Macy's to Martha Stewart: Your J.C. Penney Deal Is Not a Good Thing

Martha StewartAt one time, America's iconic happy homemaker Martha Stewart got to spend a lot of time at home -- months, in fact, when she was under house arrest after serving real jail time for making false statements to authorities regarding insider trading. Now, once again Martha Stewart's name has been connected to legal issues, as Macy's (M) has filed a legal complaint against her namesake company for hooking up with J.C. Penney (JCP).

Macy's has filed a lawsuit against Martha Stewart Living Omnimedia (MSO) to block the company's new licensing agreement with J.C. Penney. Since 2007, Macy's agreement with Martha has allowed it to carry a line of Martha Stewart-branded home items that has kept cash registers ringing in Macy's home sections.

It's no surprise that Macy's management's spoiling for a fight to keep Martha wares at their retail abode. Macy's agreement with Martha Stewart Living was supposed to be an exclusive one, and a plan to peddle similar wares at lower-end Penney's doesn't sound terribly "exclusive."

J.C. Penney isn't just planning on carrying Martha Stewart-branded items: Martha Stewart shops will be opened within J.C. Penney stores in early 2013. Getting even cozier with Martha, J.C. Penney has also purchased a $38.5 million stake in Martha Stewart Living Omnimedia.

According to The Wall Street Journal, a Martha Stewart Living spokesperson commented in December that the J.C. Penney line will be "completely different" than the selection Macy's customers encounter. There's been no comment on the lawsuit so far.

Teflon Martha

Regardless of this skirmish with Macy's, one of the most interesting aspects of this situation is that Martha Stewart's name and brand power is still so formidable that companies would fight to keep her all to themselves.

One would have thought that Stewart's insider-trading scandal and subsequent five-month prison stint would have tarnished her image beyond repair. Clearly, that's not the case. (She just returned to her namesake company's board of directors last fall, after a five-year ban on such corporate activities.)

Neither was Stewart's brand sullied by its past association with super-low-end discounter Kmart (SHLD), nor by the fact that she described it as "not the nicest place to shop" as the deal ended.

However, if you look at Martha Stewart Living Omnimedia's five-year stock chart, you'll notice that it hasn't been too good for the company's shareholders over the long haul. The company has been plagued with falling sales and margins for years now, and hasn't turned an annual profit since the year ended December 2007.

The one thing that apparently has survived very well over the years despite all kinds of adversity is Martha Stewart's brand name, since it continues to rake in the partnerships and clearly still has some pull with American consumers. Perhaps crafting and entertaining are better survival skills than one might think. Maybe Macy's shouldn't be messing with Martha -- or her name, anyway.

Motley Fool analyst Alyce Lomax does not own shares of any of the companies mentioned.

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