise revenue as it struggles to offset declines in its broadcast and publishing business, a segment that accounts for more than 60 percent of its business.
The stakes also are high for the personalities involved in the suit. Lundgren said that he hasn't spoken with the lifestyle guru since Dec. 6, 2011, when she called him to inform him that she signed a deal with Penney. The next day, Martha Stewart announced the deal to the public. Lundgren testified Monday that he was so shocked when Stewart told him that she had signed a deal, he hung up on her.
"I was completely shocked and blown away," he testified. "It was so far from anything I could imagine."
Associated PressSource: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2013-03-01-Macy's-Penney-Trial/id-2c0295c4c75e4cac9ae0012961bbc117
exton ricky williams kurt warner kurt warner missouri primary minnesota caucus knowshon moreno
MessageMe, an app that launched last week and raced up the charts to the #2 spot in social networking in the U.S., is confronting Facebook’s touchiness around access to its social graph. The app’s integration with Facebook stopped functioning earlier today (see left), the result of the company’s decision to cut MessageMe off from its “Find Friends” functionality, according to sources familiar with decision. MessageMe CEO Arjun Sethi declined to comment in this story and Facebook didn’t immediately respond to requests for comment. The move resembles Facebook’s decision last month to shut off Voxer’s access to the graph, even though Voxer connected to Facebook for well over a year. Voxer is another communications app that supports calling and voice chat. Facebook cut the app off around the same time that it launched competing functionality with free voice calling to other users. In that decision, Facebook cited Section 10 of its platform policy (which is the same one it’s using in MessageMe’s case): Reciprocity and Replicating core functionality: (a) Reciprocity: Facebook Platform enables developers to build personalized, social experiences via the Graph API and related APIs. If you use any Facebook APIs to build personalized or social experiences, you must also enable people to easily share their experiences back with people on Facebook. (b) Replicating core functionality: You may not use Facebook Platform to promote, or to export user data to, a product or service that replicates a core Facebook product or service without our permission. MessageMe apparently replicates too much of Facebook Messenger’s functionality for the company to be comfortable with it. Facebook has long been touchy about providing access to the biggest of its strategic competitors like Google and Twitter. Back in 2010, Twitter’s then-CEO Ev Williams griped about the company’s unwillingness to let Twitter users look up their Facebook friends on the service or to send Facebook updates to Twitter. In the same year, Google and Facebook had a back-and-forth over Facebook’s access to Gmail’s contact importer because the social network wouldn’t send data the other way. But it’s only in the last year that the company has really stepped up enforcement against other startups.?After cutting off Voxer last month, Facebook clarified its policy, saying that apps needed to share content back to Facebook and couldn’t replicate too much of Facebook’s core functionality.?It cited the same policy in cutting off Twitter’s Vine hours after launch and Russian search
(Credit: Samsung)
