With PetSmart Line, Martha Stewart Brand Gets Doggone Stretched

Last Updated Aug 26, 2010 2:35 PM EDT

Is Martha Stewart going to the dogs?

With the brand's launch at PetSmart (PETM) looming, it's time to ask whether Stewart is stretching her brand beyond its capacity.

Certainly Stewart is no fool, and everything she does arises from her Martha-ness. She's developed a pet's place on her website with projects, advice, a blog written by her critters â€"- presumably a ghost writer is involved -- and a sponsor, in this case Purina. She even has a brand new puppy (pictured) that just starred in a PetSmart commercial. The pet business is big business and has done well right through the recession. By the way, when it comes to discretionary pet spending, folks fork over about twice as much for dog toys then for cat playthings. The same goes for vitamins and treats.

The retail business is going strong for Martha Stewart Living Omnimedia (MSO) with revenue up about 10 percent in the latest completed quarter despite the company's losing $2.2 million in revenue due to the demise of its Kmart deal.

In the company's first quarter conference call, transcribed by SeekingAlpha, MSLO chairman Charles Koppleman characterized the retailers that have helped the company replace and surpass its Kmart business as an ideal assembly:

With The Home Depot (HD), our Martha Stewart collection at Macy's (M), our crafts business at Michaels and independent retailers, and our forthcoming pets line at PetSmart, we are confident we now have a strong presence across a range of categories where consumers seek our brand and in leading retail outlets where they expect to find us.
Yet not everything has worked out for the Stewart folks recently. A food introduction with Costco (COST), and a Walmart (WMT) crafts initiative never really took off. Walmart still carries a few craft items and rugs, but it's all very low key.

Critically, Stewart lacks that big, mass-market focal point that gave her a central presence in retailing. Sure, Stewart and Kmart quarreled and fussed at each other, but consumers off all stripes knew that they could check out Martha for spring, fall and holidays at their local Kmart.

Martha gave up a kind of B-movie star status when she pulled her home furnishings business from Kmart. By shifting it to Macy's, she stepped into something resembling the ensemble cast of Hollywood family film. Heck, the Yes, Virginia advertising she did in the 2008 holiday season, which was the major seasonal television push for the retailer and her introduction as part of the Macy's brand clan, embedded her amidst Donald Trump, Usher, Queen Latifa, Carlos Santana and Jessica Simpson.

PetSmart struck an interesting note discussing the Martha brand launch late last year on its own conference call. Robert Moran, PetSmart CEO, said:

We continue to enhance our merchandise assortments through strategic partnerships with strong brands. Our recently announced partnership with Martha Stewart Living will included a wide range of new pet accessories including apparel, collars, leashes, bedding, grooming supplies, toys and more. We believe that this partnership will allow us to connect with Martha's existing customer base creating new customer opportunities as we roll out the products in the second quarter of 2010.
Then he went into an immediate discussion of PetSmart private label products.

Certainly, the Martha Stewart brand will continue generating retail sales. For a company such as Home Depot, the Stewart connection is easy to advertise and might draw interest from women and less-handy men who have been shopping discount stores for garden stuff. But the Martha brand is never going to play the role at Home Depot that it did at Kmart, and not at PetSmart either, it seems. So, yes, Martha Stewart is going to the dogs and to the backyard enthusiasts and to the crafters and to whatever group of consumers sees her as a credible source for products they need. But they'll never come to her the way the discount store shopper did via Kmart.