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Jennifer Marks

Martha's Signature statement

If you were Martha Stewart, last week would have been a mixed bag.

True, first quarter earnings at your eponymous company outstripped The Street's expectations by one cent, but that's small comfort when your net income tumbles by more than 53.0 percent and your revenues lose 2.3 percent of their buoyancy.

On the good news side, though, you could point to the ambitious expansion of your $36 million merchandising empire, exemplified last week by the unveiling of Martha Stewart Signature floor coverings by Shaw Industries.

Taking aim at a network of what Shaw estimates is a potential customer base of 2,400 U.S. and Canadian flooring retailers, the 800-sku line encompasses just about any material that can lay on a floor: area rugs, carpet, hardwood, linoleum, laminates, ceramic tile, porcelain tile and natural stone.

Locked into bankrupt Kmart in the U.S. mass market, at least for the time being, Martha Stewart Omnimedia is now chasing mid-market retail outlets and independents. So far, that strategy has placed Signature paints in 1,600 Sherwin-Williams stores and Signature Fabrics in an undisclosed number of Calico Corners, independent retailers and designers. Coming later this year for the dealer market: Signature furniture. Also expected to be headed our way (and already being previewed by some department stores): Signature bedding.

Make no mistake, Omnimedia needs merchandise like flowers need the rain. Its publishing arm, at $182 million in annual revenues, may wield the biggest muscle, but its merchandising division puts its back into propping up the bottom line.

When ad revenues evaporated last year, merchandising contributed 40 percent of Omnimedia's $76.5 million in EBIDTA. Publishing barely eked out a sales gain in 2001 — up just 1.4 percent; but merchandising shot up 46.0 percent. In a year when Omnimedia's total revenues pushed ahead by less than $10,000, merchandising saved the day.

In the recently completed first quarter, merchandising's 41.5 percent sales jump to $11.0 million papered over a tentative 4.2 percent sales gain in television and declines of 17.7 percent in the Internet/Direct segment and 7.5 in publishing. Once again, merchandising came to the rescue for EBIDTA. Even though the division's $7.6 million marked a 1.6 percent decline over last year's first quarter, it constituted 49 percent of Omnimedia's $15.5 million EBIDTA before corporate overhead.

The next shoe to drop will be the identity of a supplier partner for Signature bedding.

What will a department store Martha Stewart brand look like? More importantly, where will it settle? It's hard to imagine a Martha label shouldering aside Donna and the boys at Bloomies or Macy's West, but it could bring a great deal of credibility to the constellation of Younkers, L.S. Ayers and Rich's/Lazarus/ Goldsmith's types outside the urban hubs.

The other big question: Will Martha do the boxes? There's a lot of growth in Bed Bath & Beyond and Linens 'N Things — although each would have to bend their formulas to present Signature the way Omnimedia will want it to be displayed.

Either way, Signature bedding could portend fewer mixed-bag weeks for Martha — not to mention a genuinely exciting label for consumers. This one is going to be great fun to watch.

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