It may surprise you to learn home goods are often some of the lowest-margin, slowest-moving items department stores carry. As a New York Times writer yesterday plainly put it, "Home is not the sexiest of categories." Ron Johnson, chief executive of the struggling JCPenney, recently stated that home items as a category "made $185 per square foot in 2007, but now made less than $80" for JCP. In comparison, Penney's current overall sales now average $279 per square foot (an important metric of a retailer's financial health) in its renovated stores.
Image via Ashley Lutz for Business Insider.
Johnson is locked in a court battle with Terry Lundgren, the head of Macy's, over the Martha Stewart brand. Stewart's longstanding partnership with the American middle-market retailer was thought to be exclusive, until she announced a new line for Penney's in December of 2011.
"[A]n exclusion in the Martha-Macy’s contract for Martha Stewart’s own stores" allowed the goddess of good housekeeping to create her own stand-alone stores. Stewart claimed some wiggle room in that particular definition and "argue[d] that the Penney stores-within-a-store [concept] count[s] as a distinct Martha store." Girlfriend wants to have her Sylvia Weinstock-decorated cake and eat it, too.
So why are these two retail behemoths fighting over what Macy's Lundgren (the lovechild of Pierce Brosnan and Butt-head) described as “generally the least profitable part of the store”? Home goods sales are tied to the housing market and a strong recovery is on the horizon. Exclusive products offer customers an incentive to bypass big box retailers like Target and Stewart's former dance partner, Kmart.
Jonathan Adler for JCP.
Michael Graves for JCP.
With her finances more curdled than an untempered flan, Stewart desperately needs this new partnership to work. Martha Stewart Living has been losing money for the past three years, and "[i]n exchange for the Stewart line, JCPenney made a hefty stock investment in Martha Stewart Omnimedia and revitalized the company's finances."
Dumplings, do you buy Martha Stewart items from Macy's? Would you be inclined to do so at JCPenney's? And will you be checking out Jonathan Adler's and Michael Graves' new JCP goodies?
Penney's and Macy's Battle Over Martha Stewart Products [The New York Times]
Martha Stewart Is Headed Back To Court For An Ugly, High-Stakes Battle With Macy's [Business Insider]