Lawless
All About Brad!
offline
Registered: Jun 2003
Local time: 08:56 PM
Location: Freezing in Colorado
Posts: 27143
|
Martha Inc.: Beginning of the end?
Stewart to leave the board of directors of her company; analysts say the brand may be in trouble.
March 8, 2004: 6:57 PM EST
NEW YORK (CNN/Money) - Martha Stewart will leave the board of directors of her company Martha Stewart Living Omnimedia but it has yet to be determined whether she will resign her position or simply not run for re-election, a person with knowledge of the board's activities told CNNfn.
"There's no issue she's going to leave the board," said the source. "It would be inappropriate to be a board member. She would like to stay involved with the creative side of the business."
The company's board met earlier Monday at the offices of law firm Fried Frank for several hours, but concluded its discussions without making any public statement. There may be an announcement this week, according to the source.
"It's a delicate situation and somewhat unprecedented," the person said.
The board of Martha Stewart Living is up for re-election at the company's annual meeting, likely to be scheduled in May.
One complication is Martha Stewart Living's contract with K-Mart requires Stewart to appear on behalf of the retailer 15-20 days each year. If the company fired her, they would be in violation of their contract with K-Mart, according to the source.
The board may be waiting to learn how much damage the Martha Stewart brand has suffered as a result of the domestic entrepreneur's conviction on four criminal counts.
Stewart quits Revlon
The 62-year-old Stewart also resigned from the board of cosmetics company Revlon after nearly eight years.
In Revlon's "Code of Business Conduct," dated December 2003, the first of 16 items listed is potential infractions related to the trading of securities. The document stresses that the code covers directors of the company.
The home decor expert spent the weekend at her Westport, Conn. home, where she met with her attorneys, advisers and MSO Chief Executive Sharon Patrick to focus on the future of her company.
With or without Stewart, the board faces difficult alternatives: saving what could be a dying brand or nursing the company away from it, retail analysts and consultants say.
Indeed, Martha Stewart Living (MSO: down $0.96 to $9.90, Research, Estimates) stock tumbled nearly 9 percent Monday after plunging 23 percent following Friday's verdict.
Credit Suisse First Boston analyst William Drewry cautioned that the stock "still has considerable downside potential from where it traded down late Friday."
In a research note, he added that the company is in danger of "significant losses going forward" from further declines in ad revenue at its magazine and TV divisions, as well as falling revenue from sales of its merchandise at Kmart.
A CBS spokesman who did not want to be identified told CNN/Money that 12 of Viacom's CBS local stations and "a few" UPN local stations would no longer air Martha Stewart's syndicated programs.
But at least one analyst called the outcome of the trial a positive, saying it "eliminated" some of the unknowns and could allow the company to move forward with "greater clarity."
"The harsh reality of the verdict in the Stewart case, we believe, will enable management and the board to make the necessary difficult strategic decisions," Morgan Stanley analyst Douglas Arthur wrote in a report.
Arthur boosted his forecasts for this year's earnings to 30 cents a share from 15 cents and also upped his 2005 forecast to 25 cents a share from 20 cents.
Martha, board plot strategy
Stewart, in a statement on her Web site Friday, said she will appeal the verdict and "continue to fight to clear my name." Stewart resigned as chairman and CEO of the company last year but remains on the board and serves as its "chief creative officer."
But analysts say Stewart's status as a convicted felon could make it extremely difficult for her to remain on the board.
While the company maps a contingency plan, industry watchers said the Martha Stewart brand might not survive, especially if she goes to jail.
"The brand as we know it is dead. Any brand that's built exclusively around a single personality can't survive something like this," said Howard Davidowitz, a veteran retail consultant.
"We're likely to see advertisers pull away" from her magazines and TV shows, Davidowitz said. "They would much rather invest in Oprah's media publishing empire rather than associate with the Stewart brand now."
Robert Passikoff, a New York-based brand consultant who has been tracking the Martha brand for nearly three years, agreed.
"This company, as it is configured today, is unsuited to compete in the marketplace with its brand taken away," said Passikoff. "Will the company survive? That remains to be seen. The immediate thing for MSO to do is distance the company from Stewart."
That process was already under way, analysts said, as the company's revenue, advertisers, readers -- and its stock price -- all were eroding because of Stewart's indictment and conviction. The stock had lost about half its value after Stewart was implicated in the ImClone scandal, though it later recovered some of that ground.
Over the past year, the company launched a new magazine -- Everyday Food -- that doesn't feature Stewart's name prominently on the cover, and a new TV show called "Pet Keeping with Marc Morrone" that excludes Martha entirely.
"We are confident that our assets -- our senior management team, our talented employees, our quality brand labels, our Omni business model and infrastructure, and our financial strength reflecting $169 million cash in the bank and no debt -- are more than sufficient to continue MSO's development as a leading 'how to' brand building company," the company said in a statement following Friday's verdict.
New York-based Martha Stewart Living, which runs publishing, television and merchandising divisions, last week reported profits that topped Wall Street forecasts for the latest quarter. But it also warned that its founder's trial would probably hurt ad revenue in the current quarter.
The company also recorded its first annual loss since going public in 1998.
Revenue from the publishing unit, which accounted for more than half of total sales in 2002, sank 26 percent last year from a year earlier. The company reduced the circulation guaranteed to advertisers of its flagship magazine, Martha Stewart Living, to 1.8 million from 2.3 million.
But Lori Kapner, marketing consultant with New York-based branding firm Kapner Consulting Inc., doesn't think it's all over for the Martha Stewart brand.
"I'm very bullish on the brand. The name stands for a style of living that people aspire to and they want her linens and recipes. A lot of people still want her products and the brand may still get plenty of sympathy votes," Kapner said.
"It falls on the shoulders of MSO's management, and not Stewart, to work hard to institutionalize the brand so that it can still prevail without Stewart," Kapner said.
|
:::>^..^<::: ~*~The Journey is more important than the end or the start~*~ :::>^..^<::: |
|
03-09-2004 04:49 AM
