Can Martha Stewart Get Her House In Order Again?

VIDEO: Department store aims to block licensing deal between Stewart and J.C. Penney.

(Dimitrios Kambouris)

The resiliency of Martha Stewart and her company may be put to the test once again.

Department store chain Macy's sued  Martha Stewart's company on Monday, trying to block a licensing deal between Martha Stewart Living Omnimedia and J.C. Penney.

Filed in New York State Supreme Court, Macy's alleges Martha Stewart Living's deal with the department store J.C. Penney violates the terms of an exclusive deal Macy's has to sell Martha Stewart Living's products. In a deal last announced last month, J.C. Penney acquired a 16.6 percent stake in Martha Stewart Living and will open mini-Martha Stewart shops in its stores.

The lawsuit may be another blow to Stewart's empire which has posted losses in four of the last five years.

The Hallmark Channel announced earlier this month that Stewart's television show, "The Martha Stewart Show," would be canceled after the current season. Her syndicated show, which has received two daytime Emmy awards, first debuted in 2005 and the Hallmark Channel has aired it since 2010.

Stewart's company, which describes itself as a leading provider of original "how-to" information, publishes four magazines, runs, and has several merchandise lines.

With the proliferation of online how-to and home design television shows, websites and magazines, competition in that space is rampant.

"Thanks to the proliferation of cable TV channels, there are a lot of people who are gaining broad consumer appeal in the areas of cooking, decorating and homemaking," said Jack Plunkett of Plunkett Research, "but few of them pull it all together like Martha Stewart."

Stewart has bounced back before. In her insider trading case in 2004, Stewart was convicted of lying to investigators about the sale of ImClone stock and was incarcerated for five months.

Like most magazine publishers, Martha Stewart Living has seen declining revenues, thanks to the recent recession, said Plunkett. However, Martha Stewart remains a powerful brand, he said.

"Since this is a multi-channel company, the firm's challenge is to rebuild advertising revenues while garnering as much merchandising income as possible," he said.

Total revenue dropped to $231 million in 2010 from $328 million in 2007.  However, Plunkett said merchandising revenues grew very well during 2011.  The company appointed three new business development executives this month.

Macy's has renewed its agreement with Martha Stewart Living Omnimedia, Inc. to exclusively sell Martha Stewart-branded product in categories such as cookware, kitchen utensils, bed and bath for another five years, a spokesman for Macy's said in a statement. The current agreement now expires in January 2018. The original agreement was signed by Martha Stewart Living in 2006, "in which the right for Macy's to sell product exclusively in these categories was clearly outlined."

The company said it will not comment further on the suit because the case is in litigation, but said "Macy's plans to fully support its exclusive Martha Stewart-branded product going forward."

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