Wal-Mart Stores Inc. has started selling Martha Stewart-branded craft products, as Martha Stewart Living Omnimedia Inc. leans more heavily on its licensed-products business.In recent weeks, the majority of Wal-Mart Stores in the U.S. and Canada have started stocking Martha Stewart-branded scrapbooks, jewelry-making kits and other craft products, the media and merchandising company said Wednesday.
Martha Stewart Living collects a high-single-digit percentage of the wholesale price from the nearly 400-product line, according to a person familiar with the deal.
Shares of Martha Stewart Living fell 19 cents, or 2.7%, to $6.80 in 4 p.m. New York Stock Exchange composite trading Wednesday.
The Wal-Mart deal isn't expected to give much of a financial lift to the company's earnings right away. But Martha Stewart Living is under pressure to sign new merchandising deals, which carry higher profit margins than the company's media businesses.
What is more, the company needs to help fill the gap from a shrinking licensing arrangement with Sears Holdings Corp.'s Kmart stores.
For a decade, Kmart has sold a line of towels, cookware and other Martha Stewart products, helping generate one-fifth of Martha Stewart Living's revenue last year.
Investors worry the New York company won't be able to make up the lost revenue as the guaranteed royalty payments fall from $65 million this year to an estimated $20 million next year. The Kmart contract is to expire in January 2010.
Under retail-industry veteran Robin Marino, who heads Martha Stewart Living's merchandising business and was recently named co-chief executive, the company has ramped up a range of new licensing arrangements over the past few years. These include a collection of housewares and holiday decorations at Macy's Inc., a line of plants and gifts sold by 1-800-Flowers.com Inc. and frozen foods sold at Costco Wholesale Corp. stores. The company already sells crafts at arts-and-crafts chain Michaels Stores Inc. and at other retailers.
By: Shira Ovide
Wall Street Journal; July 10, 2008
