Business

Monster mashed

As its courtroom tussle over Martha Stewart resumes today, JCPenney is bracing for the worst.

Accused by Macy’s of cutting an improper licensing deal with the domestic diva, CEO Ron Johnson’s company has begun scrambling this month to concoct a contingency plan should he lose the case, sources told The Post.

The worry: that Penney will be barred by a New York judge from selling an entire line of home goods designed by Stewart’s company, forcing Penney to eat massive losses on tons of inventory it has already produced.

“All of the stuff is already manufactured — it’s either on the water or in the warehouses,” according to a source close to Penney. “They’re feeling like there’s a substantial risk that they’re going to lose this and won’t be able to sell any of the merchandise.”

To avoid the danger of empty shelves, insiders said the retailer during the past two weeks has ramped up talks with Asian suppliers to arrange for emergency production of non-Stewart-designed bath products, bed linens and kitchenware.

The emergency goods, which would take 75 to 90 days to manufacture and deliver, would likely be made under old Penney private labels, which include JCP Home for bedding and Cook’s for kitchenware, sources said.

Looking to sidestep the allegation that the Stewart-designed line violates Stewart’s home-goods licensing deal with Macy’s, Penney has kept Stewart’s name off most of the goods.

Apart from a handful of categories where Macy’s doesn’t have a license, such as window treatments, the merchandise slated to hit stores next month will bear the generic tag “JCP Everyday.”

Macy’s, however, has contended that its five-year-old agreement with Stewart bars her from designing any home goods for competitors, no matter what label is on them.

Officials at Macy’s and Martha Stewart declined to comment. Penney didn’t respond to a request for comment.

As of late yesterday, lawyers for Penney, Martha Stewart Living Omnimedia and Macy’s hadn’t reached a truce after a monthlong mediation period. Having begun the non-jury trial in mid-March, all are slated to appear once again today before New York state Supreme Court Justice Jeffrey Oing.

Oing has sent mixed signals on how he might rule in the case. The judge has expressed reluctance to issue an order that could deepen the financial woes of Penney and Stewart.

But Oing also told a lawyer for Penney that it was “a risk your client took” when Penney decided to try distributing the Stewart-designed goods under the “JCP Everyday” label.

“With regard to the inventory, the judge could throw (Penney) a bone,” said Steve Gursky, a partner at law firm Olshan.

Options include allowing Penney to sell its current inventory while ceasing future production, or allowing Penney to sell basic items like solid-color towels that don’t appear to carry distinctive Stewart designs.

“The more highly designed it is, the more likely it is that the judge will forbid it,” Gursky said.