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JCPenney Settles Dispute With Sephora Over Shop-in-Shop Partnership

J. C. Penney Company Inc. and Sephora USA Inc. have agreed to settle their dispute over the beauty giant’s purported attempt to terminate its business contract with the department store chain.

In a statement released Thursday night, the two retailers announced that they have reaffirmed their partnership — which dates back more than a decade  — that allows Sephora to operate about 650 boutiques inside JCPenney’s stores. Both companies said they “worked constructively” to resolve outstanding legal matters and agreed to “mutually beneficial revisions” to their existing deal. (The terms of the settlement were not disclosed.)

The “Sephora inside JCPenney” (or SiJCP) alliance made headlines early this week when JCPenney filed a temporary restraining order against Sephora in an attempt to prevent the cosmetics retailer from supposedly exiting a long-term contract early.

According to the filing, Sephora — JCPenney’s only exclusive beauty partner — had asserted that its shop-in-shops in JCPenney’s units would not reopen when the department store chain reopens its doors, which were shuttered amid the coronavirus pandemic. JCPenney alleged that Sephora sought to amend the terms of their agreement, which does not expire “for several years,” to instead end in April 2021.

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Sephora responded with an emergency motion to dissolve and claimed JCPenney’s accusations were inaccurate. In its motion, Sephora wrote, “No part of JCP’s fanciful, one-sided narrative was or is true. In fact, JCP had and has no valid basis to show likelihood of success on the merits, irreparable harm or the other requisite elements for a [temporary restraining order].” It added that both parties had been involved in “good faith wind-down discussions” for several weeks amid reports of a looming JCPenney bankruptcy filing.

“The companies are committed to continuing to expand and innovate SiJCP’s offerings in order to deliver the beauty experience customers expect in the future,” the companies said in yesterday’s statement.

As its fleet of about 850 stores remain closed, JCPenney is reportedly in advanced talks for a debtor-in-possession loan that would continue to fund its operations during potential bankruptcy proceedings. Sources close to the situation told FN on April 24 that the company was exploring multiple financial options, and that bankruptcy was not necessarily imminent.

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