HITTING RESET: It hasn’t been the easiest few years for Martha Stewart Living Omnimedia Inc. Following a series of layoffs that cut its workforce by a quarter this year to 406, not to mention a very public, two-year legal battle in which MSLO and J.C. Penney Co. Inc. squared off before a New York state court judge against plaintiff Macy’s Inc., the media and design firm is hoping the worst is over.
This story first appeared in the February 26, 2014 issue of WWD. Subscribe Today.
Newly minted MSLO chief executive officer and director Daniel Dienst said as much Tuesday when he addressed analysts and investors on the company’s fourth-quarter earnings call.
Dubbing the litigation, which centered on whether MSLO broke its contract with Macy’s when it signed a similar deal with Penney’s, “costly, highly visible, distracting and candidly embarrassing,” the ceo emphasized the importance of its partnerships with both retailers. While MSLO reached an agreement with both parties, it also frayed its partnership with Macy’s and burned through between $7 million and $8 million in legal costs in the process.
But the courtroom skirmish was little more than a speed bump on MSLO’s road to financial recovery. In recent years, the firm has tried to counterbalance its struggling media division, which closed Everyday Food and Whole Living last year, with new brand extensions and retail partnerships. Once a mini media empire, what’s left in print for MSLO is its quarterly Martha Stewart Weddings and Martha Stewart Living, which had been a monthly until it reduced its frequency to 11 issues in 2013.
MSLO’s move away from print isn’t surprising, considering sales for its publishing arm fell 19.6 percent to $28.4 million in the fourth quarter ended Dec. 31. Broadcasting revenue fell 84 percent to $769,000, as the company exited live television programming, once a Martha mainstay. Merchandising revenue rose 12.3 percent to $18.2 million, but that gain wasn’t enough to prop up total revenues, which declined 15.9 percent to $47.4 million.
The company was able to increase its quarterly net income to $7 million, or 12 cents a share, from year-ago income of $1.1 million, or 2 cents a share, thanks in part to a 20.4 percent jump in its merchandising division’s operating income, which equaled $13.6 million. MSLO also said it reduced costs, including a $4.3 million cut in corporate expenses due to a reimbursement from its insurance carrier related to the Macy’s litigation and lower executive compensation.
With an eye on continuing the momentum, Dienst talked about growth opportunities and pointed to digital advertising as a “catalyst” for the business. As a result, MSLO is investing a significant amount of the $11 million in savings it expects to generate from the layoffs in digital.
Still, it won’t be an easy road as the company expects magazine circulation revenue to decrease this year and print advertising to remain flat.