Martha Stewart narrows loss, bedding rebounds at Kmart  

By Staff -- Home Textiles Today, 11/2/2007 12:11:00 PM

New York – Pointing to strong activity in merchandising sales at both Kmart and Macy’s, Martha Stewart Living Omnimedia (MSLO) painted a picture of turnaround, as it reported overall third-quarter revenue up 13% to $69.3 million, and an adjusted EBITDA loss of $0.7 million, compared to the $2.6 million loss for the same period one year ago.

The key factor in the turnaround is the resurgence of MSLO publishing. Still, merchandising received a shot in the arm by virtue of the Sept. 10 national launch of the Martha Stewart Collection at Macy’s and a trend reversal toward the positive at Kmart.

President and ceo Susan Lyne pointed to the convincing rebound in Kmart soft home sales since the major refresh of the Martha Stewart Everyday program. Lyne noted, “Fashion bedding is up 42% since relaunch – a strong indication that consumer interest is as high as ever.”

Total soft home at Kmart was down 21% pre-re-launch, she said, but has been tracking up about 3% since. In other words, the fashion bedding initiatives have contributed to a 24-point swing.

The company did not quantify the results at Macy’s, which only contributed for three weeks of the quarter.

MSLO needs the excitement to continue. Merchandising revenues of $34.9 million for the first three quarters of 2007 dropped 1.7% from $34.3 million. And profits have slid: nine months year-to-date adjusted EBITDA of $15.2 million for the merchandising division was down 17.4% from $18.4 million for the same period last year. Merchandising operating income of $13.8 million for the period fell 18.7% from approximately $17.0 million a year ago.

Publishing was by far the leading unit for the company, generating $7.7 in adjusted EBITDA. Internet losses of $1.7 million were nearly triple the year-prior loss, while the broadcasting loss doubled to $1.0 million. The company’s ambitious foray into licensed housing developments collided with a gloomy market.

Meanwhile, corporate staffing-up costs have increased. However, the third quarter still made the case that MSLO can turn a profit for the full year.

“For the full year 2007, we are now expecting revenue of approximately $330.0 million, operating profit in the range of $7.5 - $9.5 million, and adjusted EBITDA in the range of $33.0 - $35.0 million,” said Howard Hochhauser, cfo.

Merchandising is making money for Omnimedia, albeit less than it did a year ago. The fourth quarter will show how much momentum the new program at Macy’s and the new designs at Kmart can deliver.