Be sure to visit the MarthaPantry section on the JC Penney website! Loads of super-cool pantry items–salts, oils, heirloom beans, baking mixes. The selection is much broader than I anticipated! FOMs: Let’s start tasting! If you try a MarthaPantry item, post your comments here and I’ll share with others. Yum!
Let us not forget that, in addition to all the other things on Martha’s plate, she also serves as Non-Executive Chairman of the Board at MSLO, the company she founded. The management of the company is handled by a management team currently without a leader, after Lisa Gersh stepped down in December 2012. (A replacement for Gersh has yet to be named.) Yesterday morning, MSLO had a telephone presentation to its investors to review 1Q results for the company.
You can read the entire transcript of the earnings call at Seeking Alpha (which may require free registration), if you’re interested in the behind-the-scenes details of the company’s workings. Some interesting points include:
- Revenue for the quarter totaled $37 million, down 25% from the prior year quarter. Of the total $12.6 million absolute dollar decline in revenue, approximately $9 million can be attributed to the restructuring actions taken in publishing and broadcasting last year.
- Publishing segment revenue declined 21% in the quarter, reflecting lower print advertising and newsstand revenue, offset somewhat by a 12% growth in digital advertising revenue.
- Print revenue declined by $7 million, including $3.2 million on the advertising side and $3.8 million on the circulation side.
- Our digital advertising revenue of $4.8 million was a record first quarter performance for this business and included a significant increase in video related ad revenue.
- Merchandising expenses were significantly higher in this year’s first quarter, due largely to cost related to ramping up for the JC Penney launch.
- There is still uncertainty with respect to revenues to be generated by JC Penney partnership, due to the pending court case. Those royalty revenues were not included in the forecast for 2Q.
So, what we see from the earnings call is further proof of the shift underway at MSLO, as the company seeks to streamline its publication division and also take advantage of new media as a distribution channel for Martha’s sought-after ideas and expertise. Industry-wide, publishing is undergoing much turmoil at this time, but MSLO is well-positioned to become profitable through its merchandising partnerships with major retailers like Macy’s, Home Depot, Michael’s, Staples, and, eventually, JC Penney.
From the meeting transcript, posted on Seeking Alpha:
Before turning the call over to Ken (West, Chief Financial Officer, MSLO), I want to update you quickly on a few items of interest. First, we are excited to report that our rollout with JC Penney is under way. In April, JC Penney’s began rolling out Martha Celebrations, our new line of disposable, stylish paper products for easy entertaining, as well as MarthaWindow, MarthaLighting, MarthaRugs and MarthaMirrors in JC Penney stores and on jcp.com. The rollout will continue through much of the second quarter.
Additionally, we have had some initial discussions with JC Penney’s new CEO, Mike Ullman and other executives. All of us greatly value our partnership and we are looking forward to working with the new team.
In conjunction with the management changes at JC Penney, we reported earlier this month that their two representatives on the MSLO Board have left JC Penney and have resigned from our board as well. JC Penney is actively identifying new designees and we anticipate they will appoint replacement representatives in the near future.
Martha amazes on the cover of today’s Parade Magazine. Stunning at age 71, Martha also gives an insightful interview that you can read here. (You simply MUST scroll down to see the photo of Martha with her grandkids. Martha is clearly IN LOVE with those kids!) For an extra bit of fun, you can watch this behind-the-scenes video of the cover photo shoot. FOMs: What I love about Martha are those moments when the driven, hardworking girl from Nutley, NJ peeks through all the celebrity that surrounds her. Just. Plain. Awesome.
From the article, Martha says of her new book, “Living the Good Long Life“:
It’s all about surviving in this extraordinary world—physically, mentally, emotionally. I wrote it because nobody is paying attention to the silver tsunami of baby boomers who are now turning 65. My book focuses on what you can do for others and what you can do for yourself in terms of aging gracefully.
The new house line of home goods at JC Penney, “JCP Everyday”, is now on sale in stores and online! It is well-known that these products were designed by MSLO employees, although they are not allowed to carry the “Martha Stewart” name, pending resolution of the current court case. Some things I noticed as I viewed the items online:
1. They products definitely bear some of Martha’s signature design elements, the hen-egg blue, the faux bois pattern (one of Martha’s favorites), and the overall elevate taste level are definitely Martha-inspired.
2. Most of the products look nothing like similar items for sale at Macy’s as part of the Martha Stewart Collection. True, the pasty bags at one retailer look like the pasty bags at the other–but that’s because of the design requirements inherent in those particular items.
3. I’m intrigued by the “JCP Everyday” logo (see cookie cutters image above, bottom row at right). The two overlapping houses do, in fact, make an “M”, don’t they? Macy’s brought this up in the court case, as they sought an injunction to halt the sale of these items, even though they do not carry the “Martha Stewart” name on them. The judge denied Macy’s request, and they have appealed. Further, these items are not allowed to be sold in the Martha Stewart stores-within-stores at JC Penney, nor be placed anywhere nearby, pending the outcome of the current court case–a step taken to minimize harm to Macy’s, should they ultimately prevail in court.
FOMs: What do you think? My own message to Macy’s is this: Calm the heck down, would you? It’s clear Martha and her team have no intention of cannibalizing their own profits generated by sales at Macy’s. That wouldn’t be very smart, would it?
From the Reuters article:
“As of today, those products are on the floor and online,” Paul Rutenis, general merchandise manager of J.C. Penney’s home department, said on Monday in testimony in New York State Supreme Court.
Let’s have some fun, ok?
I love this fun article–with interactive slide show!–that shows what people wear to work at MSLO. It is great, and even gives details in case you want (need) to go shopping. FOMs: Martha looks amazing, doesn’t she? At 72 and still at the top of her game, she is an inspiration.
Enjoy!
From the Wall Street Journal article:
VP, Editor in Chief, Martha Stewart Living, on Martha: ”She’s very elegant. She does follow fashion. But she’s also not a slave to trend. She manages that nicely. She always feels on point, but is never trendy for trendy’s sake. She’s got to love the color or the cut. There are certain classic rules that she seems to live by.”
There was some good news today for Martha in the trial with Macy’s.
First, it may be useful to back up a bit: The case is actually made up of several different claims, including breach of contract, breach of confidentiality, unfair competition, and tortious interference. In some claims, Macy’s has won injunctions, which are essentially temporary smaller rulings in Macy’s favor while the larger issues are resolved permanently in the courtroom. For example, in one injunction, the judge ruled that Martha may NOT sell items in JC Penney stores until the issue of exclusivity has been resolved completely. Macy’s asked the judge to broaden that existing injunction to include items that were designed by MSLO designers but did NOT have Martha’s name on them. These items are instead branded as “jcp Everyday”. Martha insists that these items–$100 million worth of them are already at distribution centers awaiting shipment to JC Penney stores–do NOT violate the exclusivity clause of her contract with Macy’s. Good News: Today, the judge sided with Martha, so these “jcp Everyday” items will begin appearing in JC Penney stores very soon!
However, the judge ruled that the trial would continue on to the next phase. You see, up to this point, Macy’s has been doing all the talking, as they present their case that MSLO violated the exclusivity clause of their contract. Today, the judge took into account all that Macy’s has presented thus far and agreed that may in fact be true. That’s the bad news. The good news is that the trial now shifts to a new phase; one in which MSLO gets to present THEIR side of the story to counter Macy’s claim. Go get ‘em, Team Martha!
It is important to note that the judge in this case is still imploring the three parties involved to reach a settlement among themselves, without a judge’s ruling. Contract disputes such as this one are not entirely uncommon, and are often resolved with a financial settlement. In this case, JC Penney and MSLO could buy-out Macy’s contract (or just the exclusivity clause of the contract) although that seems unlikely, given the degree to which Macy’s seems to rely on the Martha Stewart Collection to generate traffic in its stores. By allowing the trial to go forward, and relying on the judge’s ruling, either party risks losing entirely.
Just launched! Check it out here: Martha at JC Penney
Categories include: Martha Celebrations, Martha Decor, Martha Stewart Crafts, and Martha Stewart Books. Other product offerings are pending outcome of the Martha vs. Macy’s lawsuit. Some resolution on the trial is expected later this month. In the meantime, here is a video of what the MarthaCelebrations store display area will look like: MarthaCelebrations at JC Penney FOMs: Let’s go shopping!
Yesterday, the New York Times had an article on the subject underlying the current court case between Macy’s and MSLO: that it is essentially “a schoolyard fight between two boys — the chief executives of Macy’s and J. C. Penney — over the most popular girl on the playground.”
If you have been following MSLO lately, you would not be blamed for worrying about the current state of the company–the stock price has plummeted and stabilized at the low end, the company is heavily vested in traditional media (which is undergoing much tumult industry-wide) and has suffered layoffs, it has all but lost its television presence, and there is unsettled leadership (former CEO Lisa Gersh stepped down after only five months at the helm). The one fiscal bright spot at the company of late has been its merchandising. Simply, Martha is still seen in the eyes of the public as an arbiter of good taste and high quality, and most importantly, consumers trust her. If Martha says it’s a good thing–you can be sure it’s a good thing.
It is Martha’s reputation for producing good products that the two retail giants–Macy’s and JC Penney’s–are hoping to leverage in their stores. Indeed, embattled JC Penney’s CEO Ron Johnson’s job may depend on his Martha Stewart-anchored plan to resuscitate that company’s housewares department. And, as the Associated Press reported:
“[Macy's CEO Terry] Lundgren said Macy’s has spent 40 percent of its overall marketing on the Martha Stewart brand and other labels in the home area, even though the home category represents 17 percent of total sales. That’s because even though the home area is typically slow turning, it drives shoppers to the store. ”I need the Martha Stewart business to be exclusive,” Lundgren said. “I don’t have a substitute.”
The judge ordered the three companies into mediation on Friday, in an attempt to have them resolve the issues themselves without a court-ordered judgement. So, even as the courtroom drama continues, one thing is for certain: the Martha Stewart brand is still as strong as ever in the eyes of consumers. And that is most definitely a good thing for MSLO.
Check out this very flattering quote from the New York Times article :
It is easy to forget that Ms. Stewart altered the way that people live by decoupling class and taste. Part of the reason that she seems embattled — her media empire is shrinking fast — is that she won her corner of the culture war. When you go into Target or Walmart and see a sage green towel that is soft to the touch, it may not carry her brand, but it reflects her hand. Her tasteful touch — in colors, in cooking, in bedding — is now ubiquitous; she just doesn’t get to cash all the checks anymore.
On Wednesday, Martha stopped by The Today Show and, as she regularly does, taped a cooking segment–for Big Martha’s Meatloaf. During her visit, she also spent a moment to sit with Matt Lauer for an very difficult interview. Lauer was pretty tough on Martha–but Martha was unfazed. She answered with typical aplomb, defending her company’s mission to offer products wherever customers want them. She was also characteristically diplomatic, choosing her words carefully to describe her thoughts about Macy’s CEO, Terry Lundgren. Lundgren famously hung up on Martha when she phoned to let him know about the new partnership with JC Penney.
The interview was preceded by this video, a short piece covering Martha’s appearance in court the day before. According to this report, the trial could finish by Friday of this week. If it does not, it may be as late as sometime in April before the judge rules on the lawsuit.
From the transcript of the interview:
Lauer: Do you believe your products in [JC Penney] stores could help turn around that company?
Martha: Well, as I said yesterday, [JC Penney CEO] Ron Johnson is a visionary. Ron Johnson worked very hard on all those fantastic Apple stores. He also had a lot to do with the great success of Target before that. Ron is a visionary. He is trying to reimagine the retail landscape, and that’s a big job. And he has not been given any time at all to do so. It takes a little while to rebuild something like a JC Penney; a monolith like that.
Lauer: We are going to follow this story, Martha. Thank you for coming in this morning. I know it wasn’t easy for you to sit down and do this.
Martha: Well, thank you very much. And I’m going to go home and make meatloaf! (laughs)
As you probably know, the Martha vs. Macy’s trial has begun. Let’s recap the relevant developments:
- In 2005, MSLO and Macy’s enter into an agreement to sell Martha Stewart branded items in Macy’s stores. The agreement gives Macy’s exclusive rights to sell Martha Stewart branded items in specific categories: bedding, bath, cookware, and dinnerware. Importantly, the agreement also contains language that allows MSLO to sell Martha Stewart branded items outside Macy’s stores, as long as they are sold in stand-alone Martha Stewart stores. (For at the time, there was a single Martha Stewart store in Japan.)
- In 2011, MSLO entered into a partnership with JC Penney to sell Martha-branded items in dedicated spaces inside JC Penney stores, essentially creating a Martha Stewart “store within a store” in JC Penney stores nationwide.
- In 2012, Macy’s sued both MSLO and JC Penney, claiming that the partnership was a breach of Macy’s exclusive right to sell Martha Stewart branded items in the specific product categories. Initially, Macy’s asked the judge to order MSLO to cease any collaborative efforts with JC Penney until after the issue was resolved at trial. However, the judge did not allow Macy’s request.
- Since then, MSLO and JC Penney have forged ahead to create MarthaHome, a “store within a store” offering three collections of products: MarthaPantry (food items), MarthaCelebrations (paper party products), and MarthaWindow (window treatments). It is also known that MSLO designers are working with JC Penney to create the “JC Penney Everyday” collection, which will offer products in those categories to which Macy’s claims to hold exclusive rights. In order to adhere to the MSLO-Macy’s exclusivity agreement, the JC Penney Everyday products will NOT have any Martha Stewart branding on them. (Although there is a connection: “Martha Stewart Everyday” was the name of Martha’s collection sold at Kmart stores from 1997 – 2009. Also, MSLO has for many years had a publication called “Everyday Food”, which also inspired a popular TV cooking show, also called “Everyday Food”.)
Today, Martha appeared in court and testified for four hours. She said that she believed her agreement with JC Penney was structured to be in compliance with the MSLO-Macy’s agreement. She also claimed that Macy’s had breached the contract by not maximizing sales of the Martha Stewart Collection at its stores. Martha claimed that she wanted to open Martha “store within a store” concept in Macy’s, but they were cool to the idea.
The trial is expected to last several weeks.
From The Huffington Post:
The biggest opportunities for Martha Stewart Living are in selling products for the home, including bedding, bath and kitchen merchandise. That’s because as the housing recovery gains momentum in the economic recovery, people likely will put more money into their homes.
During her testimony on Tuesday, Stewart said she always wanted to open big shops within Macy’s stores, but the retailer never embraced that concept. Instead, she said the merchandise in Macy’s stores is just “here and there.”
That’s why she said that a proposal from Penney’s Johnson to create shops filled with home merchandise was appealing to her. She called Johnson a “visionary.”
“We hoped this business would be growing,” Stewart said. “It just boggles my mind that we’re here sitting in front of you, judge.”
