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An Understudy Steps Up Amid Stewart's Troubles

CEO Sharon Patrick moves from behind the scenes to bolster the lifestyle icon's brand.

June 09, 2003|Aimee Picchi | Bloomberg News

Sharon Patrick, who was named chief executive of Martha Stewart Living Omnimedia Inc. last week, is emerging from behind the scenes to try to re- furbish the indicted founder's brand.

Patrick, 60, drew up the business plan that turned Stewart into a household icon after the women met 10 years ago on a hiking trip to Mt. Kilimanjaro in Tanzania. Patrick has been the New York-based media company's chief operating officer since 1997 and earned $1.52 million in salary and bonus last year.

"She was doing a lot that people didn't realize," said David Baker, who manages $500 million and holds about 40,000 shares of Martha Stewart Living. "She was Martha's understudy and will take on a much larger role."

Stewart, 61, quit as CEO and chairman Wednesday to fight criminal and civil charges stemming from her sale in December 2001 of 3,928 shares of ImClone Systems Inc. stock.

The sale came under suspicion because it took place one day ahead of an adverse ruling from the Food and Drug Administration on ImClone's promising cancer drug Erbitux. The stock plunged 18% on the news. Stewart and the company's founder, Samuel D. Waksal, are close friends.

Since her indictment, Stewart has assumed the role of chief creative officer and remains Martha Stewart Living's majority shareholder.

Investor Jeffrey Ubben, whose ValueAct Capital Partners took a stake in Martha Stewart Living in early 2002, succeeds Stewart as chairman.

Patrick, Ubben and Stewart all declined to be interviewed.

Martha Stewart Living's shares, which fell 47% in the last 12 months, rose 11 cents Friday to close at $10.24 on the New York Stock Exchange.

While Stewart presented her company's public face, Patrick focused on the unglamorous business details: In a conference call with investors, Patrick noted how cool weather this spring slowed demand for the company's garden tools and detailed the effects on inventories as a result of last year's labor woes among dockworkers that shut California's ports for a time.

"She knows the company better than anybody," said Laura Richardson, an analyst at Adams, Harkness & Hill. "Where Sharon is most helpful is in prioritizing the goals they have and developing a business plan."

Patrick, a former partner at consulting firm McKinsey & Co., will need all her business acumen in taking a bigger role at Martha Stewart Living, according to analysts who said the company's advertising and image needed bolstering.

"She needs to personally visit and comfort all their major advertisers and their agencies," said Steven McKee, president of McKee Wallwork Henderson Advertising in Albuquerque.

Martha Stewart Living magazine's circulation and advertising have declined with the investigations into the founder's sale of ImClone stock, the company has said, and Stewart's syndicated TV show has lost viewers.

The flagship magazine's circulation is down 3%, and its ad sales were about $14.9 million in April, a 32% drop from a year earlier, Publishers Information Bureau reported. Ad sales at Real Simple, a rival published magazine by AOL Time Warner Inc., more than doubled to $10.9 million; Meredith Corp.'s Better Homes & Gardens posted ad sales of $65.2 million, up 23%.

Sales of Martha Stewart Living Omnimedia's housewares products, including linens and furniture, fell 6.7% in the most recent quarter. That decline was partly due to lower sales through Kmart Holding Corp., Martha Stewart Living's main distribution partner. Kmart, which has been closing stores, recently emerged from Chapter 11 bankruptcy protection.

Patrick is the biggest individual shareholder after Stewart.

As CEO, Patrick also brings a lot to the table, though not the celebrity founder's vision, said Kurt Barnard, president of Barnard's Retail Consulting Group.

"She's a very competent manager-administrator," Barnard said. "But she's not the creative engine that drives Martha Stewart Living Omnimedia."

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