J.C. Penney Co. (JCP:US) pulled Bodum AG products from its website after the kitchen-goods maker sued the retailer for the delayed and scaled back opening of its Ron Johnson-designed home departments.
Thomas Perez, chief executive officer of New York-based subsidiary Bodum USA Inc., confirmed in an interview yesterday that the goods had been removed. J.C. Penney hasn’t explained why they were taken off the site, though Perez said he assumed it was because of the lawsuit and called it “another breach of contract.”
Bodum USA, whose closely held parent is based in Triengen, Switzerland, sued J.C. Penney Aug. 30 in New York State Supreme Court in Manhattan claiming the retailer caused “great financial loss” by not making good on an agreement to install more than 650 boutiques in its stores dedicated to the Bodum and Ordning & Reda brands. The deal with J.C. Penney was the biggest in Bodum’s history, Perez said, while declining to provide sales figures.
Johnson, J.C. Penney’s former CEO, had a grand vision for the century-old retailer to swap in trendier brands to capture younger and wealthier shoppers and give each a tailored boutique. He also got rid of most discounting. Both moves alienated customers, leading to a 25 percent drop in sales and a loss of $985 million last year. By the time Johnson left in April and was replaced by Mike Ullman, the revamped home department had been scaled back to about 500 stores.
Kristin Hays, a spokeswoman for Plano, Texas-based J.C. Penney, didn’t respond to requests for comment.
Bodum entered an agreement with J.C. Penney in November 2012 to open 683 boutiques for both of its brands by March and keep them going for four years, according to the lawsuit. As part of the deal, Bodum wouldn’t sell its products in Wal-Mart Stores Inc. or Stage Stores Inc. (SSI:US) J.C. Penney also had the exclusive rights to Ordning & Reda, which hadn’t been sold in the U.S. before.
While J.C. Penney executives said as late as February that all the boutiques would open in March, the company didn’t start unveiling them until June, according to the complaint. J.C. Penney was also required to advertise the brands and didn’t, Bodum said.
Bodum is asking for about $10 million in damages, including $5.3 million for merchandise that J.C. Penney ordered and then didn’t purchase. It’s also requesting that the court award unspecified damages for other expenses and lost profits.
So far J.C. Penney’s remodeled home sections haven’t performed well and are “a major obstacle in the turnaround” because the goods “weren’t resonating with our core customer,” Ullman said on Aug. 20. Perez said sales have been “slower than expected.”
To improve results, J.C. Penney is giving more space to low-priced items like towels and merchandising more products by category instead of by brand.
The case is Bodum USA Inc. v. J.C. Penney Corp., 653045/2013, New York State Supreme Court (Manhattan).
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