Martha Stewart Living with Kmart — For Now

A day after rumors swirled that Martha Stewart might bail out on Kmart, the president and coo of Martha Stewart Living Omnimedia (New York) insisted that the company's relationship with the troubled retailer “is solid.”

“We're taking no action,” said Sharon Patrick. “We're not talking to other partners at this time. We remain in partnership with Kmart.” Stewart's contract with Kmart, signed in June 2001, allows the parties to part ways if either files for bankruptcy protection. With Kmart's stock in a freefall (slipping 34.6 percent yesterday), several retail analysts have mentioned bankruptcy reorganization as one option to save the company.

Patrick noted that Kmart is up-to-date with its royalty payments, and all vendors supplying the Martha Stewart Everyday products have been paid. She said Martha Stewart Living Omnimedia is awaiting word from the Kmart board about the retailer's future plans. The board, which met earlier this week, has been silent about what, if any, action it took. “We're not nervous about the Kmart situation, but we are concerned,” Patrick said.

According to a Wall Street Journal report Wednesday, at least two companies that provide payment guarantees to suppliers for a fee have warned their clients to withhold Kmart shipments until the board presents its strategic plan.

Bankruptcy attorneys say termination clauses like the one found in Stewart's contract are typical but rarely enforceable. Nevertheless, the possibility of the domestic designer ending her 15-year relationship with Kmart is causing quite a stir in the retail world. “If you were Martha Stewart, wouldn't you review all available options if suddenly given the opportunity to do so?” asked retail observer and publisher Kurt Barnard. He pointed out that many retailers would probably love to get their hands on more merchandise from her — including Sears, Roebuck, which already sells Martha Stewart Everyday paint.

Since 1997, the exclusive brand of Martha Stewart Everyday has generated $5 billion in Kmart sales, making it the retailer's top brand. The Kmart deal gets Martha Stewart and her products into more than 2000 stores nationwide.

A Kmart spokeswoman would only say that Kmart “looks forward to maintaining a long-standing and mutually beneficial relationship with Martha Stewart and her team.”