Martha Stewart, JC Penny Pace Retail Sector

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JC Penny takes stake in Martha Stewart Living OmniMedia Inc in effort to revive both brands

JC Penny (NYSE:JCP) announced today that it was taking a 16.6% stake in Martha Stewart Living (NYSE:MSO) worth $38.5 million and at a 12% premium over recent Martha Stewart closing prices.

The acquisition is the second major move for Penny (NYSE:JCP) after acquiring Liz Claiborne in October.

The company’s new CEO is Ron Johnson who has been at the helm for a month and comes to Penny after creating the mega-successful Apple Stores. (NASDAQ:AAPL) stores.  His goal is to rekindle sales in both the Penny and Martha Stewart brands that have been fading in recent years and he has already brought in former top executives from Target and Apple to move the firm down that road.

The retail sector (NYSEARCA:XRT) traded slightly higher in early market action while Marth Stewart Living (NYSE:MSO) surged 35%, JC Penny (NYSE:JCP) rose 0.5%. and the Consumer Discretionary Sector (NYSEARCA:XLY) added 0.2%

Bottom Line: With the U.S consumer still stressed by high unemployment and low housing prices, competition remains cutthroat in the consmer sector. Expect aggressive innovation from JC Penny and Martha Stewart as the new Apple oriented team takes the reigns.  If successful, accelerating revenue growth and earnings could follow and as Martha Stewart used to say, “And that’s a good thing.”

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