Macy’s, J.C. Penney in court after talks on Martha Stewart wares fail

Macy’s Inc. and J.C. Penney Co. Inc. are back in court Monday after a month-long mediation effort in their dispute over Martha Stewart merchandise appeared to have failed.

The department store chains are tussling over the rights to sell the domestic doyenne’s home goods. Macy’s says it was first to sign an exclusive contract with Martha Stewart Living Omnimedia Inc.

When J.C. Penney announced that it would open in-store boutiques featuring Stewart’s products, Macy’s sued both companies.

A non-jury trial in New York state court earlier this year featured testimony from major players such as Macy’s Chief Executive Terry Lundgren, J.C. Penney head Ron Johnson and Stewart.

The parties are returning Monday from a month-long break, during which Justice Jeffrey Oing asked them to try to work out their issues in mediation – talks that appear to have been unsuccessful.

Macy’s did not immediately return requests for comment. J.C. Penney declined to comment. MSLO confirmed that court resumed Monday morning.

[Updated, April 8, 9:50 a.m.: Macy’s confirmed that mediation efforts did not result in a settlement and that John Tighe, an executive with J.C. Penney, is currently testifying.]

In late morning trading in New York, Macy’s stock was up 1.5%, or 65 cents, to $44.04 a share. J.C. Penney’s also got a bump, up 1.9%, or 29 cents, to $15.74 a share. MSLO slipped 2%, or 5 cents, to $2.36 a share.

J.C. Penney is in the midst of a brand revamp, as Johnson tries to shake off criticism of his management while reversing sliding sales, slashing jobs, freshening product assortment and experimenting with the chain’s discount strategy.

Hedge fund manager William Ackman, whose Pershing Square Capital Management firm is J.C. Penney’s largest shareholder, criticized Johnson’s strategy at a Thomson Reuters conference Friday.

The 110-year-old company has a “great brand” but peaked decades ago and has recently been “dying slowly,” Ackman said. Johnson, he said, is “working very aggressively with his team” to pull off “one of the most difficult kinds of business turnarounds.”

But Ackman said that so far, “there’s been some very big mistakes,” among them a lack of thorough testing before making sweeping changes in the retailer’s operations.

“The impact has been… something very close to a disaster,” Ackman said.

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