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MSLO's JCP biz buoys Q2; Macy's sales flat

Retail Editor 5, Staff Staff -- Home Textiles Today, July 30, 2013

New York - Martha Stewart Living Omnimedia Inc.'s second quarter was led by the strong performance of its merchandising division, which in turn was driven by the launch of the company's new branded goods at JCPenney during the three-month period.

While its business with Macy's was "principally flat with the prior year second quarter," noted interim principal executive officer, chief administrative officer and general counsel Daniel Taltz, MSLO's newly launched home goods lines at JCP were largely credited with the company's double-digit revenue increase in merchandising.

Overall merchandising revenues for MSLO increased 11% to $16.1 million for the quarter, and operating income was up 14.7% to $11.7 million.

"Our second quarter results showed improvements on a number of levels, and highlights included the launch of multiple categories of Martha-branded products at 550 JCPenney stores and on," he explained. "More specifically about JCPenney, with the launch of licensed merchandise, we began recognizing royalty revenues this quarter, which drove growth in merchandising revenue and operating income."

The JCPenney launch included Martha Stewart-branded merchandise in six new categories - Celebrations, Pantry, windows, rugs, lighting, and mirrors.

"While it is still very early, we are particularly pleased to know that Martha windows have already become the number one window treatment brand at JCPenney," Taltz noted.

Ken West, cfo, later added that MSLO's second quarter merchandising revenues increased 40% "sequentially from the first quarter," and that the growth experienced at JCPenney was partially offset by anticipated lower royalties at Home Depot.
He said the company "felt the effects" of Home Depot's decision to feature fewer skus of Marthat Stewart-branded patio products this season.

"However, we began to see an upturn in the paint category, which had been weak for some time, as we executed a repositioning of our paint products at The Home Depot," he continued. "Although we've seen some declines in last three to four quarters and softness in soft flooring and paint, paint is starting a recovery. And The Home Depot is still a very import sign partner to us now and in the future."

Taltz also offered a brief update on MSLO's relationship with Macy's.

"Closing arguments in the contractual dispute with Macy's will be made August 1st, with a decision expected shortly thereafter," he said. "Given the timing, we will not be discussing the dispute on the call today."

For the quarter, ended June 30, the company reported a 12% decline in revenue to $42.2 million from $47.9 million a year ago.

The company said growth in merchandising revenue was offset by lower revenue from publishing and broadcasting, which reflect MSLO's decision to discontinue two print titles and exit live television programming production.

The company's total operating loss for the second quarter of 2013 was $600,000 compared with a loss of $2.9 million in the prior-year period.


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