Martha vs. Macy’s: MSLO Earnings Call Transcript

On July 30, there was a telephone discussion of MSLO’s second-quarter earnings. On the call from MSLO were Lisa Gersh (President and CEO, shown above), Kenneth West (Chief Financial Officer), and Katherine Nash (VP Communications and Investor Relations). This was the first quarterly earnings report since the preliminary injunction issued by the judge in the ongoing Martha vs. Macy’s dispute.

Two things to note from this call, relating to Martha vs. Macy’s:

1. The ruling has no virtually no impact on the introduction of Martha’s items in J.C. Penney stores in March 2013. hooray! What will likely be impacted, however, is the manner in which the products are branded.

2. The judge’s ruling was a preliminary injunction, and not a final ruling. As Gersh explains, “When a court issues a preliminary injunction, the parties are generally directed to settle an order which would then very specifically detail the terms of the order which has not happened yet. We expect that to happen shortly.” So, it sounds as if there can still be a reconciling of interests, where Martha and Macy’s can both be satisfied.

My own thoughts: I wonder if the Martha By Mail brand, already in existence long before Martha’s agreement with Macy’s, is covered by the Martha-Macy’s contract? It would not be unheard of for Martha to protect her existing intellectual property when entering into new contracts, and the Martha By Mail brand already had a well-established prior use. We already know, from earlier reports, that the online component of the Martha- J.C. Penney partnership will be huge. We also know that the Martha By Mail brand was much-loved by the public. (The catalog effort, however, was plagued by distribution and fulfillment issues. The poor performance of some partners was starting to reflect poorly on the Martha Stewart name, so the catalog was shuttered.) Obviously, J.C. Penney already has a catalog infrastructure in place–including distribution and fulfillment–so it would be relatively easy to relaunch the Martha By Mail effort and tap those resources. Importantly, the agreement with Macy’s (which runs through January 2018) would be honored, as they would continue as the sole retailer offering products with the entire “Martha Stewart” name–as the brand name “Martha By Mail” does not contain Martha’s last name. FOMs: Wouldn’t you love to see the return of Martha By Mail?

You can read the entire transcript of the Q2 earnings presentation, as well as the questions and answers that followed, at Seeking Alpha. Note: registration is free!

From Seeking Alpha:

Lisa Gersh:

“First, MSLO will be launching our products both in-store and online with J.C. Penney in the first quarter of 2013 as planned. Nothing about this ruling changes that. This case is primarily a contract dispute over how certain products are branded and sold, not about the validity of the partnership with J.C. Penney.

Second, the minimum guarantee under the J.C. Penney commercial agreement including the increase we just announced is not directly affected by the ruling. We are planning to be in J.C. Penney stores with a wide array of products for consumers early next year. And we are in ongoing development of categories and products as we typically are with all of our partners.”

via Martha Stewart Living Omnimedia’s CEO Discusses Q2 2012 Results – Earnings Call Transcript – Seeking Alpha.

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