As if J.C. Penney’s financial headaches weren’t enough, three of the retailer’s exclusive merchandise collections are, peculiarly, embattled.
The 1,100-unit chain, which is staring down a cash crunch heading into the make-or-break holiday selling season, according to a Goldman Sachs report, is at odds with two suppliers of its proprietary lines, one of which has ceased to do business with the department store chain.
And of course, there’s the legal drama swirling around its Martha Stewart home collection.
A Dressing Down By Allen B. Schwartz
Just last week, Allen B. Schwartz, co-owner of apparel company A.B.S. by Allen Schwartz, terminated his five-year old Allen B. line with J.C. Penney, Women’s Wear Daily reported.
The Allen B. line launched at J.C. Penney as a sportswear collection that was carried in nearly 1,000 stores via a licensing arrangement.
But eight months ago, Penney reversed course and asked for Schwartz to instead provide a dress line for the chain, which the retailer deemed had more sales potential, according to WWD.
Schwartz, who sells upscale dresses under the A.B.S. by Allen Schwartz label at retailers such as Nordstom and Bloomingdale’s, said he was the first tony designer to simultaneously go down-market with a line at J.C. Penney, something that has now become commonplace at retail.
Penney merchants have made him feel undervalued, he told WWD. “I want to be more appreciated. I’ve done incredible work with them. I became uneasy and I’m not going to renew. . . Every season is something new. We’re staffing 25 people for a project like this, and we just can’t flip a switch. I feel very relieved,” Schwartz said. “The terms keep changing and you lose trust.”
Home Drama
Meanwhile, Bodum USA, the Danish company best know for its French press coffeemakers, filed a lawsuit against. J.C. Penney this month alleging that the retailer did not meet its contractual obligation to feature the kitchenware firm’s merchandise in hip, contemporary Bodum shops in 683 J.C. Penney stores. “J.C. Penney has breached its written agreement with Bodum, broken many other promises to Bodum and completely frustrated the entire purpose of the parties’ joint efforts, to Bodum’s great financial loss,” according to Home Furnishings News, citing a company filing.
The move to transform Penney’s home department into a sea of upscale in-store shops from names like British furniture designer Sir Terence Conran, hip potter Jonathan Adler and architect Michael Graves was one facet of ouset CEO Ron Johnson’s strategy.
Indeed, home has been one of Penney’s worst performing divisions, and returning CEO Myron “Mike” Ullman is working to undo the damage by deconstructing the in-store shops to showcase merchandise by product classification instead.
Martha, Martha, Martha
In the case of J.C. Penney’s Martha Stewart home collection, it’s not a vendor that’s claiming foul, but its biggest competitor.
Macy’s sued J.C. Penney and Martha Stewart Living Omnimedia MSO -2.08% for allegedly violating its contract with the department store, which has sold an exclusive collection from the domestic doyenne since 2006.
New York judge Jeffrey Oing is now deliberating on whether or not MSLO should be allowed to continue to design particular home products for J.C. Penney, although Stewart’s company already sells home goods to Macy’s.
Pressed by inquiries about the state of its business and even reports that it might be headed for bankruptcy, J.C. Penney issued a statement yesterdaythat sounded a note of optimism.
The retailer said it’s pleased with its turnaround efforts thus far, and that it’s “starting to see greater predictability in its performance across many areas.
“The Company continues to be encouraged by improvements in purchase conversion both in store and on jcp.com, primarily due to being back in stock in key items and sizes the customer expects to find at J.C. Penney,” according to the press release.
Stay tuned.
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