"I've thought about it a lot obviously, and I think however it ends up, I think Martha is going to win," said Charles Koppelman, the company's former chairman. "If it ends up where she has product at Macy's and J.C. Penney, that's a good thing."
What's most important for the domestic diva's company is to get back to business and expand the brand, Koppelman told CNBC's "Squawk on the Street."
The initial deal between Macy's and Martha Stewart's company was brokered during Koppelman's seven-year tenure as chairman. He currently owns about 1.1 million shares, a larger stake than even Stewart.
During Stewart's testimony in court on Tuesday, she said she did nothing wrong when she agreed to open up branded shops within J.C. Penney's stores.
The two department stores are battling over whether Stewart's company breached its contract to sell certain items exclusively at Macy's by partnering with Penney.
Since the Penney deal was penned in 2011, the department store's stock has cratered as many investors lost confidence in CEO Ron Johnson's turnaround efforts.
"Hindsight is 20-20," Koppelman said. "I think when J.C. Penney was talking to Martha, there was a great deal of hope that this was going to be an extremely exciting retailer. It still may be. I don't know Ron Johnson. I know Terry (Lundgren, CEO of Macy's) — he's a great retailer and a terrific manager."
On Tuesday, Stewart said her brand had been kept "static" at Macy's, adding that her company couldn't survive without growth.
Koppelman said he thought the smart move for Stewart's company is to figure out how to expand its brand in a thoughtful and profitable way.
"And if one of the ways to do that is to take categories that are non-exclusive at Macy's and put them in other environments — I mean we have had product at Wal-Mart, we've had product at other retailers — that's 'a good thing,' to quote Martha, and it's a good thing for the brand," he added. "And I think it perpetrates the brand."
-By CNBC's Katie Little; Follow her @katie_little_
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