J.C. Penney Invests in Martha Stewart

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December 13, 2011

Plano, Texas-based J.C. Penney Company is investing $38.5 million in Martha Stewart Living Omnimedia (MSLO) with plans to create Martha Stewart stores within JCPenney locations, and develop a new online venture.

This is the first big strategic move for J.C. Penney’s new CEO, Ron Johnson. The former head of Apple’s retail division took the helm at the department store chain in November and this deal is a maneuver to increase the number of exclusive brands at J.C. Penney and also promises to ramp up the chain’s online presence.

The company plans to open Martha Stewart retail stores inside the majority of JCPenney department stores beginning in February 2013. These Martha Stewart stores are intended to be destinations where shoppers can find a variety of home and lifestyle merchandise designed and curated by Martha Stewart and her team. J.C. Penney will market and source the products and be will be staffed by trained associates.

“Ron Johnson is a true innovator and someone who has been fundamentally redefining the retail experience,” said Stewart. “I am greatly impressed with his plans for changing an American classic, J. C. Penney, to make it a very new and different shopping experience. To partner with J. C. Penney, Ron and his extraordinary team is a big and important step in realizing my dream of putting our Martha Stewart designed products within easy reach of an even broader consumer audience.”

Under the terms of this 10-year commercial agreement, the two companies will also jointly develop an e-commerce site, expected to launch in 2013. The site will offer advice from the design maven and let shoppers buy a range of home and lifestyle products, beyond and including those featured in the stores.

The $38.5 million investment earns J.C. Penney for 11 million newly issued shares of MSLO stock at $3.50 a share and a 16.6 percent stake in MSLO. In addition, J. C. Penney will have representation on MSLO's Board of Directors. MSLO is expected to receive in excess of $200 million from J. C. Penney over the initial 10-year contract period as the stores and web site come online.

At pres time it was unclear what will become of Stewart’s exclusive agreements with competitive retailers, including Macy’s and Home Depot.

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