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Macy's CEO testifies in fight over Stewart

| Monday, Feb. 25, 2013, 6:39 p.m.

NEW YORK — Macy's CEO Terry Lundgren testified on Monday that he hung up on home diva Martha Stewart when she called to inform him on Dec. 6, 2011, that the company that bears her name had inked a deal with J.C. Penney to open shops within most of the chain's stores.

He hasn't spoken to her since, even though the two used to be good friends.

“I was sick to my stomach,” Lundgren testified in New York Supreme Court. “I can't remember hanging up on anyone in my life.”

Lundgren testified as Macy's Inc. and J.C. Penney Co. duke it out in court over the partnership with Martha Stewart Living Omnimedia.

Under Lundgren's leadership, Macy's has focused on building exclusive brands like Martha Stewart that are not carried by rivals to get shoppers to the store.

In the home area, exclusivity is key. Lundgren testified on Monday that Macy's had built the Martha Stewart brand to be the biggest in its home business. Sales last year were up 8 percent, double the rate for the entire company.

Lundgren said Macy's has spent 40 percent of its overall marketing on the Martha Stewart brand, even though the home category represents 17 percent of sales.

“I need the Martha Stewart business to be exclusive,” Lundgren said. “I don't have a substitute.”

The trial, which began on Wednesday, focuses on whether Macy's has the exclusive right to sell Martha Stewart branded cookware, bedding and other products. Other key witnesses expected to take the stand this week include Penney CEO Ron Johnson and Stewart, who founded Martha Steward Living.

Macy's sued Martha Stewart Living in January 2011, saying the company breached a long-standing contract when it penned the deal with Penney, which invested $38.5 million in a nearly 17 percent stake.

In a separate lawsuit, Macy's sued Penney claiming it had no regard for the Macy's contract and that Johnson had set out to steal the business that it had worked hard to develop.

The suits were consolidated for the bench trial. Supreme State Court Judge Jeffrey Oing is presiding over the trial, which is expected to last three weeks.

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