NEW YORK — Kmart on Monday sorted out the home, and is now looking at revamping the closet.
Following Kmart’s agreement to extend its licensing deal with Martha Stewart until 2009, ending a court fight and ensuring that the convicted, domestic diva’s sheets, towels and other products continue to fill store shelves, the discount retailer told WWD it was revamping its entire women’s apparel line this fall.
Kmart said it will unveil a refocused and redesigned apparel collection with a wider range of products. On March 18, Kmart opened an office for its design group in New York at 111 Eighth Avenue, marking the first product design presence Kmart has held in New York.
The group is headed by Lisa Schultz, senior vice president and chief creative officer. Schultz’s design team includes divisional vice presidents June Beckstead, for women’s, girls, infant and toddlers; Orlando Carreras, men’s and boys; Matthew Morris, home, and Kim Omae, intimate apparel, sleepwear and accessories.
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Kmart, which has long had a reputation for offering scratchy, low-grade apparel, said the design team will focus on “quality and style” and “redefine Kmart’s exclusive brands with a wider range of products” while maintaining low prices.
The design team is composed of industry veterans who honed their skills at specialty retailers.
Schultz, who joined Kmart in September of 2003 as senior vice president and chief creative officer, a newly created position, is responsible for the creative vision of Kmart. Previously, she was executive vice president of product development and design at The Gap Inc. for 14 years. She also held executive positions at Ralph Lauren and Calvin Klein.
Beckstead served as vice president of product design at Gap while Carreras previously led the men’s design team at Pacific Sunwear. Morris is a former consultant to Donna Karan and founder of Blue Ribbon Dog Co.
Omae, who has been with Kmart for nearly five years, has been promoted to divisional vice president for intimate apparel, sleepwear and accessories. Omae served most recently as a design director.
Kmart is currently seeking more design talent to expand the team in New York.
Regarding the lawsuit, Kmart Holding Corp. sued a subsidiary of Martha Stewart Omnimedia Inc. earlier this year over the calculation of royalty payments owed to MSO for the Martha Stewart Everyday-branded products sold at the discounter.
The revised agreement allows both companies to claim victory. Kmart gets to eliminate minimum guarantees in product categories. Instead, royalties will be calculated using an aggregate minimum guarantee formula.
Stewart, whose sentencing date is set for June 17 in a Manhattan federal court after being convicted on March 5 of conspiracy, false statements and obstruction of justice, gets her name on new categories that include ready-to-assemble furniture.
But she may be reiterating her famous line — “It’s a good thing” — in jail. Her legal troubles arose from suspicious statements she made surrounding the sale of ImClone stock. Stewart has since requested a new trial based on evidence about a juror’s checkered past that wasn’t disclosed during jury selection.
Richard Hastings, retail economist at Bernard Sands, a credit ratings firm, described the revised agreement as “contractually a good deal for Kmart.”
But Hastings said Kmart “still has to do more to convert Martha Stewart Everyday shoppers into buyers of her products. So far, Martha’s brand represents a small percentage of Kmart sales. More importantly, we don’t know how many of those who buy her branded products are also buying other things while at Kmart.”
Hastings noted that the deal is good for Stewart’s firm since merchandising has always been the strongest part of the MSO empire, which “so far, seems immune to the side effects of Stewart’s guilty verdict and personality issues, all of which badly affect her ability to make television appearances.”
At this point, analysts are stressing that both companies need their symbiotic relationship to not only thrive, but survive.
Gary Drenick, a director at BIGresearch, a consumer market intelligence firm, said his company’s surveys indicate that Kmart’s sales have been off this month. Drenick, who polls 8,000 to 10,000 consumers monthly, indicated that in April, 1,500 respondents said they shop at Kmart. So far, linens and bedding is Kmart’s largest sales category, beating electronics, footwear, men’s apparel and women’s apparel.
However, Drenick said that in the April survey of shoppers with annual incomes of $50,000 or less, year-over-year sales of soft home goods showed a decline. It’s important to note that Kmart was still closing stores before it exited bankruptcy last May, which would be a partial contributor to some of the decline. By comparison, sales of soft home goods rose at Bed, Bath & Beyond, Linen’s ’n Things and J.C. Penney’s, and were flat at Wal-Mart.
Sales of women’s apparel at Kmart, Drenick said, was down this month compared with last year, with 2.3 percent of respondents stating that they shopped at the retailer. This compares to 3.2 percent in April of last year and 3.9 percent in April of 2002. According to the national surveys by Drenick’s firm, sales at Kmart have been “trending down.”
Stewart also faced some heat in consumer surveys. BIGresearch this month posed its customary query, “What’s hot and what’s not.” The two choices were Stewart and shock-jock Howard Stern. Both were in a dead heat, with 12.4 percent stating Stewart was hot versus 12.3 percent for Stern, and 87.6 percent giving her the thumbs-down versus a similar 87.7 percent for Stern.
Executives at Kmart and MSO could not be reached for comment with regard to the lawsuit. In statements, each firm seemed pleased to leave the suit behind.
Julian Day, president and chief executive officer of Kmart, said, “We are pleased to have extended and deepened our relationship with Martha Stewart Living Omnimedia. Kmart is committed to providing the highest quality and value-driven products to our millions of loyal customers nationwide, and the Martha Stewart Everyday brand is a great example of this commitment.”
Sharon Patrick, president and ceo of MSO, said in a statement, “This is an exciting development. We are delighted that Kmart will continue to be a foundation partner for MSO throughout the decade and that our two companies have found mutually agreeable ways to improve upon our beneficial relationship.”