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Susan Lyne Leaves MSLO as President and CEO

Susan Lyne, who rebuilt the Martha Stewart Living business in the aftermath of the namesake founder's legal woes, has stepped down as chief executive, and the job is being split between two company executives.

The management changes come as Martha Stewart Living Omnimedia Inc. navigates through a tough advertising climate and confronts a consumer - saddled with high gas and food prices - who may no longer be eager to replicate the home diva's lifestyle with all things Martha Stewart.
Lyne "did a great job dealing with the issues that arose in the wake of Martha Stewart's legal troubles," said David Bank, an analyst at RBC Capital Markets. But he expressed concern that a challenging environment has stalled the company's growth and could dampen stores' willingness to sign up for big-scale deals like the one recently forged with Macy's Inc. and Costco Wholesale Corp.

Last year, Martha Stewart unveiled an exclusive home-furnishings collection with Macy's as part of a multiyear deal; it also signed a multiyear deal to develop a cobranded line of frozen and fresh food with Costco, which started to be rolled out late last year.

Another issue is whether shoppers will be willing to spring for Martha Stewart pots and pans as they scale back on nonessential purchases.

"They are certainly staying at home more, but that doesn't mean they are reupholstering their couches and buying new sheets or pillows for their beds," said Wendy Liebmann, president of WSL Strategic Retail, a marketing consultancy. Still, she said that the company's product diversification - from crafts and food to discount and upscale merchandise - gives it at an advantage.

Executive reorganization: The New York-based media empire said that Wenda Harris Millard, 53, who is currently president of media at Martha Stewart Living, and Robin Marino, 53, president of merchandising, would be co-CEOs.

The company also announced in a regulatory filing Wednesday that it will form an advisory committee, called the office of the chairman, to focus on the strategic direction of the company. The committee will be comprised of the two new co-CEOs, Chairman Charles Koppelman, Chief Creative Officer Gael Towey and the company's founder, Martha Stewart. Stewart has been back in the limelight with her own TV show and other projects since March 2005, when she completed her five-month prison sentence for lying about a stock sale.

"While there is never a perfect time to depart, the company is on sound footing and we expect the transition to be very smooth," Lyne, 58, said in a statement. Lyne, who is also stepping down as president, will remain a director and an adviser for 30 days.

Lyne was unavailable for an interview, but Koppelman told The Associated Press that Lyne, who replaced Stewart's longtime confidante Sharon Patrick in November 2004, felt that "her job was completed." He added she had brought back profitability and re-energized its brands.
Future strategy: Koppelman acknowledged an overall tough environment but said he believes that the company's diverse offerings make it "recession-proof." "We are positioned to be almost everywhere the economy is going," he said.

To fuel growth, Martha Stewart Living is exploring international opportunities for its magazines and its merchandise, Koppelman said. The company's television programs air in more than 70 countries. The company is also looking to replace longtime partner Kmart, whose contract ends in 2010, with another low-price operator, but company executives declined to be specific. Kmart's contract began in 1997.

Martha Stewart Living (MSO) swung to a profit of $10.3 million, or 20 cents per share, in 2007, from a loss of $17 million, or 33 cents per share, in 2006. Revenue rose 14% to $327.9 million, helped by improvements in its broadcast, publishing and merchandising divisions.

Marino noted that Martha Stewart Living's home-products collection that is being sold exclusively at Macy's (M, Fortune 500) is beating sales expectations. But she noted that the full rollout of its food line with Costco (COST, Fortune 500) is taking longer than expected because of the complexities of developing the recipes.

Kmart's woes have limited Martha Stewart's growth, and the company has stopped producing its women's lifestyle magazine called Blueprint, launched in the spring of 2006.

The company has lost three-quarters of its value during Lyne's tenure, with its shares falling from a high of about $37 in February 2005 to below $8. Shares fell 48 cents, or more than 6%, to $7.50 in late afternoon trading Wednesday.

Millard, who joined the company last July, was previously chief sales officer of Internet company Yahoo Inc. (YHOO, Fortune 500).

Marino was president and operating chief of accessories maker Kate Spade until she joined Martha Stewart Living in 2005.

In August 2006, Stewart - who abdicated her chairman and chief executive titles following her 2003 indictment - accepted a five-year ban as part of a settlement with the Securities and Exchange Commission on being a company director, and agreed to limits for the same period on her service as an officer or employee of a public company. When asked whether Stewart would reclaim her title as chairman when the ban is lifted, Koppelman responded, "Martha is happy to be founder."

Courtesy of the Associated Press