NEW YORK — Advertising industry executives said Tuesday that Martha Stewart’s possible criminal indictment is unlikely to have any negative impact on her magazine Martha Stewart Living — at least for now.
But the impact could be greater on her multimedia company, Martha Stewart Living Omnimedia, according to a CNBC report, Stewart will resign as chairman and ceo of the company once the indictment is issued.
This story first appeared in the June 4, 2003 issue of WWD. Subscribe Today.
Stewart could face a criminal indictment as early as today. The company issued a statement Tuesday saying the U.S. attorney’s office for the Southern District of New York would ask for an indictment of Stewart from the grand jury investigating her sale of stock in ImClone Systems in 2001. The company said the Securities and Exchange Commission would likely file a civil complaint as well.
At the firm’s annual shareholder meeting here Tuesday, director and former Sears ceo Arthur Martinez declined comment when asked if Stewart would resign. Stewart’s employment contract says she could be terminated in the case of a felony conviction or “willful gross misconduct,” as decided by the board. Stewart’s lawyer, Robert Morvillo, released a statement saying she would declare innocence in the face of any charges.
Shares in the firm sank $1.68, or 15 percent, to close at $9.52, as investors worried this latest twist would further hurt Stewart’s eponymous brand. Her legal fallout was blamed for the 23.5 percent fall in Martha Stewart Living’s ad pages in the first quarter, which led to a 21 percent drop in publishing revenue, to $34.1 million; a 14.6 percent drop in overall revenue to $58 million, and a $4.5 million loss.
As for advertising executives, they said they’re sticking with the magazine for now. “We did some research when this first came up six months ago, and we found the brand of the magazine has surpassed that of the person,” said Brett Stewart, senior vice president, director of print services for Universal McCann. “We surmised the readers will think ‘Oh, isn’t that awful,’ but they have a relationship with the magazine that they want to keep. I don’t know how the clients will handle it, however.”
They could use it as leverage for additional concessions, which would eat into revenues. “Sure, I think negative press will be used by the competition as well as the buyers negotiating, looking for any advantage possible,” said Tyler Schaeffer, senior vice president of media brand planning at Foote, Cone & Belding.