J.C. Penney can sell Martha Stewart goods

Story originally appeared on USA Today.

NEW YORK (AP) — J.C. Penney can sell some goods designed by Martha Stewart that were destined for shelves this spring —for now, a New York State Supreme Court judge ruled Friday.

Rival department store chain Macy's Inc. had sought to bar J.C. Penney Co. from selling some items designed by Martha Stewart under the name JCP Everyday. Macy's has an exclusive deal with Martha Stewart Living Omnimedia to sell some categories of items under the Martha Stewart name.

The ruling lets Penney sell the items, which are labeled JCP Everyday and don't carry the Stewart name, until the lawsuit is fully decided. Macy's said in a statement that it plans to appeal the ruling.

In afternoon trading Friday, shares of J.C. Penney were down 7 cents to $14.85 apiece after being down more than $3.60 a share before the news broke.

Judge Jeffrey Oing cautioned that the ruling is preliminary and Penney could still face costly damages if Macy's prevails in the case.

"This decision has not been very easy to make," said Oing, who heard arguments from both sides for nearly three hours before he made his decision.

The two retailers are locked in a court battle over a relationship with Martha Stewart. Macy's is suing Martha Stewart for breaching an exclusive contract that it had with the merchandising and media company in certain goods like bedding and bath items. Penney made a deal to open Martha Stewart mini-shops, which had been planned for this spring. It also sued Penney for having no regard for the contract.

A temporary order made last summer still bars Penney from selling Martha Stewart branded goods in the exclusive product categories. Macy's had argued that selling the JCP Everyday goods, which included items covered by the contract, would confuse customers and create harm to Macy's. Macy's attorneys also argued that the double house logo that resembles the letter "M'' would give shoppers the idea that the merchandise was from Martha Stewart.

Oing said Friday that Macy's didn't prove irreparable harm. Macy's may face some financial pressure but "it's not like a building torn down," he said.

But he warned Penney lawyers to stay away from using Martha Stewart name in advertising when it comes to the products covered by the contract.

"You are to stay away from the Martha Stewart brand and label at all costs," he warned.

The ruling provides temporary relief for Penney, which is in a cash crunch following a failed turnaround plan by its former CEO Ron Johnson, who was ousted Monday. The company suffered a nearly billion loss and saw a 25 percent drop in revenue in the latest year as Johnson's plan to get rid of most discounts and bring in hip new brands failed to resonate with shoppers.

Penney has been hoping that an overhauled home area, being rolled out this month, will help it recover. It was counting on the Martha Stewart mini-shops to anchor the area. But those plans are on hold. The company is going ahead and adding Martha Celebrations areas, which house paper products and stationery. Those items are not covered by Macy's exclusive contract.

Analysts estimate that if Penney couldn't sell the JCP Everyday goods, it could take a hit of as much as $100 million.

Both companies returned to court this week after a three-week court-ordered mediation that didn't lead anywhere.

The trial started in mid-February and included three weeks of testimony from a parade of witnesses, including Macy's CEO Terry Lundgren, Penney's Johnson and Martha Stewart herself.

The two suits were consolidated for the bench trial.

Late Thursday, a published report said J.C. Penney is consulting with bankers at Blackstone Group on how the struggling store chain can raise $1 billion in cash.

An online report from The Wall Street Journal said one option being discussed with Blackstone is selling a minority stake in Penney. The paper reports Penney is looking to possible investors. The financial paper cited people familiar with the matter.

The development follows the Plano,Tex.-based company's move Monday to oust Johnson after 17 months on the job. His plan to overhaul the Penney failed to resonate with customers and resulted in nearly a billion dollars in losses and a 25% drop in revenue last year.

Neither Blackstone nor Penney could be immediately reached for comment.