Martha Stewart plans to stick with Kmart for forseeable future
Wednesday, January 23rd 2002, 12:00 am
By: News On 6
DETROIT (AP) _ Martha Stewart won't pull her line of home and garden products from Kmart stores ``for the foreseeable future,'' despite the retailing giant's Chapter 11 bankruptcy filing.
The Martha Stewart Everyday brand, which includes sheets, towels, paints and kitchenware, is Kmart's largest volume-producing label, generating about $1.5 billion in sales last year.
Stewart said Kmart owed about $13 million to Martha Stewart Living Omnimedia at the time of Tuesday's filing, but added that the company is confident Kmart will take steps to make payments as fully and promptly as possible.
``Going forward, Kmart will continue to sell Martha Stewart Everyday brand products under the terms of our contract for the foreseeable future,'' she said in a statement Tuesday.
Martha Stewart Omnimedia has a provision in its contract allowing it to leave Kmart in bankruptcy, but that would have to be approved by a bankruptcy judge.
Analysts say keeping the brand is a must for the No. 3 discount retailer. Losing Martha Stewart ``would be a huge loss to the company,'' said Eric Beder, an analyst with Ladenburg, Thalmann & Co.
Beder and others say retaining those brands that are exclusive to Kmart, including Martha Stewart, are key to keeping customers.
``What makes people come to your store ... is the type of merchandise that you yourself have exclusively,'' said Ulysses A. Yannas, an analyst with Buckman, Buckman & Reid.
Martha Stewart brands give Kmart an edge over other discount retailers, Yannas said.
``When you have Martha Stewart in the bedroom and in the bathroom area, you really don't need to compete with the Wal-Marts and the Targets, because they're not especially strong in that area. You compete with the Bed, Bath and Beyond'' and similar stores, Yannas said.
But some said Kmart can't rely solely on Martha Stewart.
William A. Brandt Jr., president and CEO of Development Specialists Inc., said Kmart must get its brand-name niche in order.
``Their desire to keep Martha Stewart, which is a good brand, shouldn't be looked at in a vacuum,'' Brandt said.
Kmart also carries Sesame Street and Disney brands, but analysts have said the company needs to do more to make sure customers associate those brands with the Troy-based discount retailer.
As much as Kmart might need Martha Stewart, some said she also needs them and is unlikely to leave.
``Considering how much sales she gets at Kmart ... I don't think she can easily do without for any period of time,'' Yannas said. Stewart is now likely to get the more aggressive advertising and better in-store displays that she has been asking for, Yannas said.
He said Kmart could survive without Stewart, but not as easily.
``It's not a do or die for Kmart,'' he said. ``The other side of the coin is it's a great door-opener and customer draw.''