FILE - In this June 22, 2004 file photo, Martha Stewart leaves the Martha Stewart Living Omnimedia Inc. annual shareholders' meeting, in New York. Beginning in February 2013, customers will be able to visit distinct Martha Stewart retail stores inside the majority of jcpenney department stores. These Martha Stewart stores are intended to be destinations where consumers can experience an engaging and inspiring environment and buy a variety of affordable, high-quality home and lifestyle merchandise designed and curated by Martha Stewart and her team. (AP Photo/Mary Altaffer, File)
FILE - In this June 22, 2004 file photo, Martha Stewart leaves the Martha Stewart Living Omnimedia Inc. annual shareholders' meeting, in New York. Beginning in February 2013, customers will be able to visit distinct Martha Stewart retail stores inside the majority of jcpenney department stores. These Martha Stewart stores are intended to be destinations where consumers can experience an engaging and inspiring environment and buy a variety of affordable, high-quality home and lifestyle merchandise designed and curated by Martha Stewart and her team. (AP Photo/Mary Altaffer, File)
FILE - In this May 10, 2006 file photo, a customer leaves a JC Penney Department store in Cupertino, Calif. Beginning in February 2013, customers will be able to visit distinct Martha Stewart retail stores inside the majority of jcpenney department stores. These Martha Stewart stores are intended to be destinations where consumers can experience an engaging and inspiring environment and buy a variety of affordable, high-quality home and lifestyle merchandise designed and curated by Martha Stewart and her team. (AP Photo/Paul Sakuma, File)
NEW YORK (AP) ? J.C. Penney Co. is buying a minority stake in Martha Stewart Living Omnimedia Inc. for $38.5 million, the latest move by the department store to attract new customers and perk up lackluster sales.
Penney is acquiring a 16.6 percent stake in the media and merchandising company. The Plano, Texas, company will create mini-Martha Stewart shops within its department stores and a joint website.
The deal, announced Wednesday, comes at a time when both brands are aiming to revitalize business. Penney recently brought on former Apple Inc. executive Ron Johnson as CEO. Johnson, who joined the company's board in August, took over merchandising and marketing responsibilities on Nov. 1.
Johnson, who will assume the remaining CEO functions on Feb. 1, has said he wanted to "re-imagine" the department store chain. As for Martha Stewart, it has grappled with declines in print advertising revenue and fierce competition from other websites that also offer recipes and other lifestyle information.
In its latest move, Penney is buying 11 million Martha Stewart Living shares at $3.50 per share, and getting representation on the New York company's board. The companies did not disclose how many board seats were involved. Martha Stewart is expected to receive more than $200 million from the 10-year deal.
"We intend for Martha Stewart stores to be a key centerpiece of our new strategy to transform J.C. Penney into America's favorite store," CEO Johnson said in a statement.
As part of the deal, the companies will create Martha Stewart retail stores within most J.C. Penney locations starting in February 2013. The stores will carry home goods and other items that will be chosen by Martha Stewart and her team, and marketed by Penney.
The joint website, which will have products from the Martha Stewart stores inside J.C. Penney and other items designed or chosen by lifestyles guru Stewart, is also expected to launch in 2013.
"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," Stewart, who is the founder and a board member of the company that bears her name, said in a statement.
It's yet another retail deal for Martha Stewart, which in May hired investment company Blackstone Advisory Partners to explore partnerships and investments. Martha Stewart also has exclusive arrangements with other companies, including Penney rival Macy's Inc. and Home Depot Inc. In an interview with The Associated Press Wednesday, Lisa Gersh, president and chief operating officer at Martha Stewart, said details were still being hammered out for the Penny shops, but that the partnership would not affect its distribution with other store partners like Macy's.
"This is a different presentation and a different view," Gersh said. "We think this is great for the brand and for all our (store) partners." She noted that just as shoppers go to the Apple store for the experience, the goal is for customers to go to the Martha Stewart shops at Penney's for the experience.
But Macy's said on Wednesday that it was reviewing the partnership "in light of the proliferation of Martha Stewart-branded product in the marketplace," according to an e-mailed statement from Macy's spokesman Jim Sluzewski. "No decisions have been made at this time," he said.
Home Depot didn't immediately return a call.
The deal with Martha Stewart is the latest stamp that Johnson, the former Apple stores executive, is putting on Penney. Earlier in the fall, Penney hired Target Corp.'s top marketing executive, Michael Francis, as its new president in October. And the chain announced last month that it hired two of Johnson's former Apple colleagues, Daniel Walker and Michael Kramer, to serve as chief talent officer and chief operating officer.
Penney is set to announce a new pricing strategy in January.
Under Johnson's predecessor Myron Ullman III, Penney added popular brands like European clothing line MNG by Mango and Sephora cosmetics, but the company is still struggling to make its stores more inviting places to shop. In its third quarter ended Oct. 29, Penney's revenue at stores opened at least a year fell 1.6 percent That compares with increases of 4 percent at Macy's and 2.1 percent at Kohl's Corp. for the same period. That decline continued into November, with Penney posting a 2 percent drop for the measure, which is considered a key barometer of a retailer's health.
Penney's shares slipped 5 cents to $33.25 in morning trading, while Martha Stewart's shares rose $1.03, or 33 percent, to $4.15.
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