Struggling for the right fit

David Carr / New York Times News Service /

Media companies are often closely associated with their founders — Rupert Murdoch at News Corp. and Sumner Redstone at Viacom come to mind — but none are linked with their products in quite the way Martha Stewart is.

Maybe that’s why she can still draw a crowd, even when the subject is contract law. Add in her lifestyle — as reflected in her magazines, her television work and even her Twitter account — and she can engender admiration, envy and aspiration.

So there we all were in New York state Supreme Court one recent morning, a roomful of reporters and a dozen high-priced lawyers who could barely fit in front of Justice Jeffrey Oing.

And in case you thought Stewart’s charisma had completely dimmed, keep in mind that while the trial may be a contract dispute in name, it is really a schoolyard fight between two boys — the chief executives of Macy’s and J.C. Penney — over the most popular girl on the playground.

Stewart obviously enjoyed the attention and did not seem to sweat the details in answering questions from the witness stand. To her, everything is small stuff, including her role in a contentious contract dispute between the two retail behemoths. “I’m surprised we are here,” she told me in the hallway during a break in her testimony. “It’s a lot of uproar over a contract.”

As contract fights go, this one is a doozy. Stewart signed an exclusive deal with Macy’s to sell certain branded housewares in 2007, and then she signed a deal with J.C. Penney in December 2011 to open a series of Martha Stewart stores-within-a-store.

Terry Lundgren, Macy’s chief executive, went ballistic and Ron Johnson, the struggling CEO of J.C. Penney, didn’t back down. So Martha Stewart was back in court again.

The legal issues were less fraught than the ones in her criminal trial in 2004, when she ended up being convicted on charges of lying to government investigators about a stock sale. But that conviction hung in the air as she testified, as a near-death experience for the company she founded, Martha Stewart Living Omnimedia.

“It could’ve taken down the brand; it did not,” Stewart said in her testimony. “But I must tell you that rebuilding is a lot harder than building.” It was one of a number of on-the-nose statements she made from the witness stand.

Martha’s rise to the top

It is easy to forget that Stewart, who has aspects worthy of “Saturday Night Live,” altered the way that people live by decoupling class and taste. Part of the reason that she seems embattled — her media empire is shrinking fast — is that she won her corner of the culture war.

When you go into Target or Walmart and see a sage green towel that is soft to the touch, it may not carry her brand, but it reflects her hand. Her tasteful touch — in colors, in cooking, in bedding — is now ubiquitous; she just doesn’t get to cash all the checks anymore.

Back when she tilted the culture and brought class to mass, she was chagrined to discover that not everyone was applauding.

“I paid the price for going mass very early on,” she said from the witness stand. “The garden club of Greenwich canceled my speaking engagement.”

Falling fortunes

Right now, Martha Stewart Living Omnimedia’s stock is $2.63 a share, down from $4.45 a year ago, with a diminutive market capitalization of $176.4 million. The company gets all the scrutiny of a public one, which has been brutal on occasion, but little benefit in terms of capital or operational muscle.

The fortunes of Stewart and the company that bears her name are very closely aligned. She owns 90 percent of the voting stock and 26 million shares. Even as her company struggled from 2009 to 2011, Stewart received more than $21 million in compensation. Her fans may forgive her excesses, but her shareholders and Wall Street are far less charmed.

Perhaps what the company needs is not more transparency, but less visibility. David Banks, an analyst at RBC Capital Markets, pointed out that another lifestyle brand, albeit a bit spicier one, Playboy, has gone private to very good effect.

Martha Stewart Living Omnimedia is in the middle of a large restructuring, shifting from a media company to a merchandising enterprise, a process that will pinch short-term profits while the company plays for the farther shore. Stewart grabbed more real estate on store shelves partly because her presence on the newsstand is shrinking.

As the tussle in state Supreme Court illustrates, the retail environment clearly remains hungry for strong individual brands that convey quality.

“If it ends up where she has product at Macy’s and J.C. Penney,” said Charles Koppelman, the former chairman of Martha Stewart Living Omnimedia, “that’s a good thing.”