The Company: Tough Second Act; She Used Her Name and Face to Build Martha Stewart Living Omnimedia into a Powerhouse. Can It Survive without Martha?

Newsweek, March 15, 2004 | Go to article overview

The Company: Tough Second Act; She Used Her Name and Face to Build Martha Stewart Living Omnimedia into a Powerhouse. Can It Survive without Martha?


Byline: Peg Tyre

In the hours after the verdict was announced, the question reverberated from CNBC to the aisles of Kmart: can Martha Stewart Living survive without... Martha Stewart? The company, once a Wall Street darling, has been pummeled the past two years, its prospects clouded by Stewart's legal problems and the bankruptcy of Kmart, distributor of Martha-approved bedsheets and housewares. The day before the verdict, CEO Sharon Patrick assured investors that "we have made appropriate contingency plans" in case Stewart was found guilty. Few were convinced. After the verdict, the stock dropped by nearly a third.

It could fall even further. Since Stewart took her empire public in 1999, investors have worried whether the firm could survive if its namesake suffered, say, a disabling injury. In many ways her conviction is even more harmful: besides removing her from management, it taints an enterprise built on wholesomeness and good taste. Even before the verdict, ad pages at Martha Stewart Living were down 30 percent; last week the company announced its first annual loss. Now that defection is expected to become a stampede. "The verdict gave advertisers the answer they were looking for," says Robin Steinberg, top print- media buyer for Carat U.S.A. "There is no gray area here."

The company conceded that a guilty ruling would likely mean bigger ad problems--it could completely imperil its key TV franchise. …

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