By Lawrence A. Rothman, CFA
September 17, 2007
By now, I'm sure everyone has seen the commercials. Martha Stewart Omnimedia (NYSE: MSO) has decided to sell an exclusive line -- titled the Martha Stewart Collection -- at Macy's (NYSE: M), in the department store's largest private-label brand launch yet. While the ads may be fine, I'm not so sure about the outcome for Martha.
For a long time, the company has sold its Martha Stewart Everyday line at Kmart, which offers items such as patio furniture, bedroom, and bathroom goods. For the latest quarter, sales of its goods at the Kmart chain were down 21%. Then again, Kmart -- a unit of Sears Holdings (Nasdaq: SHLD) -- isn't doing very well. Same-store sales have been declining for some time, with a 3.8% drop at its Kmart stores in just the last quarter.
So Martha Stewart has decided to target middle-market shoppers by selling bedding, cookware, and dining pieces exclusively at Macy's. Alas, the department store has its own set of problems. Its August same-store sales rose just 2.4%, not even half of Nordstrom's (NYSE: JWN) 6.6% increase.
But I've got an even more basic question, Fools: Why do both collections start with Martha Stewart? If you're appealing to different audiences, it'd make sense to more significantly distinguish between the brands -- starting with their names.
It's not like Martha has the Midas touch, either. She may be a whiz at spinning yarn into all kinds of things, but her business ventures are decidedly more mixed. For instance, I found her line of paint inferior, and that's putting it kindly.
Stewart's company is struggling, and its losses have been mounting. In the latest quarter, it lost $0.09 a share on continuing operations, excluding non-recurring items. That compares to a similar year-ago loss of $0.07 per share. With Kmart an increasingly unreliable place to push her goods, Stewart clearly needed to change something. However, starting a new line, under a brand that's had mixed success lately, in a department store facing similar pressures, seems like an odd choice.
Then again, it might just be the needed touch to boost sales for both struggling parties. Let's see whether Martha can weave a miracle from this one.
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