Originally created 10/10/05

Martha Stewart tries to turn around her company



NEW YORK - Martha Stewart wants to be everybody's best friend, but it's a tough popularity contest.

New projects reflect a new touchy-feely business approach and friendlier persona for the diva of homemaking. She rapped with Sean "Diddy" Combs and made dough figures with Conan O'Brien on her new daytime talk show "Martha," and on her reality show "The Apprentice: Martha Stewart," she writes lovely rejection notes to canned candidates. She has even quickly incorporated her five-month prison experience into her brand, selling 13,000 copies of that famous poncho she wore when she was released in March to benefit women's charities.

Stewart is also reaching out to new viewers, with plans to develop a new home improvement reality TV show next year, as well as new books, DVD's and a radio show in coming months.

Whether this new approach will help to turn around Martha Stewart Living Omnimedia Inc. remains to be seen. Advertisers fled and her stock plummeted as much as 50 percent while Stewart fought against charges of lying to investigators about a stock sale, then shares and its business rebounded while she served time in Alderson, W.Va.

But since Stewart's two TV shows made their debut last month, the stock has fallen 26 percent to around $25 per share amid lukewarm ratings. And some fans are not quite sure what to make of the new, funnier and chattier Martha.

"I miss her old show. I walked away learning more. She was more studious," said Jane Sanders. "Celebrities don't do it for me," said Sanders, 40, from Queens, N.Y. who was part of the live studio audience for Stewart's talk show featuring O'Brien last week.

But there are also positive signs. Susan Lyne, president and CEO of Stewart's New York-based multimedia company, reported that sales of Martha Stewart Everyday merchandise, from pots to towels, at Kmart stores have enjoyed an uptick.

The company is also seeing interest from potential new suppliers and retailers about new products and continues to talk to Sears Holding Corp. about expanding Stewart's Kmart products into Sears stores, Lyne said.

Advertising revenue is also getting a boost from the TV exposure, which Lyne said has created a "halo" over the brand. The number of ad pages for its flagship magazine Martha Stewart Living is expected to be up a better-than-expected 48 percent for the third quarter over a year ago, Lyne said.

"There are definitely more positive conversations happening - with more clients, " said Brenda White, director of print investment for Starcom USA, which buys advertising space for dozens of companies. "We know there is going to be a future for the company, which could have been a question before."

Still, Lyne declined to talk about when advertising revenue would return to its original levels or when the company would return to profitability, after suffering a string of losses. In late July, Martha Stewart Living reported second quarter losses of $33.5 million, compared to a loss of $17.8 million in the year-ago period while revenue rose 4.3 percent to $46 million from $44 million. But the company also said that it expects to narrow its operational losses at the end of the year.

"The queen ruled once from her castle," but time will tell whether Stewart can reclaim her position, said Robert Passikoff, president of the New York-based market research company Brand Keys Inc.

Analysts also cited intense competition from other lifestyle magazines like Real Simple, which benefited when advertisers turned away from Stewart's publications during her legal troubles.

Ivan Feinseth, managing director for Matrix USA, LLC, a New York-based research and brokerage company, also warned that the brand could suffer from too much exposure.

"She has a chance to build back the company to where it was, but it has to be slow," he said.

In addition to the two TV shows, and the upcoming home improvement show, set to air on cable channel Discovery Communications next year, Stewart will have a 24-hour radio channel with Sirius Satellite Radio Inc. that will feature cooking, gardening and entertaining programming for women. It will make its debut later this month.

Consumers will also see more products starting with the holiday season. There will be a DVD series of how-to tips starting in October with the first four titles focused on holiday entertaining. Stewart's "The Baking Book," her first cookbook in six years, will be out in November and a business book called "Martha's Rules" is due out later this month.

"We are very comfortable with the level of attention the company is getting," Lyne said. But she acknowledged the company recently tweaked the syndicated talk show, which made its debut Sept. 12, to make it more instructional. However, Lyne said she was pleased with the ratings.

In fact, the TV shows have helped promote Stewart's brand and business partners. On her "Apprentice" show, for example, contestants had to create a children's fairy tale for Random House, which publishes Stewart's books. Another episode had contestants design a flower shop, a plug for her online flower business.

"I think that 'Martha,' in particular, has been incredibly valuable in reaching a broader audience and delivering on our promise to answer not only the question of how to do something but why we do what we do," Stewart wrote in an e-mail response to The Associated Press.

As for Stewart's version of "The Apprentice," which is not affiliated with the company, Lyne said she has been disappointed by the ratings. According to Nielsen Media Research, the reality show only attracted 7.0 million viewers in the first episode; the number fell to 6.1 million the following week.

The show could be a victim of viewers being too bored with the format - ratings for Donald Trump's "Apprentice" have also disappointed this season. But Feinseth pointed out that Stewart's polite demeanor on the show, while pleasing her core fans who watch her daytime show and buy her products, could turn off reality TV viewers who were expecting Stewart to be as harsh as Trump.

Lyne said she doesn't feel that "Martha should be a different persona," even if she could.

"We are involved in a much longer game," Lyne added. "What is good for the company and what is good for her is being well served by the show."

On the Net:

www.marthastewart.com