The decision to dump Stewart ends a long-running legal battle with rival Macy's, which had sued both Penney and Stewart on grounds that the 72-year-old mogul had violated their licensing deal.
Penney was reportedly unhappy with the performance of Stewart's collection and decided to end the lawsuit by cutting ties with her.
“[CEO] Mike [Ullman] said her designs aren’t that great,” an insider said of the 72-year-old's collection. “He says they’re not selling, and they’re nothing that your normal Joe Schmoe can’t come up with.”
“They definitely are not going to carry [Martha Stewart home goods] any longer and [they are] not waiting for the court ruling," a source told the Post.
The news pushed J.C. Penney shares up 5.3 percent on Thursday, while stocks for Martha Stewart's Living Omnimedia fell 6.1 percent.
According to Daily Finance's Matt Brownell, Ullman's decision to drop Stewart is part of the company's effort to fix poor management decisions made by ousted CEO Ron Johnson.