|
| Martha Stewart arrives to court in New York, Tuesday, March 5, 2013. Macy's Inc. is suing the media and merchandising company Stewart founded for breaching an exclusive contract when she signed a deal with J.C. Penney in December 2011 to open shops at most of its stores this spring |
NEW YORK (AP)
-- Home decor and food guru Martha Stewart testified in court on
Tuesday that she did nothing wrong when she signed an agreement to open
shops within most of J.C. Penney's stores across the country.
Stewart
testified in New York State Supreme Court in a trial over whether the
company she founded breached its contract to sell cookware, bedding and
other items exclusively at Macy's when she inked the deal with Penney.
Stewart's
appearance, which followed a lineup of other top brass including the
CEOs of both Macy's Inc. and J.C. Penney Co., attracted a lot of
attention from the media. So much so that the judge opened up the jury
box to make room for the expanded audience, and spectators had to wait
behind a roped line to enter the courtroom.
During
four hours of testimony, Stewart, who founded Martha Stewart Living
Omnimedia Inc., denied Macy's allegations that she did anything
unethical and said she was only looking to expand her brand.
Stewart
said it's Macy's that didn't uphold its end of the agreement to try to
maximize the potential of her business. She said her brand had grown to
about $300 million at Macy's, but the business was now "static" at the
department store chain. She said she had hoped the business would exceed
$400 million.
"We were disappointed,"
Stewart, 71, wearing a light brown tunic and a mini skirt, testified.
"We got to a certain dollar amount and struggled and never got any
further."
The trial, which began Feb. 20,
centers around whether Macy's has the exclusive right to sell some
Martha Stewart branded products such as cookware, bedding and bath
items.
Penney signed a pact in December 2011
with Martha Stewart Living to open shops at most of its 1,100 stores by
this spring. A month later, Macy's renewed its long-standing exclusive
deal with Martha Stewart until 2018, then it sued both Martha Stewart
Living and Penney.
Macy's is trying to block
Penney's from opening the Martha Stewart shops within its stores. The
company also is seeking to stop Martha Stewart from providing any
designs to Penney - whether or not they carry the Martha Stewart label.
Martha
Stewart and Penney are using what they believe is a loophole in the
agreement between Macy's and Martha Stewart to move forward with their
deal. It's a provision that allows Martha Stewart to sell some of the
products that it offers in Macy's stores at Martha Stewart shops, too.
According
to Martha Stewart lawyers, because the Macy's agreement doesn't specify
that Martha Stewart stores have to be "stand alone" locations, the mini
shops within Penney's stores would not violate the contract. Stewart
said in court Tuesday that even Amazon.com could be considered a store,
given that shoppers are shifting more to online buying.
"I don't think you need walls to be a store," she said.
The
trial has revealed some of the drama that took place behind-the-scenes
as the Martha Stewart-Penney deal came to be. During his testimony on
Friday, Penney CEO Johnson rejected claims by Macy's lawyers that he
plotted to push Martha Stewart to breach her deal with Macy's with the
goal of eventually becoming the sole carrier of some of Stewart's
products.
Johnson, who was dressed in a dark
suit and striped navy tie, testified that he just wanted to get a piece
of the action while helping the Martha Stewart's business grow. He also
said that the expanded partnership could be good for all parties
involved, including Macy's.
Macy's attorneys,
meanwhile, have portrayed Stewart as someone who turned her back on a
good friend, Macy's CEO Terry Lundgren, to broker a deal with a rival
company. During testimony earlier in the trial, Lundgren, who wore a
suit, said that he hung up on Stewart after she told him about the deal
she'd reached with Penney. He said he hasn't spoken to her since.
"I was quite taken back by his response and when he hung up on me I was quite flabbergasted," Stewart testified Tuesday.
Stewart
also testified that she couldn't discuss the impending Penney deal with
Lundgren sooner because the negotiations were "confidential." But
Theodore Grossman, an attorney representing Macy's, presented an email
on Tuesday that showed that Stewart had discussed the idea in the summer
of 2011 with Millard Drexler, CEO of the J. Crew clothing chain.
Stewart called Drexler a "helpful adviser."
Stewart's
testimony comes as the company she founded continues to struggle.
Martha Stewart Living just finished its fifth straight year of losses.
The company has also had steep sales declines.
Martha
Stewart Living took a hit when Stewart was indicted in 2003 on charges
that included making false statements and obstruction of justice related
to a personal stock sale. She was convicted in March 2004 and was
sentenced to five months in prison. After Stewart's release in March
2005, business began to recover as advertisers who had fled returned.
"I stumbled in 2003," Stewart said Tuesday, adding that "We emerged from that whole and healthy."
Still,
in the past few years, Martha Stewart Living's broadcast and publishing
divisions have been grappling with a shift by people to getting their
recipes and food tips on the Web and on their mobile devices. As a
result, the company, based in New York City, has been trying to bolster
its merchandising business, which represents 30 percent of the company's
annual revenue.
The biggest opportunities for
Martha Stewart Living are in selling products for the home, including
bedding, bath and kitchen merchandise. That's because as the housing
recovery gains momentum in the economic recovery, people likely will put
more money into their homes.
During her
testimony on Tuesday, Stewart said she always wanted to open big shops
within Macy's stores, but the retailer never embraced that concept.
Instead, she said the merchandise in Macy's stores is just "here and
there."
That's why she said that a proposal
from Penney's Johnson to create shops filled with home merchandise was
appealing to her. She called Johnson a "visionary."
"We
hoped this business would be growing," Stewart said. "It just boggles
my mind that we're here sitting in front of you, judge."
