J.C. Penney and Macy's Finally Sort Things Out

Finding out that J.C. Penney (NYSE: JCP  ) lost its long battle against Macy's (NYSE: M  ) over the right to sell Martha Stewart Living Omnimedia (NYSE: MSO  ) products was surprisingly cathartic. It felt like finding Waldo after an hour of staring at a page full of sunburned swimmers and striped beach towels. Yesterday, a judge ruled that J.C. Penney interfered with Macy's exclusivity agreement with Martha Stewart by selling certain products.

J.C. Penney won't be assessed any punitive damages, with the New York state Supreme Court judge saying the company's board and management had suffered enough by being "humiliated." Macy's can still argue for monetary damages for lost revenue, but any punishment has been ruled out.

Martha Stewart in high demand
The whole debacle links back to J.C. Penney's usual suspect, former CEO Ron Johnson. Under Johnson's watch, the company signed a deal that brought the Martha Stewart brand's homewares line into stores. The problem is that Macy's had an exclusivity agreement with Martha Stewart for many of the lines that J.C. Penney picked up.

The judge said J.C. Penney exhibited "adolescent behavior in the worst form." Even so, he decided that Macy's had failed to show that it deserved any extra money from punitive damages, saying that J.C. Penney's actions were not malicious.

It's the absolute best outcome that J.C. Penney investors could have hoped for, as it seemed clear from the start that Macy's was going to win this one. J.C. Penney's stock was up slightly at midday Tuesday, reflecting the fact that things could have gone much worse for the company.

J.C. Penney sees a brighter future
I've been on a J.C. Penney positivity kick recently. CEO Myron Ullman has a clear idea of what the company needs to do, which is a positive step for the business. J.C. Penney could easily have been hammered by a huge fine, taking more of the company's already limited cash away from day-to-day operations.

There's still the chance for things to go wrong here, with Macy's free to argue for substantial lost revenue, which would not fall under the "punitive damages" umbrella. The decision on final payments will be made by a special committee at a later date. Analysts have estimated that J.C. Penney may have gained upward of $100 million from Martha Stewart sales, some of which Macy's is going to go right after. Even with the potential for a hit later on, J.C. Penney investors should still revel in this result.

Battles continue in your very own home
This fight might be winding down, but there are still others going on all around the market. You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2998139, ~/Articles/ArticleHandler.aspx, 9/3/2015 7:08:37 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Andrew Marder

Andrew Marder worked in retail for years, holding jobs ranging from bookseller to bank strategy analyst. He has worked for the Motley Fool since 2012, and loves coffee.

Today's Market

updated 9 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:01 PM
JCP $9.32 Up +0.06 +0.65%
J.C. Penney Compan… CAPS Rating: *
M $58.62 Up +0.67 +1.16%
Macy's, Inc. CAPS Rating: **
MSO $6.08 Up +0.02 +0.33%
Martha Stewart Liv… CAPS Rating: *