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J.C. Penney and Sephora settle legal dispute

By Kristopher Fraser

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Fashion

J.C. Penney Co. and Sephora USA Inc. have reached an agreement over the dispute regarding Sephora operating about 650 shop-in-shops inside of J.C. Penney locations. Most of the terms of the agreement have been kept under wraps, but a deal has been reached that says Sephora will continue to operate stores inside of J.C. Penney.

J.C. Penney filed a lawsuit in Texas saying that Sephora was threatening to walk out on their agreement over the boutiques. A judge issued an order blocking Sephora from exiting the agreement and Sephora took the case to federal court to overturn the ruling.

Sephora says that J.C. Penney breached their contract when the department store chain furloughed the majority of its workforce. Like many other retail chains, including Macy's and Kohl's, J.C. Penney opted to furlough its workforce so their employees could collect unemployment while there were lockdowns in place to help stop the spread of coronavirus. Sephora, on the other hand, never furloughed employees at its standalone stores, even though they were also locked down due to coronavirus.

Sephora was attempting to pull out of their 16-year-agreement with J.C. Penney by April 2021, a year earlier than the contract was set to expire in May 2022. J.C. Penney said this would kill their beauty department, which drives major foot traffic to their stores.

Sephora appeared to want to break away from the struggling retailer as quickly as possible. J.C. Penney is currently struggling to restructure its debt, and the only silver lining for the company compared to many other department stores and fashion chains is it actually paid their rent during the coronavirus lockdown.

The chance Sephora will want to continue its partnership with J.C. Penney after 2022 is slim. Department stores are expected to continue struggling during the coronavirus pandemic, and with the soaring unemployment rate affecting consumer spending, it could be a while before retailers bounce back.

photo: courtesy of Business Wire

J C Penney
Sephora