Macy’s CEO: ‘Shocked … Sick to My Stomach’ After Betrayal by Former ‘Friend’ Martha Stewart

The Macy's-JCPenney-Martha Stewart squabble has quickly gotten personal, even reminiscent of high school—with accusations of backstabbing, betrayal, and months of deception among executives who once considered themselves "friends."

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You’d think that a contract dispute over department store merchandise exclusivity would be a “strictly business” type of affair. But the Macy’s-JCPenney-Martha Stewart squabble has quickly gotten personal, even reminiscent of high school—with accusations of backstabbing, betrayal, and months of deception among executives who once considered themselves “friends.”

At the heart of the dispute is Martha Stewart, the “devious diva,” in New York Post parlance, whose company, Martha Stewart Living, has had a merchandising contract with Macy’s since 2006. In early December 2011, however, Stewart told Macy’s CEO Terry Lundgren over the phone that hundreds of Martha Stewart boutique stores would soon be opening inside JCPenney locations around the country. “I was completely shocked and blown away,” upon hearing the news, Lundgren testified this week in court, in a trial in which Macy’s is suing both JCPenney and Stewart’s company. “I was literally sick to my stomach.”

Then Stewart reportedly dropped a line that could have come from one of the “Mean Girls,” had one of the characters gone on to work in the corporate world. “She said this was going to be good for Macy’s,” Lundgren said. “I think that’s when I hung up.” For Lundgren, this was a first. “I don’t remember hanging up on anyone in my life,” he said. “The thought this was going to be good for Macy’s was so far from anything I could comprehend.”

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Lundgren hasn’t talked to Stewart since. “I don’t have a personal relationship with Martha Stewart,” he said in court. At least not anymore he doesn’t.

In the months leading up to the stomach-churning, friendship-ending phone call, Lundgren was in regular contact with Stewart and considered her a friend. Stewart regularly asked about Lundgren’s wife in e-mails, according to Bloomberg News. The Post reported that mere weeks before Stewart dropped the news on Lundgren that she was going into business with one of his direct rivals, Stewart hit up the Macy’s CEO for free tickets to $10,000 VIP dinners and the Macy’s Thanksgiving Day Parade.

The Stewart-Lundgren tiff isn’t the only backstabbing aspect of the suit, though. The CEOs of Macy’s and JCPenney, once buddies or at least on collegial terms, also seem to be engaged in something of a catfight. In January 2012, soon after JCPenney CEO Ron Johnson announced the department store’s plans for a dramatic makeover involving “fair and square” pricing, Lundgren reached out to Johnson and wished him the best. According to the Post:

“Thank you, Terry. Your note means a ton to me,” Johnson replied in an e-mail dated Jan. 27, 2012, which was submitted as evidence by Macy’s.

“I consider you a friend.”

At the same time, however, Johnson was trading snarky e-mails with colleagues about Macy’s — including one in which the former Apple exec said Macy’s management “look asleep at the wheel.”

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Cue the cat-whipping-out-claws sound.

Johnson, whose company has struggled mightily and recently given up on several aspects of his much-hyped makeover, is expected to testify in court later this week. Stewart is also expected to take the stand, but it is unclear when. In all likelihood, the two will try to steer the conversation back to business and away from the drama of backstabbing and former friends doling out the silent treatment.

Martha Stewart Living issued a cold statement about the matter, published by Bloomberg:

“This is a contractual dispute … However, rather than focus on the specific terms in the contract that are in dispute, Macy’s continues to distract with emotional stories that are not relevant. The contract is written to allow MSLO to sell a broad range of branded and non-branded products in JCP, including any MSLO-branded products within MSLO stores in JCP. We look forward to presenting our case.”