J. C. Penney buys 16.6% stake in Martha Stewart Living Omnimedia

10-year deal calls for Martha Stewart shop-in-shops, e-commerce site

Home Accents Today Staff -- Home Accents Today, 12/7/2011 10:07:54 AM

J. C. Penney Co. and Martha Stewart Living Omnimedia are joining forces to create a unique and comprehensive retail experience featuring Martha Stewart products and advice. J.C. Penney has invested $38.5 million for a 16.6% share in MSLO, and MSLO is expected to receive in excess of $200 million from J. C. Penney over an initial 10-year contract period. J. C. Penney will have representation on MSLO's Board of Directors.
     Beginning in February 2013, customers will be able to visit Martha Stewart retail stores inside JC Penney department stores. The shop-in-shops will offer "a variety of affordable, high-quality home and lifestyle merchandise designed and curated by Martha Stewart and her team," according to a news release. J. C. Penney will market and source the products. The two companies will also jointly develop and launch an e-commerce site.
     According to a Wall Street Journal report,  the strategy of J.C. Penney's new CEO, former Apple exec Ron Johnson, is to add more well-known name brands to attract younger customers while strengthening Penney's hold on its core consumer, middle-aged women.
     The WSJ report says the alliance with J.C. Penny provides a "much-needed" cash infusion to MSLO which has experienced declining revenues in all three of its divisions, publishing, broadcasting and merchandising. Martha Stewart enlisted the services of Blackstone Group in May to began exploring opportunities.
     Stewart described Ron Johnson as an innovator who is fundamentally redefining the retail experience. "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. I'm also very excited to work with J. C. Penney to create an online shopping experience, which will offer a broad range of Martha Stewart products. I cannot wait to get started on this new venture."
     Lisa Gersh, president and chief operating officer of MSLO, said, "The strategic alliance we've announced today with J. C. Penney strengthens our balance sheet, will enhance the reach of our brands and expand our vibrant merchandising and media presence for the benefit of all of our partners. We believe this alliance is an important step in positioning our company for the future. J. C. Penney also recognizes the powerful cross-promotional value and reach this alliance represents in light of our magazine, digital and broadcast properties. We are excited to work closely with the J. C. Penney team to help drive the success of our respective businesses."