Martha Stewart in Court Tuesday - ABC 33/40 - Birmingham News, Weather, Sports

Martha Stewart denies any wrongdoing in J.C. Penney deal

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Martha Stewart headshot, founder of Martha Stewart Living Omnimedia, arriving at court on Tuesday, March 5, 2013 for case involving Macy's and JC Penney. (AP Graphic) Martha Stewart headshot, founder of Martha Stewart Living Omnimedia, arriving at court on Tuesday, March 5, 2013 for case involving Macy's and JC Penney. (AP Graphic)

By ANNE D'INNOCENZIO
AP Retail Writer

NEW YORK (AP) - Home diva Martha Stewart testified in court on Tuesday that she did nothing wrong when she signed an agreement to open up shops within most of J.C. Penney's stores across the country.

Stewart testified in New York State Supreme Court as part of a legal battle over whether the company that she founded breached its contract to sell some items exclusively at Macy's when she inked the deal with Penney in December 2011.

Stewart, who founded Martha Stewart Living Omnimedia Inc., during three hours of testimony, denied Macy's allegations that she did anything unethical in brokering the deal with Penney.

She said that she was only looking to expand and offer new opportunities for shoppers. In fact, she said that it was Macy's that didn't uphold its end of an agreement for trying to maximize the potential of her business, she said.

"I think Macy's has been a good partner," Stewart said. "It just boggles my mind that we're here sitting in front of you, judge."

The trial, which is in its third week, has unveiled some of the drama that has taken place behind-the-scenes between Stewart and the CEOs of Macy's Inc. and J.C. Penney Co.

Macy's attorneys have portrayed Stewart as someone who turned her back on a good friend, Macy's CEO Terry Lundgren, to broker a deal with a rival company. During testimony earlier in the trial, Lundgren said that he hung up on Stewart after she told him about the deal she'd reached with Penney, and hasn't spoken to her since.

"I was quite taken back by his response and when he hung up on me I was quite flabbergasted," Stewart said on Tuesday.

Stewart's testimony comes as the company she founded continues to struggle. Martha Stewart Living just finished its fifth straight year of losses. The company has also had steep sales declines.

Martha Stewart Living has been trying to bolster its merchandising business, which represents 30 percent of the company's annual revenue, to offset declines in its broadcast and publishing divisions as people continue to shift toward the Web and mobile apps to get their recipes and food tips.

As the housing recovery gains momentum and consumers look to plow money into their home, the biggest opportunities for Martha Stewart Living are in the home category. So, the stakes are high.

During her testimony on Tuesday, Stewart said she always wanted to open big shops at Macy's, but the retailer never embraced that concept. Instead, she noted the merchandise is just "here and there."

That's why she said that a proposal from Penney's CEO Ron Johnson to create shops filled with all sorts of home merchandise was appealing.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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