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Merchandising a bright spot as MSLO narrows 1Q loss

New York - With merchandising revenues up 33% in the first quarter, Martha Stewart Living Omnimedia was able to partially offset declines in the company's publishing and broadcasting divisions.

Merchandising revenues for the three-month period ended March 31 rang in at $13.6 million, compared to $10.2 million in the prior year's first quarter.

The gain was driven by the launch of the Martha Stewart Home Office line at Staples during the quarter as well as the receipt of initial design fees from JCPenney for Martha Stewart shop-in-shops schedule to launch next year. The company also credited strong sales for Martha Stewart Collection home products lines at Macy's - especially textiles and decorative housewares - and the Martha Stewart paint line at The Home Depot.

Operating income for the merchandising division leapt 81% to $9.4 million during the quarter.

"Without giving any specific quantification," cfo Ken West said during the company's conference call with analysts, MSLO expects further growth "at both the Home Depot and Macy's. We're happy with those partners and all of our partners as a whole."

Macy's and MSLO are currently engaged in mutual law suits over the JCPenney deal, which Macy's asserts violates its exclusive for certain categories of Martha Stewart home merchandise.

MSLO outlined several recent developments in its merchandising division.

--Home Depot has extended its agreement to offer Martha Stewart Living branded products in its 2,000-plus stores through March 2016 and will offer an expanded assortment of products. Top performers in the quarter included specialty paint and project paint, as well as decor, and storage and organization.
--Martha's new home office line boasted a strong launch with more than 300 products across multiple product categories at the office supply chain's units in the U.S. and Canada and on its e-commerce site.
--Martha Stewart Pets "performed well" across categories, as the company continued to expand the assortment, including the introduction of a new cats program last year.
--Emeril's business delivered a strong performance in the quarter, driven by shipments of product that launched at JCPenney in early April and two appearances on HSN.

The company's net loss for the quarter was $3.6 million, an improvement over the year-ago quarter's net loss of $7.1 million. Total company revenues fell 5.5% to $49.8 million.

Still, results were overall better than expected, noted president and coo Lisa Gersh.

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