Despite Awful Performance, Martha Stewart Contract Extended

It must be nice to be a founder. Despite a horrible performance, both financially and for shareholders, Martha Stewart was given a contract extension to act as founder and chief creative officer through June 30, 2017. Martha Stewart Living Omnimedia (NYSE: MSO) and its founder “have agreed to negotiate mutually acceptable adjustments to the terms of the employment agreement to take effect at July 1, 2013 (or such earlier date as the parties may agree).”

Over the course of the past five years, Martha Stewart shares have fallen from almost $16 to $3.56.

The company’s growth also has died. In the most recently reported quarter, revenue fell to $49.8 million from $52.7 million in the same period a year ago. The corporation lost $3.6 million.

Martha Stewart gave COO Lisa Gersh “a restricted stock unit award in respect of 64,395 shares of MSLO Class A Common Stock.” Part of the reason for this was “her role in consummating the transactions with J. C. Penney Corporation, Inc.” The deal involved JCPenney (NYSE: JCP) buying 16% of MSO, and creating a retail partnership between the companies.

But, JCPenney sales have collapsed since the arrival of new CEO Ron Johnson. And, Macy’s (NYSE: M) filed a lawsuit in January that accuses Martha Stewart Living Omnimedia of violated a preexisting contract. Nice work by Gersh, but will the company take the shares back if Macy’s wins the suit?

Douglas A. McIntyre