Doing without Martha
Doing without Martha
BY SOO YOUN
DAILY NEWS BUSINESS WRITER
July 17, 2004
Martha Stewart's looming jail stint may help liberate her company-but only for a bit.
Though shares of her media company, Martha Stewart Living Omnimedia, soared
almost 40% after her five-month prison term was announced, analysts said the company
needed a temporary reprieve from its domestic figurehead while it tries to regroup.
The stock surged 37% yesterday, or $3.17, to $11.81.
"The best thing for Martha Stewart Living Omnimedia as it attempts to win back advertisers is to have Ms. Stewart's legal issues out of the headlines," said William Blair & Co. analyst Alissa Goldwasser.
"Conditions that could prolong the media frenzy will likely delay any potential turnaround for the company," she added.
Stewart's sentence yesterday was delayed indefinitely until all the appeals of her case have been exhausted. So immediately after the sentencing, Stewart appeared on the courthouse steps shilling for her company.
"Perhaps all of you out there can continue to show your support by subscribing to our magazine, by buying our products, by encouraging our advertisers to come back in full-force to our magazines," Stewart said.
But experts were not persuaded that her company could survive without her and her reputation intact, although for months it has been trying.
"After 26 months of uncertainty, we see this as an important step toward closure for MSO. We continue to manage the company for the long-term, with a commitment to preserving our many assets and brand labels," a company statement said.
Still, the Martha Stewart name is already coming off some of its products.
Morningstar analyst T.K. MacKay, cited the removal of Stewart's name from her "Everyday Foods" magazine as a way the firm is distancing itself from its founder.
The company denied the effort to remove the tagline, which read "from the kitchens of Martha Stewart Living" caused a circulation increase.
"It just is not related," spokeswoman Elizabeth Estroff said.
But Martha's syndicated TV program has been put on indefinite hiatus. And while reruns of "Martha Stewart Living," which was dropped from CBS, will begin airing in prime time on The Style Network, four new special wedding episodes with original material will air next year - without Stewart.
Still, Kmart continues to display prominently Martha Stewart Everyday products, and her furniture line remains a hot seller. Kmart publicly repeated its support for Stewart yesterday. The company has already committed to carry her housewares line until 2010.
The other problem is that as a convicted felon, Stewart cannot serve as an officer or director of a publicly traded company, though she has been designated "founding editorial director."
"She's going to have to be careful to stay on the right side of the law," said media investment banker Ken Marlin. "If she's barred from being an executive in a publicly traded company, they are going to make sure she is not in any decision-making capacity."