After two tumultuous years
that saw the company’s share price collapse and an iconoclastic CEO shown the door, JCPenney announced that it will terminate its troubled partnership with Martha Stewart Living Omnimedia in
2017 -- four years earlier than previously agreed.
JCPenney will also return 11 million shares in MSLO that it purchased as part of the deal, equal to around 17% of the company.
The decision suggests that JCP is disappointed with the results of its merchandising deal with MSLO, which called for MSLO to create special, branded product lines in kitchenware,
bedding and bath products. Last year, JCP was forced to rebrand the products as “JCP Everyday” after rival retailer Macy’s sued JCP and MSLO, arguing that their deal violated
Macy’s previous existing merchandising deal with MSLO.
This week’s announcement also reduces the scope of MSLO’s design duties for JCP to product lines in window
treatments and holiday goods -- product categories not precluded by Macy’s agreement with MSLO. However, Macy’s is still demanding compensation for losses resulting from the JCP-MSLO
merchandising deal in other categories; a decision is expected sometime later this month.
The early termination of the partnership is also a setback for MSLO, which was supposed to
reap $200 million over 10 years from merchandising fees -- revenues that would help offset losses resulting from the secular decline in print advertising revenues and the end of some of MSLO’s
Over the last few years, MSLO’s total revenues have declined from $230.8 million in 2010 to $197.6 million in 2012, with publishing revenues declining from $145.6
million to $122.5 million over that period, or from 63% to 62% of the company’s total business. Over the same period, merchandising revenues increased from $42.8 million to $57.6 million, or
from 18.5% to 29% of the total.