Rebuilding the 'Martha Stewart' Brand

"Capitalising on the chronic insecurity of Americans in matters of taste, she (Martha Stewart) branded herself the ultimate authority on perfect living."

- The Economist in 2002. ¹

"The case against Martha Stewart has to be seen against the background of the financial scandals of the last three or four years, and the public perception that the guilty parties are not being brought to justice. I think prosecutors in this case saw Martha Stewart as an opportunity to demonstrate that they are bringing people to justice, and it doesn't matter if they are prominent or influential or not."

- Lawrence White, professor of economics at Stern School of Business in New York, in 2004 ²

"Many, many good people . . . have gone to prison - look at Nelson Mandela."

- Martha Stewart, founder of Martha Stewart Living Omnimedia, in 2004 ³

The Long Road To Revival

Revenue also increased from $60.2 million to $84 million during the same period. Talking about the company's improved performance, Susan Lyne (Lyne), MSO's president and CEO said, "The results for the quarter show meaningful improvement in all areas of our business. Results outpaced expectations in every segment." ⁵

However, MSO's satisfaction was short-lived. When the company announced its first quarter 2006 results, MSO was back in the red. After it posted a profit in the last quarter of 2005, Wall Street analysts had predicted the company's return to profitability by the end of 2006. However, the $6.84 million loss on revenues of $61.8 million in the first quarter of 2006 seemed to put paid to their expectations.

MSO's financial troubles had begun in 2002, when Stewart became embroiled in legal problems related to the sale of her shares in the biopharmaceutical company Imclone Systems Incorporated (Imclone). MSO, which was heavily dependent on its founder's image, suffered when advertisers, wary of associating themselves with a tainted brand, shunned it.

After Stewart was convicted in early 2004, some of the more pessimistic observers even predicted the end of MSO. At the time, in an effort to get over its troubles, the company started taking steps to distance itself from Stewart's image.

However, MSO later made a dramatic about-turn and started promoting the Martha Stewart brand vigorously. Although by early 2006 the company had recovered from the lows of 2003 and 2004, it was far from certain whether the Martha Stewart brand would regain enough of its former cachet to ensure financial stability for the company, and attractive returns for its shareholders.

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1] "Cooking Martha's Goose," The Economist, September 12, 2002.
2] Janet Ball, "Martha Stewart pays price of fame," bbc.co.uk, March 5, 2004.
3] Marcus Wareen, "Stewart Makes Herself at Home in Prison," The Daily Telegraph, October 9, 2004.
4] Dollars ($) refer to US dollars in this case study.
5] www.marthastewart.com

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