Wall St. Batters Martha Stewart Stock
Wall Street continued to hammer shares of Martha Stewart Living Omnimedia Inc. on Wednesday after reports of a wider investigation into alleged insider trading by Martha Stewart.
But, at least so far, the scandal appears to have had very little effect on the company’s business.
Shares of the multimedia company fell 24% Wednesday, losing $3.20 to close at $10.40 on the New York Stock Exchange.
The stock has fallen since June 7, when a House of Representatives panel said it was reviewing Stewart’s sale last December of stock of ImClone Systems Inc. Reports have since included possible charges against Stewart for obstruction of justice and making false statements regarding her role in the sale.
Stewart’s most important constituency, however--the TV viewers, magazine readers and decorating disciples who buy everything from paint to gardening tools emblazoned with her name--have stood by the entertaining expert, retailers and others say.
“I don’t think at this point, any of this has impacted her company at all,” said Jeffrey Klinefelter, an analyst with U.S. Bancorp Piper Jaffray in Minneapolis. “I haven’t heard about any changes in sales trends, advertisers pushing back or anything else.”
And unless Stewart is formally charged with a crime, that trend probably will continue, say financial analysts and consumer behavior experts. She might even, in typical Martha Stewart fashion, turn the potential disaster to her advantage.
A Kmart Corp. spokesman said the company does not break out sales of individual brands, but Stewart’s “Everyday” line of thousands of exclusive products continues to sell well. At Sherwin-Williams Co., which makes Martha Stewart paint for Kmart and recently began selling a line of Martha Stewart-licensed paint colors at its 2,600 stores, only one customer has called with concerns about Stewart’s integrity and her relationship with the paint company, said spokesman Conway Ivey.
“I told her that I don’t know anything about the allegations, that we would want to see what comes out of any judicial process,” Ivey said, “but that we’ve had a relationship with her and her company and that they are excellent people who have always acted in an honorable and forthright way.”
Stewart has denied wrongdoing in her sale of nearly 4,000 ImClone shares one day before the Food and Drug Administration rejected ImClone’s application for approval of an experimental cancer drug, which sent the stock plummeting.
If Stewart is exonerated--or even charged with a crime but not convicted, some say--she could use the scandal to prove her oft-repeated claim that she is subjected to greater scrutiny as one of the few successful women leaders of a major American company.
“If nothing is found, she can use it in the future to say, remember this the next time someone attacks me,” said Michael Kamins, an associate professor of marketing at the USC Marshall School of Business.
The controversy grew out of Stewart’s friendship with former ImClone Chief Executive Samuel D. Waksal, who was arrested two weeks ago on charges of insider trading for allegedly trying to sell his stock and tipping off family members after learning of the impending FDA decision.
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Times wire services were used in compiling this report.
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