Her company is tagged with a $1.5 billion market cap right now. I'm sure that Richard Simmons, Dr. Ruth Westheimer, and Bob Vila all wish they had held on to that fifteenth minute long enough to go public in today's "feed me" IPO market. There was a time when ordinary people became self-help icons and built the fad into a cottage industry. Nowadays, that quick flash of fame will transform that cottage into a mansion.
I won't waste my time, yours, or especially Martha's, by taking you on a tour of the "Hall of Fleeting Fame." It's closed anyway. They're clearing the Dr. Joyce Brothers and Judge Wapner exhibits to make room for Judge Judy and Dr. Laura Schlessinger.
If you don't think Martha's pop culture star will eventually fade away, then I think your optimism better hit play on "Sweatin' to the Oldies," if you know what I mean.
Even if I'm wrong, until Omnimedia takes out a $1.5 billion life insurance policy on Martha herself, investors are taking on a great deal of risk here. I know, companies like Disney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> and Hershey <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HSY)") else Response.Write("(NYSE: HSY)") end if %> went on to succeed long after their namesake founders passed away. But Disney sold family entertainment. Hershey sold chocolates. Martha sells Martha. While I imagine her life will far outlast her popularity, this is a unique hazard in buying into Omnimedia.
I think Martha knows it. I do. She knows how to entertain guests. She knows how to make an entrance. Now, it seems, she has mastered the exit. Could it be that the company was taken public just as it was peaking financially? Omnimedia was profitable and debt-free just before the offering. What other need could the company have to go public other than set up eventual liquidity on demand? A few weeks after the offering was completed, the company reported a dramatic reduction in quarterly profits. The analysts, many which played a part in the underwriting process and should ideally appear bullish, expect earnings of just $0.08 a share next year. That is half of this year's $0.18 projection.
Now, the company can explain this away. It is simply investing in new outlets. That's not good enough for me. Let's get into the problem here. Omnimedia's operations are broken down into four parts. There is publishing, television, merchandising, and direct commerce.
Publishing is the mainstay. So far this year it has accounted for 65% of total revenues. Between Martha Stewart Living magazine and syndicated columns, the print medium is an effective money machine which I can't knock. There is nothing wrong with this segment other than the fact that its growth has maxed out. For the September quarter publishing sales rose a scant 4%. You really can't take this much further.
The other parts of the Omnimedia puzzle, the ones that many are banking on, just don't fit. Actually, they all, without exception, might even be detrimental to the publishing bread and butter. Let me explain. Television. We all love the box. But with Martha Stewart hitting the airwaves as a CBS Today correspondent, in her own Living and Food Network cooking show, and in self-pub pieces like tonight's holiday special, she is wearing the public out. Every celebrity I mentioned earlier became overexposed on the telly and was ultimately discarded from consumer fancy. Meanwhile, the Landers sisters (Abby and Ann, not Judy and Audrey) have continued to churn out advice columns for decades because they have kept their persona in check, and out of the box. When will Martha grace the cover of Time so we can toast it officially?
Next up? Merchandising. The irony here is knee deep and thick. Martha Stewart prides herself on educating women to be crafty and creative in home and garden care. She inspires her audience to think for itself. So, why belittle them by sending them to Kmart for Martha Stewart Home branded basics and fabrics? To put this in Foolish context, it's as if after five years of preaching the importance of individual empowerment in financial matters we roll out a high-load Motley Fool Mutual Fund. The "Martha Stewart for Slackers" merchandising approach is self-defeating. It can backfire on her print-life integrity.
The same goes for her marthastewart.com and Martha by Mail direct commerce inspirations. Either teach us how to make miniature cedar wreaths or charge us $48 to buy one outright -- not both. While its impressive that the company's website attracted 758,000 unique visitors back in September, it's important to note that for the entire quarter, along with the mail order division, this segment generated less than $7 million in sales.
With Omnimedia's publishing efforts barely inching forward, and Martha's clock ticking towards minute fifteen threatening everything else, why would any investor want to decorate his or her portfolio with this? Let the Hall of Fleeting Fame use the certificates as wallpaper. Let reality serve as glue.
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