Kmart, the US discount retailer, is suing Martha Stewart Living Omnimedia to reduce royalty payments for sales of its Martha Stewart homewares brand, claiming the media and merchandising group was “double-counting” royalties.
The complaint, filed with the US Bankruptcy Court in Chicago on Wednesday, claims MSLO is “victimising Kmart by forcing it to pay excessive royalties and advertising dollars based on an untenable interpretation of the agreement”.
On Friday MSLO said Kmart was seeking to reduce royalty payments by about $4.5m to $47.5m for the year ended January 31 2004, and to cut advertising spending by about $1m-$2m a year.
“MSLO believes Kmart’s interpretation is inconsistent with the terms of our long-standing contract, and therefore intends to defend this action and enforce the terms of the contract,” the company said.
Kmart, which has an exclusive deal to sell Martha Stewart bedding, furniture and other homewares, emerged from bankruptcy last May. While store closures have hurt Martha Stewart sales, the retailer has consistently said the brand was selling well, despite the legal travails of the group’s founder, Martha Stewart.