Martha Stewart Living Omnimedia Essay

Martha Stewart

Too Much of a Good Thing?: A Quantitative Analysis of Martha Stewart Living Omnimedia

Martha Stewart and her business endeavors have come a very long way since the cooking, crafting, and home makeover maven attended a stock brokerage class and earned her trading license in 1968 (O'Rourke 2007). The fact that Stewart even had a brokerage license might seem some what ironic in light of the insider trading scandal and resultant prison sentence that have now become some of the best-known details of her life, but far from being exemplary or definitive of Stewart's character or path to success this episode is quite contrary to the overall trajectory of her life and business acumen (Bhattacharya & Marshall 2009). At the same time, Stewart's current company could certainly stand to be in better financial shape than it currently is.

Beginning with a catering service and then a specialty foods store in the 1970s, Martha Stewart has been doing what she does far longer than her corporation, Martha Stewart Living Omnimedia, has been in existence (O'Rourke 2007). It is through her entire career, however, that Martha Stewart was able to build the multi-million dollar corporation she is currently the figurehead of (though she is still barred from holding office in her company as part of her sentence), which still has extraordinarily strong sales among a certain consumer segment and significant revenue streams from a variety of operations (Bhattacharya & Marshall 2009; Byron 2002). Despite this revenue, however, the corporation is not currently profitable, and its market value also suggests a company in trouble.

In the following pages, a quantitative analysis of Martha Stewart Living Omnimedia that examines the financial situation and valuation of the company from several angles will be conducted. This analysis reveals a complex situation for a relatively new corporation still struggling to make a profit despite the fact that it does many millions of dollars in business each year, and that is so closely tied to the persona and image of its founder and effective leader that it has struggled to form a more lasting and solid brand identity (Byron 2002; O'Rourke 2007).Despite being internationally known and having a variety of media outlets that serve both as marketing tools and as potential revenue streams, the company is struggling under the cost of its operations and is currently only truly profitable through its licensing agreements for a wide variety of merchandise offerings (MSLO 2011). The effects that this situation has on the business as a whole and its position in the market and its industry will be assessed through this quantitative analysis.

Liquidity

Martha Stewart Living Omnimedia is highly liquid, with the corporation's current assets nearly twice the amount of its current liabilities (as of 2010) and total assets closer to three times total liabilities (MSLO 2011). The company does not actually own a great deal of property or raw materials, nor does it use them in its operation, which is one way Ms. Stewart has intentionally built the brand and which keeps it both solvent and flexible (MSLO 2011). All of this makes for a company with a high degree of liquidity, which seems to offer some safety to investors.

Asset Management

The company's success when it comes to asset management is much more difficult to define with any clarity or certainty than the liquidity of the firm, as the variations in the success levels of the company's assets are extreme and quite complex. Much of what Martha Stewart "sells" through her various media outlets is intangible: consumers are attracted to the image of upscale living that they cannot really afford, and actually become willing to settle for the image itself (Bhattacharya & Marshall 2009). Martha Stewart Living Omnimedia has had enormous success in reaching these consumers and in creating revenue from them, to some degree, but it has not been able to fully monetize this intellectual asset (O'Rourke 2007; MSLO 2011). The same can be said of the primary asset of Martha Stewart Living Omnimedia, namely Martha Stewart herself; enormously….....