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Macy’s Wins Battle and Anticipates Damages

Macy’s has won a decisive battle in a war that’s been ongoing for two years. New York Supreme Court Justice Jeffrey K. Oing, ruled that JC Penney interfered in the enduring relationship between Macy’s and Martha Stewart Omnimedia.

Former JC Penney CEO Ron Johnson formulated a plan to have Martha Stewart’s company transform Penney’s home department into a shop branded by Martha herself. Under Johnson’s leadership, the organization also purchased a 16% stake in Martha Steward Living. The board has renounced that investment since then.

Although the judge made it clear that Macy’s hadn’t proven that they deserve damages, he ruled that the matter be moved to a judicial hearing officer to handle Macy’s claims. Macy’s stated, “We are delighted, but certainly not surprised, that the court has found tortuous interference by JCP. It’s a great shame that Macy’s had to expend time, money and the diversion of its resources in order to protect its rights. We look forward to the damages phases of the case.”

JC Penney replied in an official statement, “The Company does not believe that money damages aren’t and will defend against any damages awarded in the Special Master process. We are also considering our options for appeal.”

The judge considered this case to be a basic breach of contract, but also added that the stakes are high due to competition from each other and abroad; namely, U.S. jobs hang on the balance.

Although JC Penney faces a sizable hurdle with this case, there is good news. JCP reported two consecutive quarters of rising sales, the latest quarter increasing 6.2%. Penney reported a net loss of $352M, equivalent to $1.15 a share; a year back, it was $348M at $1.58 a share.

Additionally, Penney announced that it replaced its $1.85B bank credit line with a $2.35B credit facility. This fact jacked up JCP’s seasonal liquidity needs by a lofty $500M during the holiday season. A credit facility is defined as a type of loan or debt strategy to arrange equity financing. It involves several forms of financing, including revolving credit and a line of credit that serves as standby funding.

JCP has endured both peaks and valleys in recent years, but the brand has held up through tough battles with competitors, Penney has all but fully recovered from the failed chain-wide remodeling attempt by former CEO Ron Johnson and claimed its cut its capital spending by $250M.






Photo: Macy’s, credit Bebeto Matthews/AP Photo


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