- The Washington Times - Friday, October 11, 2002

Kmart is running a new television advertisement featuring embattled domestic diva Martha Stewart a move that has some folks on Wall Street and Madison Avenue scratching their heads.
The commercial, which promotes Mrs. Stewart's line of pastel-colored bed linens and bath towels, has reached the airwaves at an unusual time.
Last week, Mrs. Stewart resigned from the board of the New York Stock Exchange amid reports that federal prosecutors had secured a key witness in their investigation of her role in the ImClone Systems Inc. insider-trading scandal.
The advertisement ends with a smiling Mrs. Stewart snuggled tightly in a bed made with her linens. A second wave of ads in which Mrs. Stewart promotes a new line of holiday decorations, baking equipment and other products is slated to begin airing in early November.
"Nine months ago, we were wondering if Martha Stewart was ruining her reputation by being associated with Kmart. Now it could be the other way around," said Sheldon Grodsky, president of Grodsky Associates Inc., a business-research group in South Orange, N.J.
Kmart Corp. filed for bankruptcy protection from its creditors in January.
A spokesman at the company's Troy, Mich., headquarters declined comment when asked whether the struggling retailer was reluctant to feature Mrs. Stewart in its advertising. "We're not discussing that," said Kmart's David Karraker.
The retailer's New York advertising agency, Arnell Group, did not return phone calls.
The Martha Stewart Everyday products that Kmart carries account for $1.5 billion of the chain's $36 billion in revenue, according to published reports.
Mrs. Stewart's company, Martha Stewart Omnimedia Inc., is projected to generate $312.2 million in revenue this year, and about $49.1 million of that will come from merchandising, primarily through Kmart.
Mrs. Stewart, chairman and chief executive of Martha Stewart Omnimedia, has kept a low profile since the ImClone scandal broke.
The homemaking maven sold several thousand shares of the ImClone biotechnology company shortly before it announced that the Food and Drug Administration was not going to approve an anti-cancer drug ImClone had been developing.
Former ImClone Chief Executive Officer Sam Waksal a friend of Mrs. Stewart's was arrested June 12 on charges of insider trading and perjury. Mrs. Stewart is being investigated, but has not been charged with any wrongdoing.
Mrs. Stewart ended her weekly appearances on CBS' "The Early Show" in June after an awkward cooking segment during which then-host Jane Clayson asked her questions about ImClone.
Her once-frequent appearances in the media have dwindled since then.
So why has she suddenly resurfaced in Kmart ads?
The retailer may be contractually obligated to feature her in its commercials, according to Michael J. Schroeder, president of Wasmer, Schroeder & Co., an investment firm in Naples, Fla.
"Legally, they may not have a choice," Mr. Schroeder said.
Or this may be just another example of the fiercely loyal relationship between Kmart and Mrs. Stewart.
In February before the ImClone scandal tarnished her reputation Mrs. Stewart told CNN talk host Larry King that she had no plans to desert the struggling Kmart.
"We have been working with them for 15 years. It's pretty hard to run out on a partner that's down. You know, that's not our style," she said.
In the spring, Kmart pulled copies of the Globe tabloid from its checkout stands because it featured nasty articles about Mrs. Stewart under the headlines "Mean Martha Stewart Exposed" and "Martha the Monster."
The tabloid based its reporting on the book "Martha Inc.," which explores the purported dark side of Mrs. Stewart's climb to the top of the corporate ladder.


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