Macy's CEO shocked by Martha Stewart deal with J.C. Penney

Mon Feb 25, 2013 3:32pm EST
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By Karen Freifeld

NEW YORK (Reuters) - Macy's Inc (M.N: Quote) Chief Executive Terry Lundgren said he was shocked when Martha Stewart told him in 2011 that she was starting a new alliance with rival J.C. Penney Co Inc (JCP.N: Quote).

Lundgren, testifying on Monday in the trial of two Macy's lawsuits over the alliance, said Stewart told him of the deal the night before J.C. Penney announced it. He said he was so appalled he hung up on her.

"I was completely shocked and blown away," Lundgren said. "I was literally sick to my stomach."

J.C. Penney announced on December 7, 2011, that it would launch Martha Stewart boutiques in about 700 of its department stores in 2013. It also bought 17 percent of her company, Martha Stewart Living Omnimedia MSO.N.

Macy's, which has its own deal with Martha Stewart, sued her company in January 2012 for breach of contract, and later sued J.C. Penney as well. Macy's says it has the exclusive right to sell Martha Stewart products in certain product categories, including cookware and bedding.

The two cases were consolidated for a non-jury trial before Justice Jeffrey Oing in New York state court in Manhattan.

Lundgren, 60, said Stewart sounded like she was reading from a document prepared by lawyers when they spoke, and that he cut off the conversation when the home goods doyenne claimed her deal with J.C. Penney would be good for Macy's.

"I think that's when I hung up," said Lundgren. "The thought this was going to be good for Macy's was so far from anything I could comprehend."   Continued...

Macy's Chief Executive Terry Lundgren arrives at the New York state Supreme Court in Manhattan February 25, 2013. REUTERS/Brendan McDermid