Martha Stewart Discusses Latest Legal Woes on TODAY

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This morning on "TODAY," Martha Stewart sat down with Matt Lauer to discuss the recent contract dispute with Macy's and the impact on her brand. Stewart was grilled in court on Tuesday, caught between Macy's and JC Penney, both of which have laid claim on her products. In the interview, Stewart discusses the case, saying "it's terribly important that we don't lose."

Watch the full interview on TODAY.com

A transcript of this morning's interview on TODAY follows:

Matt Lauer: Martha Stewart is with us now. Martha, good morning to you.

Martha Stewart (Martha Stewart Living): Pleasure, Matt.

Matt Lauer: Talk about the contract dispute in a second. I want to start with an image, though, and I want to put that image up of you on the witness stand that people are seeing across the country right now. And, you know what this does, Martha. This conjures up memories of 2004 and your conviction and your time in prison and it damaged your company and your brand and your reputation. Are you worried this, no matter whether you're smiling in that picture or not, will do the same thing?

Martha Stewart: Well, I certainly hope not. And, in 2004, I did not take the stand.

Matt Lauer: Right.

Martha Stewart: I was not able to defend myself, but yesterday I was there to defend our company, our contract with Macy's and to defend what I have been trying to do with JCPenney.

Matt Lauer: It's bad timing. I mean, you've had a tough year. It's well reported. The company had a-- a tough year, a loss of reported fifty-six million dollars, layoff of about twelve percent of the staff. How does the timing of this case impact your company?

Martha Stewart: Well, it's terribly important that we don't lose a case like this. This is-- this is a very important case. In fact, we really want to make product, we're-- our merchandising business is good. We make beautiful, beautiful product. We design product for our partners. We have partners like the Home Depot, like PetSmart, like--

Matt Lauer: Like Macy's.

Martha Stewart: --Macy's.

Matt Lauer: Like Macy's.

Martha Stewart: Right.

Matt Lauer: And-- and basically their contention is this. They had a deal with you and, when you negotiated the deal JCPenney and then-- announced that deal to Terry Lundgren the night before the deal was announced to the public but it--

Martha Stewart: Well, that's generally when you do announce something to--

Matt Lauer: --but he feels it violated the exclusivity of that contract. Did you when you negotiated the deal with JCPenney think it was going to be good for Macy's?

Martha Stewart: Really and truly we thought it would be good for Martha Stewart Living Omnimedia to be able to build seven hundred stores for the showcasing of Martha product. And-- and this was--

Matt Lauer: But did you think it was going to be good for Macy's or did you think it was going to water down their business?

Martha Stewart: I-- I think our product is so strong at Macy's that it will not hurt that at all. We're there for the Macy's consumer. We want to be where the consumer needs and wants us.

Matt Lauer: How do you think you did on the stand?

Martha Stewart: I think I did all right. It's a very difficult thing to sit there for four hours and be asked complicated, convoluted questions. I think I understood-- most of the questions and answered them fairly and-- and honestly.

Matt Lauer: I want to go back to that conversation you had with Terry Lundgren, the CEO of Macy's, the night before the deal with JCPenney--

Martha Stewart: Right.

Matt Lauer: --was announced to the public. He said when you started to tell him about this, he was shocked, he was blown away, he was sick to his stomach, he hung up the phone and hasn't spoken to you since. And you testified that you were flabbergasted by his reaction. What did you expect his reaction to be?

Martha Stewart: Well, Terry Lundgren is the consummate CEO. He's an excellent businessman. He should be able to discuss business in a business-like fashion. Hanging up on a woman businessperson, I think, was rude and-- and not right. My--

Matt Lauer: But as the consummate CEO, do you think he had a right to protect his brand? I was thinking last night, if you called me today and you said, Matt, I'm going to do the meatloaf segment with you and all my cooking segments with you on the TODAY Show, but I'm going to go to CBS This Morning and I'm going to do all of my decorating segments, I think that hurts me.

Martha Stewart: We would have had a discussion before, just as I tried to have a discussion with Terry Lundgren. But-- and my daughter called him during last year. My daughter who really is very, you know, worried about this whole situation, he would not speak to her. He would not speak to anybody involved. And that's kind of wrong.

Matt Lauer: So you think this could have been resolved before it ever got to a lawsuit?

Martha Stewart: Oh, it should definitely have been resolved. It is a contract dispute. In our contract, we're allowed to have a store within a store or a store, a-- a Martha Store. That's what we were planning to do.

Matt Lauer: Real quickly to end on-- on what the future could hold. JCPenney has had has had a real tough time, losses of about a billion dollars. Do you believe your products in their stores can help turn around that company?

Martha Stewart: Well, as I said yesterday, Ron Johnson is a visionary. Ron Johnson worked very hard on all those fantastic Apple stores. He also had a lot to do with the great success of Target before that. Ron is a visionary. He's trying to re-imagine the retail landscape. And that's a big job. And he has not been given-- any time at all to do so--

Matt Lauer: We--

Martha Stewart: --you know, it takes a little while to rebuild something like a JCPenney, a monolith like that.

Matt Lauer: We're going to follow this story, Martha. First of all, thank you for coming in this morning.

Martha Stewart: Well, thank you very much.

Matt Lauer: I know it wasn't easy for you to sit down and do this.

Martha Stewart: And then I'm going to come and make meatloaf.

Matt Lauer: I know after that from the unusual to the ridiculous, absolutely. Martha Stewart, thanks very much.

Martha Stewart: Thank you.