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The Five Dumbest Things on Wall Street This Week: March 1

2.) Martha's Devilish Deal

Martha Stewart was back in court this week. Need we say more Dumbest fans?

Okay. We'll say a little bit more. It's simply too tough for us not to comment on a case this monumentally idiotic.

Macy's (M) Chief Executive Terry Lundgren testified on Monday that he was so disgusted after Stewart informed him of her deal to sell her wares at rival J.C. Penney (JCP) back in December 2011 that he hung up the phone and has not exchanged words with the domestic diva since. Macy's, which signed its deal with Stewart following her release from prison in 2005, sued Martha Stewart Living Omnimedia (MSO - Get Report) in January 2012 for breach of contract, claiming it has the exclusive right to sell her products in product categories like cookware and bedding. Macy's later sued J.C. Penney as well, and the two cases were consolidated in this week's non-jury trial in Manhattan.

J.C. Penney announced on December 7, 2011 - Pearl Harbor Day mind you - its plan to launch Martha Stewart boutiques in more than 700 of its stores in 2013 as a part of CEO Ron Johnson's grand turnaround strategy. As a kicker to the deal, Penney's purchased 17% of Martha Stewart Living Omnimedia for $38.5 million.

"I was completely shocked and blown away," said Lundgren Monday. "I was literally sick to my stomach."

And you rightfully should have been Terry. You singlehandedly rehabilitated Martha's brand following her obstruction of justice conviction, and this is how she pays you back?

Heck, she might as well have taken a homemade shiv to your back big guy. That's probably what she would have done when she was a guest of the government in Alderson West Virginia anyway.

A stone-cold Stewart told Lundgren that the J.C. Penney deal would be good for Macy's, according to Lundgren's testimony. And that's when he hung up on her.

"The thought this was going to be good for Macy's was so far from anything I could comprehend," said Lundgren.

If it's any consolation to you, we can't fathom it either Terry old boy. Then again, the ultimate judge - that stock market that is - seems to be on your side in the wake of Martha and Ron's Faustian bargain. A quick look at this week's earnings results clearly illustrates the downside of their devilish deal.

Macy's reported a fourth-quarter profit that beat Wall Street expectations Tuesday, sending its shares up 3%. Meanwhile, MSO stock sank over 5% on that same day after it reported a 74% drop in 4th quarter net income as a result of weak ad sales. The conclusion of "The Martha Stewart Show" in mid-2012 certainly wasn't "a good thing" for its broadcast division either.

As for Penney's, well, Ron Johnson's demolition project reported another massively ugly quarter Wednesday with an adjusted net loss of $427 million, or $1.95 per share. On the top-line, the once-iconic retailer posted 30% plunge in revenue, proving once and for all that Martha hitched her wagon to the wrong star.

Looking back a little further, shares of Macy's have risen 7% over the past year compared with a 57% drop in Penney's shares and a 40% tumble in MSO stock.

Sometimes karma can be a real kick in the ass. Can't it Martha?
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AH $0.00 0.00%
AVID $8.19 0.00%
LYV $25.43 0.00%
MSO $6.06 0.00%
VVUS $1.72 0.00%


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