Plano, Texas based middle America department store J.C. Penney is looking to strengthen its appeal to American consumers with a deal to acquire a stake in Martha Stewart Living Omnimedia. The move is the first by J.C. Penney’s new CEO Ron Johnson, who created the now iconic Apple Store, to elevate the store’s retail brand and further develop a solid base of loyal shoppers through unique and differentiated customer experiences and Private Brands.
J.C. Penney will take a 16.6% stake in Martha Stewart Living for $38.5 million, or $3.50 per share. It will also have representation on Martha Stewart’s board.
“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,” said Johnson. A part of the deal is to create an e-commerce site for Martha Stewart cross-licensed products that is expected to launch in 2013. J.C. Penney will also develop Martha Stewart retail store-within-a-store with Martha Stewart Private Brand products, along with educational tips.
“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,” said Martha Stewart, who serves as director of the board of Martha Stewart Living Omnimedia.
The ten-year contract is estimated to generate more than $200 million for Martha Stewart Living over the period. For J.C. Penney, which is competing with department stores like Kohl’s and Macy’s to draw returning customers with robust Private Brand portfolios, influential designers and national brands, the agreement is the first step in Johnson’s effort to create a new J.C Penney complete with a differentiated and compelling Private Brand portfolio. It remains to be seen how this move will impact existing agreements with other retailers including: Walmart, Macy’s, Michael’s Crafts and Staples.