Report: Martha Stewart and J.C. Penney Are Breaking Up

J.C. Penney will terminate its controversial partnership with Martha Stewart, according to a report Thursday in the New York Post.

The retailer struck a deal in December 2011 to carry home goods from Martha Stewart Living Omnimedia (MSO), but Macy's cried foul, claiming that it already had an exclusive agreement with Stewart. The three parties have spent more than a year locked in a three-way legal battle that has threatened to pull the home goods off the shelves at J.C. Penney stores.

But now it seems that J.C. Penney (JCP) has made a pre-emptive strike, opting to give up the legal fight with Macy's (M) and stop carrying the items. Source told the Post's James Covert that returning CEO Mike Ullman simply wasn't that enthused with Stewart's line of home goods, and that sales were disappointing.

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If so, it's yet another way that Ullman is rolling back the radical changes implemented by predecessor Ron Johnson. The former Apple executive made the Martha Stewart deal one of the centerpieces of his radical makeover of the century-old retailer, but the ugly legal fight became emblematic of the slipshod execution of his vision.

Ullman already nixed key elements of Johnson's apparel strategy by axing style icon Nick Wooster upon arrival, and last month he consolidated power by winning an ugly public fight with activist investor Bill Ackman. On his earnings call last month he called Johnson's overhaul of the home department "disappointing," and now it seems he's taking action to clean up that mess, too.

So if you're in the market for some home goods, we suggest checking out J.C. Penney. In the coming weeks, you're likely to find steep discounts on all Martha Stewart goods as it tries to liquidate its remaining stock.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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