19 October 2010

Home Depot pins Remodeling Hopes on Martha Stewart

Associated Press

Martha Stewart knows a thing or two about kitchens: She owns 21. Home Depot hopes the domestic diva still has enough cachet to inspire Americans to start remodeling again with a new line of kitchen countertops, hardware and cabinets.

The line represents an expansion of a bet Home Depot made on Stewart last year when it signed a deal with her after her long-running deal with Kmart ended when they couldn't come to terms.

The increasingly high profile at Home Depot is a boon to Stewart and her company, Martha Stewart Living Omnimedia Inc., which has seen its share price fall 79 percent since the beginning of 2007 as the recession exacerbated choppy performance from its publishing and broadcast divisions. It's pursuing more partnerships with retailers to make up for the tough media business.

The line, which hit stores in September, includes 11 different styles of cabinets, 8 different countertops and 45 cabinetry hardware items and is inspired by a few of Stewart's own kitchens. While focused on the kitchen, cabinets can be used in other rooms like laundry and bathrooms.

"It's a natural area for us, and we finally have a partner who is able to do it in a large way," Stewart said at a launch event in New York on Thursday. "There are details you don't get at the mass-market level," she said, citing a bracket as an example that was inspired by vintage brackets she found at an antique market.

Home Depot began selling Martha Stewart Living-branded products in January, beginning with patio furniture, cleaning products, home decor and closet organization items. Paint and carpet followed.

While Home Depot won't disclose specific sales figures by category, the company said the Martha Stewart Living items are doing well and in the month they have been in stores the kitchen products are exceeding expectations.

"It's spreading like weeds to other merchandise categories, so that's a pretty good indication of how well its doing," said Wall Street Strategies analyst Brian Sozzi.

Still, executives acknowledge that introducing a kitchen line during the uncertain economy is a risk.

Americans buffeted by high unemployment, an anemic housing market and uncertain economy have scaled back on remodeling projects. Homeowners spent $114 billion on remodeling in 2009, 22 percent less than a peak of $146 billion in 2006, before the recession began according to the National Association of Home Builders.

Home Depot is hoping the new kitchen line, which is color-coordinated with Martha Stewart's lines of paint and carpeting, will egg customers on to bigger remodeling projects.

"You could argue it is a funny time to launch," said Bob Baird, Home Depot merchandising vice president of kitchens. "Nobody needs a new kitchen tomorrow. ... But it is a great time to invest because when things do turn around, we'll be able to leverage our investments big time."

Stewart, who also sells products branded with her name at Macy's, Michael's, PetSmart and other stores, said her formula is focusing on strong design coupled with low prices, items that are "affordable, sturdy and well built."

Merchandise revenue has a bright point for Martha Stewart Living Omnimedia. Although the black eye of Stewart's prison stint in 2004 has faded, the company was hurt by the advertising slump during the recession and has operated at a loss for six of the past eight quarters.

There have been signs of stabilization. In its most recent quarter, the company's loss narrowed, helped by strong merchandise sales and solid growth in online advertising revenue. The company also moved Martha Stewart's eponymous show to the Hallmark channel last month in an effort to improve its results. The show had been in syndication.

The items in the new kitchen and cabinet line come in a wide range of prices — some kitchens cost $133 per linear foot, while others cost $153. The cost of a total kitchen renovation falls around $2,000 or $3,000 for a small kitchen, depending on the products used and not including labor.

Stewart added she was interested in expanding the Martha Stewart Living brand to other areas of Home Depot. Mirrors, drapes and drapery hardware begin to roll out this month, as are holiday items including pre-decorated artificial trees, wreaths and ornaments.

"There are many, many opportunities," she said.

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