It’s a Good Thing: Martha + JCPenney

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It’s a good thing for Martha (to use one of her signature phrases). It’s a good thing for JC Penney. And it’s a good thing for Macy’s, which I’ll get to in a minute. I’m writing, of course, about JC Penney’s acquisition of roughly a 16% stake in Martha Stewart Living Omnimedia Inc.,which means the retail giant will be installing Martha Stewart shops inside JCPenney stores beginning in February, 2013, following the expiration of Martha’s contract with Macy’s.

From a financial perspective, though the terms of Martha’s deal with Macy’s are not public, the $38.5 million buy-in from Penney’s was certainly not a bad thing for MSLO. And for JCP to make that kind of investment, they must have an idea that’s it’s a really good strategic move.


First of all, from the few hints and statements that have been put forth by Penney’s new CEO, Ron Johnson, there is no way he plans on implementing a “tired formula,” as some have called it. Nor is Martha Stewart a tired brand, even though it’s bounced around for some time. In fact, according to Robin Report home furnishings columnist Warren Shoulberg, who is also Editor-in-Chief of HFN , Editorial Director of several Sandow Media business publications, and one of the most knowledgeable experts covering the home sector, the MS brand continues to be one of the most underrated in the home business. And, it did find a refreshing, well-positioned home at Macy’s where, according to most sources, it was doing quite well.

So, I don’t believe Martha would team up with JC Penney solely for financial reasons. I believe Ron Johnson had conversations with Martha Stewart about the strategies that would fuel his vision, and in which her brand would play an exciting new role: “…I’m not here to improve, I’m here to transform…” As reported, Penney’s envisions bringing “a comprehensive retail experience featuring Martha Stewart products, know-how and advice.” These will be Martha Stewart stores within Penney’s, but run by associates trained by the brand. And, I can see this expanding into cooking classes and why not Martha’s restaurant, and other “Martha-isms,” a term of Mr. Shoulberg’s. Home and garden apparel anyone?

By the way, the reason I believe Martha leaving Macy’s will also be “a good thing” for Macy’s, is that it provides the opportunity for them to pursue a brand or designer who is perhaps better aligned with their sought-after younger consumers.

\"TheJohnson has taken a lot of barbs from pundits, teasing about how he would translate the Apple “genius bar” in JC Penney. In fact, Bloomberg Businessweek ran a cartoon parodying such attempts and how they would look like within the store. Well, Johnson may not have genius bars in Penney’s, but he might very well have Martha-trained associates as little geniuses on All Things Martha.

And, for those of you who think this was a weak opening act for his grand new vision for JCP and the department store business model, I believe it’s not even close to being the whole act. On January 25th we will likely hear about all three acts and how a newly transformed JC Penney is going to look. And, I wouldn’t be surprised if he’s going to talk about acquiring and/or leasing space to “star” brands or designers who, like Martha, will provide their own shops, maybe even run by their own brand “geniuses.”

So, imagine an enclosed “mini-mall” with all kinds of events, restaurants, and theatre: JC Penney as a destination for experiences, and within that destination, branded shops of all kinds. Following the Sephora and MNG by Mango models, and soon to be Martha Stewart boutiques (and maybe restaurants?), they could lease space to brands such as Soma, which matches their core consumer sweet spot, and others. Why not? Those apparel specialty chain brands get hundreds of new locations for very little capital investment, and Penney’s traffic. What a synergy. And, then of course, why not roll out their own private branded specialty chains like Arizona and others?

I wonder if Apple would find some of their locations attractive for leasing space?

Are these ideas way out there? Sure they are. Would they be enormously costly to pull off? Sure they would. Would they take a long time to implement? Of course. Would they be “transformational?”


(Below is a response we received from a prominent retail consultant who, understandably, shall go nameless, and who took issue with Robin’s bullish view of the MS/JCP deal)

Robin –
I\’ve got to say that this is the first one where I think you\’ve wandered way off course. Where\’s that cynicism we all know and love? You\’ve laid out a wonderful set of aspirations for JCP. However, unless you have access to some inside info on Johnson\’s plans, I don\’t see how he he\’s going to pull off the program you\’ve outlined without investing billions in the reconfiguration — and then, god knows how much in the marketing needed to lure customers. It would take Johnson years to get those kinds of broad changes in place. Martha\’s done her bit on TV, at Kmart, Home Depot, and Macy\’s — and, of course, Alderson State Pen. By the time Johnson got this going, Martha and the brand would be about 867 in dog years. What do they say about new tricks?

I\’m just not sure that it\’s possible to freshen her up for yet another rebirth. My impression is that it was really the Macy\’s team that was designing (or at least directing) the merchandise for their stores. Everything else that she\’s been doing on her own hasn\’t changed since the 1990s. Basically, if Newt Gingrich had gone into retail, he\’d be Martha Stewart.

Moreover, the JCP Board is presumably paying Johnson a fortune to win over the same demographic that went nuts over the Apple stores. You note that Macy\’s is targeting a younger customer. Why is Johnson targeting an older customer who is more likely looking for \”geriatric\” than \”genius\” bars? Maybe she\’s an acquired taste, but for \”excitement,\” there are a number of women who come to mind before Martha Stewart. And, in conclusion… if Johnson is such a master, you\’d think he would orchestrate this a little better. Assume that he has in mind the great makeover you\’ve described. I would think that Martha Stewart would be just a small — and one of the less exciting — parts of it. Why not wait six more weeks to be able to trumpet out the broad strategy — and generate real enthusiam among investors and the vendor community? I must say, as a mouth-watering appetizer, Martha\’s right up there with a lettuce wedge.

Where I do agree is that, in the end, Macy\’s will be much better off. They\’ve got excitement and energy going for them, are in the forefront of every technology, and much more than anybody else, seem to embrace retailing as theater and entertainment.

So, in the end, JCP\’s move just leaves me scratching my head — and a number of other body parts.

Most humbly yours,

Bruce Wayne

P.S. One of my partners felt strongly that I\’d be nuts to put my name on this. So, given his sentiments — and the remote chance that Martha is planning to invite me for the Holidays — I probably should keep my identity hidden.

Robin’s Response:

I must say, all of your points are valid (and we love the humor), except among consumers, the MS brand is still powerful. So, everything you say will turn out to be right — ho-hum at best, failure at worst — unless what I’m predicting is carried out by JCP. And, you’re right about the investment — huge — including major store overhauls, etc. But, hey, this is what the guy promised and what everybody expects, so I guess I’m rolling the dice on his declarations. We’ll also hear him on the 25th of January with the whole enchilada.



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