By Emily Kaiser
CHICAGO (Reuters) - Martha Stewart Living Omnimedia Inc. (MSO.N: Quote,
Profile,
Research) and Kmart Holding Corp. (KMRT.O: Quote, Profile, Research) on
Monday
said they amended and extended their deal to sell the style guru's
products in
Kmart stores, just weeks after Martha Stewart was convicted of lying about
a
stock sale.
The two-year extension through 2009 adds new Martha Stewart Everyday
exclusive
merchandise such as ready-to-assemble furniture to the collection that
already
includes home decorating items, housewares and baby goods.
It also eliminates certain minimum payment guarantees that had been at the
center of a lawsuit that Kmart filed against Martha Stewart Living in
February.
Kmart said on Monday it has agreed to drop that lawsuit.
The deal comes less than two months after company founder Martha Stewart
was
found guilty of lying to investigators over a suspicious stock sale,
casting
doubts over the future of her business.
Stewart resigned as a board member and officer of Martha Stewart Living on
March
15, but remains at the company as founding editorial director.
The relationship between the two companies was already strained after
Kmart
became the largest retailer to file for bankruptcy in January 2002. Kmart
emerged from Chapter 11 protection in May 2003 after closing 600 of its
2,100
stores, leaving a smaller sales base for the Martha Stewart goods.
Shares of Martha Stewart Living rose 1.4 percent in early New York Stock
Exchange trading. Kmart's stock, which has more than tripled since last
May, was
up slightly on the Nasdaq.
"This is very encouraging," said Richard Hastings, retail analyst with
credit
advisory firm Bernard Sands. "It means that Kmart's management is
committed to
keeping a key brand in the stores for the long haul."
Peter Cohan, a management consultant in Marlborough, Massachusetts, who
has
followed Martha Stewart's company, said the extension shows that enough
consumers remain "rabid supporters" of Stewart despite her conviction.
"She has managed to get a tremendous amount of loyalty from those
consumers who
love her and will buy her stuff, and view buying stuff now as a sign of
solidarity," he said. "Kmart decided it's good business to be loyal to the
consumers who go in there and buy her stuff."
In a joint statement, the companies gave few additional details on the
amended
agreement. Kmart spokesman Jack Ferry said the retailer would not disclose
specific contract terms.
Kmart began selling Martha Stewart Everyday merchandise in its stores in
1997,
and the two companies signed a seven-year agreement in June 2001, just
seven
months before Kmart filed for bankruptcy.
The Troy, Michigan-based retailer had said throughout Stewart's legal
troubles
that the exclusive Martha Stewart Everyday merchandise was selling well in
its
stores.
Shares of Martha Stewart Living were up 15 cents at $10.78 on the NYSE,
while
Kmart's stock tacked on 6 cents to trade at $47.01 on the Nasdaq.
(Additional
reporting by Martha Graybow in New York)
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