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Martha Stewart Climbing Back from Kmart Crash

Martha StewartMartha Stewart checking out at the 2007 launch at Macy’s.
NEW YORK - Macy's may have the class, but Kmart still has the mass.
     Martha Stewart Living Omnimedia Inc. last week said its merchandising business turned the page in 2010, having achieved "critical mass" by yearend thanks largely to the strong performances of its branded products sold at The Home Depot and Macy's.
     But the conversation also opened a window on how much effort has been involved in replicating the now-defunct Kmart business - which generated $1 billion in retail sales at it peak.
     When the Martha Stewart Collection of hard and soft home kicked off at Macy's in fall 2009, many viewed it as the "replacement" for the Kmart program. But reading between the lines, it appears the Macy's program is much smaller than many in the industry believe.
     Last week, MSLO executives said total retail sales of Martha Stewart products at MSLO's four leading merchandising partnerships - Martha Stewart Living at the Home Depot, Martha Stewart Collection at Macy's, Martha Stewart Pets at Petsmart, and Martha Stewart Cratfs, along with the Emeril business - were approximately $750 million in 2010.
     Those are four out of 20 merchandising partnerships across multiple product categories for Martha Stewart and Emeril brands. Together this year, they are expected to finally hit the $1 billion in Martha retail sales once produced by Kmart.
     The biggest eye-opener was the identification of the greatest sales generator in the group: The Home Depot, where Martha launched 12 months ago in 13 hard home product categories and carpeting.
     The Kmart impact is still being felt, and probably for the last time, Kmart royalty contributions are still being called out in MSLO's financial results. Kmart in fiscal 2010 was $1.2 million, down from $24.5 million Kmart contributed in 2009.
     Kmart's royalty contribution to MSLO in the fourth quarter of 2009 - as the program was ended - amounted to 65% of the $25.7 million in MSLO merchandising revenue. For fourth quarter 2010, merchandising revenue was $11.6 million - but excluding the Kmart impact, 4Q revenue rose 31%.
     "Our merchandising business is now a portfolio of licensing partnerships rather than a single entity," said president and ceo of merchandising Robin Marino during the company's analyst call.
     "So as we prepare to take the final steps across the bridge into the post-Kmart world, we feel very good about where our merchandising business sits," she added.
     At Macy's, the Martha Stewart Collection "continues the number one brand in the home store," Marino said. "This holiday season was extremely successful for us across our entire business, especially soft home textiles.
     "Same store sales showed double digit increases compared to the prior year's quarter, with particularly strong sales online through macys.com."

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