Martha's Everyday Plans -- and Beyond

The embattled domestic diva laments her current situation, discusses her new magazine, and proclaims the merits of the company she built

By Diane Brady

Martha Stewart knows how to get a giggle out of her senior staff. "I mean, I'm not retiring," she says to hoots of laughter. "I wish! Someday."

If anything, having stepped down earlier in June as chairman and CEO of Martha Stewart Living Omnimedia, Inc. (MSLO ) may not be a disaster. "I don't think my creative input into the company has changed," says Stewart, who now goes by the title of founder and chief creative officer. "I hope that actually I can contribute even more in the coming months, years, whatever, because that has been my main focus anyway."

On the eve of the June 26 launch of Everyday Food magazine, her first big announcement since facing a series of charges, including securities fraud, stemming from her sale of Imclone (IMCLE ) stock, Stewart is upbeat about her business, the one she has worked so long to build. But a year of screaming headlines and a battered stock price have taken a toll.

KEEPING QUIET.

  In an interview with BusinessWeek Online, Stewart expressed frustration at her inability to defend herself and boost public faith in her company. "I just can't go and cry my heart out on Larry King, which I wouldn't mind doing," she says. "You just can't do that -- not in this situation. But the company should be celebrated and celebrated and celebrated for what it is, what it has done, and what it will do in the future. That's what I'm doing."

Stewart and her team are working overtime to let the world know that the show will go on, although Stewart's role has been radically and permanently altered -- even if she is ultimately found innocent. President Sharon Patrick is now the CEO. "I'm not going to go out to speak to the investors like Sharon is going to speak," says Stewart, noting that she's still on the board. "We're working very hard to repair damage that's occurred to the company. The company was not indicted."

Stewart, of course, has been indicted on criminal charges by the Justice Dept. and faces civil charges from the Securities & Exchange Commission that would bar her from running a public company. She acknowledges that defending herself could eat up a healthy chunk of time over the next 12 months. But the celebrated homemaker insists she can divert her attention to her trial and even take some time off without causing disruption in the MSLO ranks. "They would probably love it if I went away for three months and came back with about 5,000 more ideas," she jokes.

DISNEY WITHOUT WALT.

  The humor may be lost on some investors, and Patrick is exasperated with those who assume Martha the brand must rise or fall with the fortunes of Martha the person. "I drive myself crazy," she says. "The circumstance now has thrown a weird prism on what we were about. We're moving forward. We're still in our strategy. We know where we're going. We tell you where we're going, and we get there. We're really good at what we do." Continues Patrick: "You have to wonder how, at Disney (DIS ), they still do those Mickey Mouse things when Walt has been gone for 30 years."

Then again, Walt Disney was never the face and voice of his brand to the extent Martha has been for hers. What has so unnerved investors from the start of the investigation was the fact that Stewart's company -- rightly or wrongly -- seemed indelibly wrapped up with the personality of its founder. She hosts the daily TV show, does the Kmart (KMRT ) commercials, writes the magazine column and, to the average consumer, embodies the very soul of the brand.

It's a role that Stewart is now eager to downplay. "The name of the company happens to be my name, and I have been the spokesperson for this company," she says. "I'm a good spokesperson. It just happens to be that way, and this company has been very lucky to have a great spokesperson. That's why we grew so fast." By Diane Brady

MASS WITH CLASS.

  To dub oneself "a good spokesperson" after personally raising domestic chores to high art while forging a media-and-merchandising empire might sound ridiculously modest. But who can blame Stewart for undercutting her own role in the company? Ad sales are down, and the stock price is about half what it was before the scandal broke. "What we need now is that growth rate," she admits. "We can't have that without a lot of good will."

The potential to recoup investor's good will is there. And the business is forging ahead. Everyday Food, for example, represents MSLO's push into mass-market magazines. After test-launching the digest-size publication, the company has decided to roll out 10 issues a year starting in September, 2003.

Unlike Martha Stewart Living, which targets a more affluent demographic, Everyday Food will be aimed at the supermarket crowd. It downplays Stewart's name and -- with colors like burgundy, orange, and mustard yellow -- is a distinct departure from her signature pastel palette. "Visually, we wanted to use a new brand," explains Design Director Scot Schy, who likes to dub the feel of the recipe book as "mass with class."

"KIND OF OBVIOUS."

  No one seems more eager to diverge from the Martha look than Stewart herself. "Look, I have an orange watch today," she beams, before stretching out her feet. "Look, Scot. I'm wearing orange shoes today." For Stewart, Everyday Food is the wave of the future. "I can envision that this kind of magazine would appeal to the people who spend dollars on our Everyday products" at Kmart," she says.

Patrick also has high hopes, noting that "it seems kind of obvious that, if food is successful, we have these other content areas that could also go mass market." The new CEO obviously has to hedge her enthusiasm, lest investors confuse it with inappropriate forward-looking statements.

Given MSLO's diminished share price and Stewart's lessened title, some might wonder if the founder rues the day back in late 1999 when she took the company public. Stewart insists that, for whatever hassles it may have produced, a stock exchange listing "brought home to the American public that finally the domestic arts could be perceived as a business, as a viable occupation."

Patrick adds that it also enabled MSLO to make talented employees part-owners in the business. "That's a wonderful thing," she says. "What's a shame is that the stock has gone under pressure because of the situation."

BEAUTIFUL BALANCE SHEET.

  Stewart says it's "drastically unfair," noting that "someone told us the other day they have not seen such a strong balance sheet in a long time in a lot of companies. And this balance sheet is there and has been there all along." But even she admits that it's going to take more than a nice balance sheet to woo investors. "They'll come back when our revenues and earnings can show the kind of improvement that is necessary for them to want to come back," she says. "This is business."

Moreover, the woman who prides herself on teaching Americans how to live the good life says she has learned some things herself over the past year. "I've been extremely heartened and feel really good about the way that everybody has behaved here. That's for sure," she says, then pauses and seems at a rare loss for words. "It's incredible to me. When you face such difficulties, it's difficult. But I'm very heartened."

Brady is an associate editor for BusinessWeek in New York

Edited by Beth Belton

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