For JC Penney, some empty shelves might be next

J.C. Penney (JCP) might be heading for a disaster this spring. 

The judge in the lawsuit filed by Macy's (M) over Penney's rival contract with domestic diva Martha Stewart issued a stark warning: Empty shelves might be on the horizon for Penney customers.

New York State Supreme Court Judge Jeffrey Oing told Penney's attorneys on Monday that he could order home products with Stewart's name off Penney's shelves this spring, according to The Associated Press. That would spell more problems for the retailer, which last Wednesday reported a complete wreck of a holiday quarter.

Empty shelves are never a good sign, but what would make the situation worse is that Penney is planning a big rollout for its Martha Stewart products on Mother's Day, May 12. The new products, which include rugs and window coverings with Martha's name as well as a private label called Everyday, have already been delayed from a March 1 debut. 

A Penney attorney laid out the consequences for the judge: If the retailer is blocked from selling Martha Stewart products, it would be devastating for the company. Why? It doesn't have a substitute, he said. 

"That's the risk your client took," Oing told Penney's attorneys on Monday, according to the AP. "Ultimately, you guys played it out."

Penney has been struggling with its home-goods area and has planned to introduce a "store-within-a-stor​e" concept using Stewart's brand to revitalize the segment. 

Losing those products would also prove to be another blow to Penney Chief Executive Ron Johnson, whose strategy for revitalizing the century-old retailer has so far backfired. After he eliminated coupons and sales, many loyal consumers got miffed and avoided the stores, leading to last week's terrible earnings report.

In an attempt to keep Penney's shelves stocked, Martha Stewart took the stand on Tuesday and testified that she believed her company was "absolutely allowed" to design products for Penney despite a previous contract with Macy's, reports Bloomberg. Macy's, which has sold Martha Stewart-brand products since 2007, is trying to block Penney from doing the same and to halt Stewart's company from providing any designs to its rival. 

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