Martha Stewart Begins Final Tag Sales for Direct Unit

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Martha Stewart Living Omnimedia Inc. will close its catalog and flagship online store next month with a final tag sale offering up to 70 percent off on more than 300 items.


The closure will come a month before company founder Martha Stewart is scheduled to be released from a women's prison in Alderson, WV, after completing her five-month sentence. Once out in early March, she will spend another five months under house arrest at home in Bedford, NY.


With this move, Martha Stewart's The Catalog for Living will cease publication more than two years after a makeover and name change from Martha By Mail. The site at www.marthastewart.com will stop selling items, too, focusing instead on how-to information.


"We have enjoyed discovering and creating beautiful unique items for you over the past eight years," a statement on marthastewart.com said.


Consumers will still be able to buy Martha Stewart-branded gifts, cookware and home furnishings through Kmart. They will also be able to buy bouquets on www.marthasflowers.com, which has reported positive numbers for the New York media and merchandise firm.


The decision to end non-flower direct marketing operations resulted from an Aug. 3 announcement that followed poor direct marketing sales.


Third-quarter operating losses at Martha Stewart's direct commerce division widened to $2.7 million, from $2 million in the prior year. Sales dropped more than 6 percent to $6.2 million, from $6.6 million in the year-ago third-quarter.


However, the division's losses for the first nine months of 2004 fell to $7.8 million, from $14.8 million. But sales plummeted more than 15 percent to $18.2 million, from $21.4 million in the same nine months a year earlier.


The company is positioning itself as a provider of how-to information in magazines and on the Internet and television.


It is clear that the company has been hit hard by the founder's conviction related to insider trading of ImClone Systems stock. Magazine advertisers have become skittish. Media coverage invariably is negative. And product sales online and in the reduced circulation catalog took a hit as well.


The end result is a scaled-back company with fewer employees and a flagship magazine with less emphasis on the founder's name.


But Martha Stewart, the brand, is not dead. While she was in prison, Stewart's company reached an agreement last month with NBC Universal Domestic Television Distribution for a new TV series.


The hourlong syndicated program will debut in the fall on NBC's owned and operated stations. It will feature Stewart, celebrity guests and a studio audience talking about cooking, entertaining, decorating and home renovating. Mark Burnett, known for "The Apprentice," will produce.


Another deal was struck earlier this month with PBS station WETA in Washington, DC. Starting earlier this month, PBS stations nationwide have been running a new TV series called Everyday Food, after Martha Stewart's popular 16-month-old food magazine. Twenty-six episodes will air.


The biggest testament to returning faith in the Martha Stewart brand is its share price: up from $17 in October to more than $28 in trading yesterday. Martha Stewart Living Omnimedia Inc. traded at about $8 in January 2004.


Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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