Store within a store concept goes to court

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NEW YORK, March 2 (UPI) -- Martha Stewart's company cooked up the plan that would allow U.S. retailer J.C. Penney to sell its wares despite a contract with Macy's, it was said in court.

Macy's contends it has an exclusive contract to sell Martha Stewart housewares, which it has been selling exclusively since the end of 2009, when Martha Stewart's relationship with Kmart ended, The New York Times reported Saturday.

In December 2011, however, J.C. Penney announced it had struck a deal with Martha Stewart that involved creating a store within a store that would legally distance Martha Stewart from its exclusive contract with Macy's.

The contract with Macy's allows Martha Stewart's company to sell its own products in its own stand-alone stores. As such, the deal with J.C. Penney calls for Martha Stewart to design and build stand-alone kiosks or booths that just happen to be inside J.C. Penney stores.

J.C. Penney would own the merchandise and its personnel would sell the products. But legally the kiosk would be a Martha Stewart venture, J.C. Penney contends.

Macy's is challenging that idea in court.

J.C. Penney's Chief Executive Officer Ron Johnson said in court that Martha Stewart's firm came up with the idea. But documents and his testimony made it clear that, even though housewares is not the most profitable department in a department store, Johnson envisions Martha Stewart's line as vital to his company.

In an email to company executives, Johnson called the store within a store concept "a breakthrough."

In another email, written the day the deal with Martha Stewart was announced, he wrote that Macy's CEO Terry Lundgren, "might have a headache tonight."

Analysts say that housewares creates customer traffic because, at some point, almost everyone needs a pot or a pan or a towel or bedding.

The housing market is also on the upswing, which makes it a good time to corner the market on housewares that people often buy when they move to a new home.