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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 203131  
Subject: Semi-OT: Ron Johnson's first move at JC Pennys Date: 12/9/2011 9:01 AM
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Many people wondered why Ron Johnson, head honcho of the Apple Stores concept(s), would jump from Apple to JC Penny. Well, other than the bigger title, more money, power, and control...

Penny's will buy a 16% share of Martha Stewart Living, stitching the two companies more tightly together. Some think the Martha brand tarnished, but that imbroglio mostly happened five years ago, was pretty minor by comparison with more recent outrages, and people's memories are short. More to the point, she has a multi-line appeal: she transcends most names like Jaclyn Smith or Liz Clayborne, whose influence stops at the edge of the clothes department. Martha has successfully sold paint colors, rugs, mugs, jugs, food, tile, shelving, sheets & pillowcases, furniture, household decorations and accessories and yes, clothes, making her a natural for a multi-line retailer like Penny's.

http://dealbook.nytimes.com/2011/12/07/j-c-penney-to-buy-sta...

The article details plans to merchandise part of the store as "Martha" (my proposed title) and to train employees there to be especially knowledgable in those products, not unlike Genius Bar experts at the Apple Stores. A knowledgable salesperson on the floor. What a concept! (Using resources other than a short term vendor contract to tie up a supply chain. What a concept!)

This has the potential to win on several fronts: they will lock out most direct competitors (like, say, Target, where Johnson lived before his Apple adventure) from carrying Martha Stewart products. Those in categories where Penny doesn't play, such as paint or wall-to-wall carpeting would presumably continue at other retailers (Home Depot has several lines at the moment, in paint and closet kits, among others), the association gives focus to an image of the store which benefits from the halo effect (a criticism I have had about Sears underutilization of their upscale Land's End acquisition), and they have stock ownership in a company which is beaten down largely because of the advertising recession, giving them a potential win in asset and book value over and above the simple metrics of same-store-sales retailing. (And I expect to see yet another specialty/vanity publication from Martha, available only to Penny's shoppers and funded by other Penny's vendors to drive traffic and be profitable unto itself, aiding both Penny's and Martha over time.)

There are risks to any acquisition or association and this is no different, putting so many eggs in Martha's basket might not work out, or worse she might be involved in another scandal, you never know. But overall it seems a big - and potentially good - first step for Johnson as he leaves the uber-successful Apple Retail division and steps into the muddled vision of a department store chain which has largely drifted on momentum and leasehold space for the past 20 or 30 years.
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