Martha Stewart's failed resurrection

By Schumpeter

AS THE ban on her serving as a corporate office holder expires, and Martha Stewart prepares to rejoin the board of her company, Martha Stewart Living Omnimedia, New York magazine has an excellent piece on how her plans for resurrecting her company, and her own reputation as a business titan, have fallen apart.

MSLO has been profitable in only one of the past eight years, losing a total of $185 million during the same period. In the fourth quarter of last year, on the verge of violating loan covenants, the company had to renegotiate its debt with Bank of America. Operationally, the company faces significant problems, too. Stewart's daily television-programming block on the Hallmark Channel has scored such disappointing ratings that it was cut from eight hours to five. The company has struggled to replace the revenue it used to enjoy through its licensing partnership with Kmart, and it has failed altogether to build a commercially significant digital business. Its stock price has languished below $5 for most of the past year (and at press time was $4.07). Last week, a Wall Street analyst slashed his valuation of the company's assets by 10 percent.

Ms Stewart has proved difficult to work with. The company has struck too many ill-considered deals. Spending has been out-of-control. MSLO has employed a striking number of relatives of senior executives. Above all, Ms Stewart has failed to grasp the rise of frugal consumers, who want to stretch their diminished resources rather than put on dinner parties for 20.

Failed comeback attempts might be a suitably gloomy subject for a future Schumpeter column. Any suggestions of examples (especially from the worlds of business and finance) would be gratefully received.