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In emails, Penney targeted Macy’s deal

– It’s been a tough week to be Ron Johnson.

J.C. Penney’s CEO was in the hot seat again on Friday in New York State Supreme Court after facing investors earlier this week over a dismal quarterly earnings performance that marked one year of snowballing losses and sharp sales declines since he came on board.

This time, he was being grilled for four hours by lawyers from rival Macy’s Inc. who presented emails that he wrote that they believe illustrate how he plotted to push home diva Martha Stewart to breach an exclusive deal with his rival. They contend he wanted Macy’s backed into a corner so Penney would be the sole department store distributor of some of Stewart’s goods.

“I need to propose a deal so she (Martha Stewart) can go to Terry Lundgren at Macy’s and break the agreement,” reads one email Johnson wrote to an Penney executive in August 2011.

Johnson, looking tense with his hands clasped, acknowledged that getting a deal with Martha Stewart was critical but stopped short of saying his goal was to break the exclusive agreement. He said he knew there would have to be “an amendment” to a deal between Macy’s and Martha Stewart so that Penney could move forward.

In cross examination by Penney’s attorneys, Johnson said he just wanted to get a piece of the action while helping the struggling Martha Stewart business grow. And he says that the expanded partnership could be good for everyone, including Macy’s.

“Your success is based on a success of a vendor,” Johnson testified. “Competition can be your friend.”

Penney ended up signing a pact in December 2011 with Martha Stewart Living to open shops at most of its stores in spring 2013. But one month later, Macy’s renewed its long-standing exclusive deal until 2018 and then immediately sued Martha Stewart Living and Penney.

The trial focuses on whether Macy’s has the exclusive right to sell some Martha Stewart branded products such as cookware, bedding and bath items.

Macy’s is seeking to block Penney from opening Martha Stewart mini shops in its stores. The shops are part of Johnson’s plan to reinvent the shopping experience at the beleaguered chain.

Stewart is expected to testify Tuesday.

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