Martha Stewart's Mess: Advertisers Bail But She Keeps Her "Weekend Driver"

Martha Stewart's advertisers, including Kmart, largely walked away from her company during the recession and have been so slow to come back that the company is looking for new investors or maybe even an equity firm to take it private again.

As Blackstone Advisory Partners invites tire-kickers to examine Martha Stewart Living Omnimedia (MSO)'s books, they will find an unprofitable company that is mostly failing to deal with the digital media age. On the plus side, there is a functional business somewhere within the mess that is Martha, it's just that breaking that news to the company's founder -- and persuading her that she may need to tighten her own belt a bit -- could be difficult. She owns voting control of the company's stock.

Stewart may be beloved as an adviser on cakes and scrapbooks, but her management track record over the last five years has not been a good thing. MSLO lost money every year since 2006, save 2007, when it made $10 million on revenues of $203 million. Revenues have slid ever since. Here's how much ad money has bailed out of the Stewart empire since 2008. The numbers are annual revenues from Stewart's various divisions:

Print advertising 2008: $94.8 million
2010: $73.8 million
Broadcast advertising 2008: $26.7 million
2010: $23.5 million
Radio advertising: 2008: $7.5 million
2010: $3.5 million
Merchandising: 2008: $57.8 million
2010: $42.8 million

Only digital advertising has improved:

Digital advertising 2008: $14.4 million
2010: $21.4 million

The merchandising losses stem mainly from the end of a deal with Kmart in January 2010 that Stewart appears to have not replaced. The company is running an accumulated deficit of $163 million. In other words, MSLO would need to repeat its 2007 performance for 16 straight years before the company breaks even.

Stewart the Sultan
Otherwise, things are looking up. Revenues rose across the board in Q1 2011, showing that there is some sign of life within the brand itself. If an acquirer or investor were to come on board, however, the most obvious place to ask for cuts is within management itself, which is currently a self-serving sultanate for Stewart and her family. Stewart's compensation was $6 million in 2010, of which almost half were gilded-cage perks:

$2.5 million was a diva fee to license her name for her own company. Most founders whose names adorn their own companies don't take such a fee.
$248,328 in "union fees" earned as talent on her own TV show.
$119,039 for security.
$81,330 for her personal assistants.
$55,725 for a "weekend driver."
$29,538 for a personal trainer.
Unspecified sums for life insurance, a charitable contributions, and phone and internet services.

That's right, Stewart gets paid $6 million a year and doesn't even pay her own phone bill. The largesse doesn't end there. MSLO is riddled with nepotism. Also on the company payroll are:

Margaret Christiansen, Stewart's sister-in-law, a senior vice president who received $198,835 in compensation in 2010.
Alexis Stewart, Stewart's daughter, who was paid $407,680 to host a TV show.
Jennifer Koppelman Hutt, daughter of CEO Charles Koppelman, who received $350,675, also for hosting broadcast shows.

It's not that there's anything fundamentally unsound about the company. Adult supervision could probably turn the place around in a couple of years, largely through cuts and efficiencies. But that would require Stewart to concentrate on her creative product and accept professional management of everything else, including her compensation. It's tough to imagine her saying yes.

Related:

Image of Jennifer Garner and Stewart from MarthaStewart.com.

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