Here’s How J.C. Penny and Martha Stewart Living Omnimedia Plan on Dominating Retail

Two famous brands trying to rebuild themselves are preparing to come together: J.C. Penney (NYSE:JCPis buying a 16.6% stake in Martha Stewart Living Omnimedia (NYSE:MSO) for $38.5 million. The two companies are entering a 10-year partnership that plans to introduce Martha Stewart ministores and an improved on-line image featuring the Martha Stewart brand.

J.C. Penney (NYSE:JCP) is paying $3.50 a share, a premium of 12% over Tuesday’s close price. The deal was reportedly hammered out after months of discussions between the two companies — spearheaded for J.C. Penney by Ron Johnson, formerly of Target (NYSE:TGT) and Apple (NASDAQ:AAPL).

J.C. Penney is probably trying to repeat its success with exclusive mini stores-within-stores such as Liz Claiborne (NYSE:LIZ), which JCP claimed to be a ‘stand-out performer’ in its last quarterly earnings call. In the case of MSO, J.C. Penney could benefit by drawing in customers with the highly recognizable Martha Stewart brand. Martha Stewart (NYSE:MSO) would benefit from J.C. Penney’s retailing strength, prominent positioning, and a fresh new line of earnings – estimated at about $200 million including royalties, design fees, and advertising commitments.

Here’s how these stocks are trading on the news:

J. C. Penney Company, Inc. (NYSE:JCP): JCP shares recently traded at $33.36, up $0.06, or 0.18%. They have traded in a 52-week range of $23.44 to $41.00. Volume today was 795,049 shares versus a 3-month average volume of 5,221,170 shares. The company’s trailing P/E is 36.42, while trailing earnings are $0.92 per share.

Martha Stewart Living Omnimedia Inc. (NYSE:MSO): MSO shares recently traded at $4.14, up $1.02, or 32.69%. They have traded in a 52-week range of $2.77 to $5.49. Volume today was 3,139,317 shares versus a 3-month average volume of 190,358 shares. The company’s trailing earnings are $-0.28 per share.

Target Corp. (NYSE:TGT): TGT shares recently traded at $53.85, up $0.19, or 0.35%. They have traded in a 52-week range of $45.28 to $60.97. Volume today was 1,733,514 shares versus a 3-month average volume of 6,692,400 shares. The company’s trailing P/E is 12.53, while trailing earnings are $4.30 per share.

Apple Inc. (NASDAQ:AAPL): AAPL shares recently traded at $388.22, down $2.73, or 0.7%. They have traded in a 52-week range of $310.50 to $426.70. Volume today was 4,181,237 shares versus a 3-month average volume of 19,083,800 shares. The company’s trailing P/E is 14.03, while trailing earnings are $27.68 per share.

Liz Claiborne Inc. (NYSE:LIZ): LIZ shares recently traded at $8.29, down $0.21, or 2.47%. They have traded in a 52-week range of $4.02 to $9.18. Volume today was 936,100 shares versus a 3-month average volume of 4,041,240 shares. The company’s trailing earnings are $-4.57 per share.

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