Saturday, July 17, 2004

Fight to clear her name may cloud empire's future

By Anne D'Innocenzio
The Associated Press

NEW YORK - Martha Stewart the person wants exoneration. Martha Stewart the company needs it all to just end.

With the dame of domesticity planning to fight her criminal conviction in a stock sale case, she effectively threatens to perpetuate the cloud that has hung over her business empire for two years. It's a cloud not just of scandal but of uncertainty - and uncertainty hurts any business.

"Martha the person is doing what she needs to do and that is looking out for herself, but it is not consistent with looking out for the brand," said Seth Siegel, co-founder of The Beanstalk Group, a trademark licensing agency. "Martha the brand needs closure, and Martha the person needs to fight."

The founder and former chairman and CEO of Martha Stewart Living Omnimedia Inc. has maintained her innocence, and told reporters after her sentencing Friday that she plans to take her case to a federal appeals court. She also appealed to consumers to buy her magazines and merchandise.

In a statement following the sentencing, Martha Stewart Living Omnimedia called the sentencing "an important step toward closure" for the company and said, "we continue to manage the company for the long-term, with a commitment to preserving our many assets and brand labels."

Beanstalk's Siegel noted that while the lighter-than-expected sentence "removes the worst of the stigma from Martha, it is by no means closure" because Stewart intends to exhaust her appeals. The best scenario for the brand would be for Stewart to complete her prison term immediately, he said.

A delayed resolution to Stewart's legal situation does not bode well for Martha Stewart Living Omnimedia, whose officials have told investors that the sooner the matter is closed, the sooner the company can expect a rebound in advertising at its magazines, including Martha Stewart Living.

Even if Stewart wins an appeal or clears her name, analysts say the damage has already been done to the brand that was built on her reputation as a perfect homemaker.

Martha Stewart Living Omnimedia reported a wider-than-expected first-quarter loss, and warned that advertiser defections will likely push losses for the second quarter beyond Wall Street projections.

Kmart Holding Co. reiterated its loyalty to Martha Stewart's company Friday after the domestic style maven was sentenced to five months in prison for lying about a stock sale.

"Martha Stewart Living Omnimedia is a valued brand partner of Kmart," the Troy, Mich.-based retailer said. "We look forward to continuing our mutually beneficial and successful relationship with MSLO."

Kmart, which has exclusive rights to the Martha Stewart Everyday brand in housewares and other products, said it could not comment on the details of the case or sentencing, calling it "a personal matter."

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