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MSLO banks on JCP alliance to take it closer to multi-channnel goals

Calls deal "great" for Macy's

Retail Editor 4 -- Home Textiles Today, December 7, 2011

New York - Just hours after announcing its new alliance with JCPenney, Martha Stewart Living Omnimedia offered more details during a live conference here today - but more importantly, vaguely answered analysts' questions about the deal's impact on MSLO's exclusive relationship with Macy's.

At the UBS 39th Annual Global Media and Communications Conference, MSLO president and coo Lisa Gersh acknowledged "the company has not performed well, and our stock price proves that," but offered a long list of efforts already in place - including the new partnership with JCP -to improve MSLO's business by the second half of 2012, if not sooner.

Among those: Merchandising, which Gersh described as "a great business [that] will be even better."

While MSLO's largest partnerships are currently with The Home Depot and Macy's, the company implied its JCP alliance could potentially become bigger and more relevant.

"[It is] a great opportunity for all of our partners," Gersh said in response to an analyst's query about how MSLO views its JCP partnership against the Macy's relationship, which crosses multiple hard and soft home categories.

"It will really help us fully develop the brand and give it that distinctive voice that we know it has in the way it speaks to our customer. It's a great opportunity to grow the brand further, and we think it's a great opportunity for Macy's as well."

Speaking on more general terms related to merchandising in her prepared statements, Gersh noted: "As our merchandising deals come up for renegotiation, given the strength of the product that we have in the marketplace we believe that better terms for our merchandising deals are available. And all of this provides a great segue to the JCP announcement we made this morning."

Gersh then proceeded to offer a detailed outline of how MSLO"s deal with JCP "delivers on every level: for the customer, the company and for shareholders. The retail piece [supports] our strategy in several key ways."

First, she said, it creates "a unique and comprehensive retail experience featuring Martha Stewart product, know-how and [web] site."

Secondly, it addresses MSLO's grander ecommerce strategy.

"We will jointly develop and operate an ecommerce site with JCPenney that will offer Martha Stewart's expertise and be a convenient destination for customers to purchase a wide range of home and lifestyle products," Gersh explained.

MSLO had run its own consumer-direct ecommerce and catalog business featuring better-level product, but abandoned it several years ago.

Third, MSLO is expected to receive from JCP in excess of $200 million, which consists of design fees, advertising commitments, and royalty payments over 10 years.

In turn, JCP will take 16.6% stake and will have board representation. MSLO will pay a special dividend of $0.25 per share to shareholders.

"We expect tremendous profitability [from the JCP strategy]...and are happy with the current relationships with all of our license partners, and we expect them all to continue [to perform] very strongly in the future," Gersh said.

The JCPenney partnership is also positioned as a key component of the company's larger effort toward living up to its "omnimedia" name.

""This strategic investment is a strong endorsement of Martha and what we're doing here at the company," Gersh said, later adding, "The partnership actually brings together all the segments of our business in an incredible way. The opportunity that JCPenney will provide is a distinctive store at JCPenney where we can provide our product along with our know-how, which has really been the dream of the company from the beginning and the reason were an omnimedia company. So for us, it really brings together all of those elements...We hope our customers will come to JCPenney to buy product and learn about product."

JCP will also play a role in MSLO's broader international merchandising initiative, Gersh said, without offering further details. Gersh described MSLO's international merchandising as "an important growth area and one we will be very focused on," especially in Europe, South America and Asia where the Martha Stewart brand already has brand recognition.

Finally, Gersh said MSLO plans to expand and its merchandising reach in several categories, including food and gardening, "to name a few," as well as others "we have yet to exploit."

 

 

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