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Martha Stewart Living Tossed Into Untested Waters

Martha Stewart Living Omnimedia is not dead, but the company founder and largest shareholder first has to apologize to avoid that fate for her how-to lifestyle brand.

That hopeful observation amid a sea of condemning noises following Stewart's conviction March 5 on four charges related to insider trading comes from consultant Laura Ries, co-author of numerous books on branding and marketing strategy.

“The company should hope that Martha comes to her senses, finds some humility and apologizes,” Ries said. “The American public has an overwhelming ability to forgive, but you have to first admit you made a mistake, promise to never do it again and express how terribly sorry you feel about it.”

Stewart's net worth and her company's fate hang in the balance. Her television shows have been removed in some markets, and her newspaper columns have been rebranded. Revenue from magazine publishing, merchandising and e-commerce and catalog similarly is threatened.

The day before Stewart was found guilty, her company reported that revenue dropped 17 percent last year, ending 2003 with a net loss of $2.8 million versus a net income of $7.3 million in 2002. In the Internet and catalog group, revenue fell 16 percent, mainly because of a planned cutback in catalog circulation. In March 2003, the company restructured its Internet/direct commerce division and laid off 40 percent of the staff.

As for Martha Stewart's mailing lists, the files still are available from list manager Millard Group. The core lists are Martha Stewart: The Catalog for Living with 294,300 last-12-month buyers and the Martha Stewart Living magazine file with 1.1 million active paid subscribers. Also available is the Everyday Food magazine file with 281,100 active paid subscribers.

Compared with the catalog file's 13-24 month buyer count, the current 12-month buyers count is down 69,000 names, a 19 percent drop.

“Long before any of this came up with accusations about Martha Stewart, the company had planned to cut back circulation on the catalog anyway,” said Donna Hamilton, vice president of sales in the list management division at Millard, Peterborough, NH. “The current 12-month count is what they expected.”

Aside from that, the catalog and magazines are mailing and the lists are being updated monthly.

For the most part, list brokers said the same rules apply to the Martha Stewart files as with any list on the market.

“What determines the success of a list has to do with the buyers on the list and their purchase behavior,” said Steve Tamke, senior vice president at Mokrynski & Associates Inc., Hackensack, NJ. “If they are recent purchasers, high-dollar purchasers and/or frequent purchasers of the products in Martha's book and if the product affinity between what they are purchasing and what a mailer is mailing is high, the list should continue to do well.”

One also might argue that Stewart's customers who have been buying during this timeframe are even more loyal than the average purchaser, Tamke added.

Another broker was unsure about that assessment.

“As to whether or not the names might be more responsive to my mailer's offer than when Martha was in her heyday, I don't think that will necessarily be true,” said Linda Huntoon, executive vice president at Direct Media Inc., Greenwich, CT.

Still, Huntoon said that if the names are valuable, a mailer couldn't care less what's happening with Stewart.

“There is no blueprint to follow when something like this happens to a brand,” Tamke said.

It is a tough call, especially as the bad press shows no sign of relenting. One option is to take Stewart's name off the door, though Ries doesn't see that happening.

“You cannot separate Martha Stewart Living Omnimedia from Martha Stewart,” she said. “The company is Martha, and Martha is the company.”

A Reuters report late last week supports that view. It stated that Stewart was near an agreement with Martha Stewart Living Omnimedia that would let her continue with the company, likely in a creative role but not as an officer.

The New York company has $169 million cash in the bank and no debt. A March 5 media note lamented the setback to the brand and its founder but reminded recipients “to recognize the significant contribution that Martha has made to advancing the domestic arts and improving the quality of life in and around our homes.”

As Stewart awaits sentencing and plans an appeal, others are lining up to grab some of Martha Stewart Living's business. In May, JC Penney will introduce a 1,700-strong range of home furnishings products from author Chris Casson Madden. That same month, Hearst Magazines will test O at Home, an extension of the popular Oprah Winfrey-branded title O. Last week, Conde Nast Publications said it is working on a home version of its Lucky for women and Cargo for men shopping magazines.

“Many people, from 'Queer Eye's' [Fab Five] to Paris Hilton's mom, are jumping into the arena, vying for our dollars to help us improve our lives with a great party, an organized house, a perfect meal and a quick manicure,” Ries said. “There has been a great divergence with cooking experts, fashion experts, home decorating experts, but I don't think we'll see anyone with the likes of Martha again.”

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