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American Morning

Kmart's Blue Lights Could All Be Turning Red

Aired January 18, 2002 - 07:50   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Welcome back, moving up on just about seven minutes before the hour. Kmart's statements blue lights could all be turning red - the man who turned Denny's around after it filed for bankruptcy, James Adamson (ph) is taking the reigns of the struggling chain of discount stores. Also without giving any reason at all, the president of the company and Chief Operating Officer, Mark Schwartz (ph), suddenly departed yesterday. So as Kmart inches towards what may be the inevitable, rumors have been circulating about what the woman who sells her merchandise exclusively at the store will do next.

CNN's Garrick Utley takes a look at Martha Stewart.

(BEGIN VIDEOTAPE)

GARRICK UTLEY, CNN CORRESPONDENT: What is amazing, truly amazing about smiling, charming, tough-as-nails Martha Stewart is not what she sells, but how she's been able to sell herself. In magazines and books, telling us how to set the perfect table, and make a more gracious home.

MARTHA STEWART: Perhaps my favorite activity of all is making flower arrangements.

UTLEY: In the ideallic (ph) kitchen of her television program, showing us how to turn brussel sprouts into entertaining success and in the ever lengthening list of things she sells, particularly at troubled Kmart. She is no longer Martha Stewart, a mere mortal or a successful businesswoman, she's become something more.

HOWARD DAVIDOVITZ, DAVIDOVITZ & ASSOCIATES: She is the gold standard for Kmart.

UTLEY: There was a time when the American success story simply met getting rich, famous or powerful, and preferably all three, and those who did became known as celebrities or stars until those terms were devalued through loose use and overuse, so a new word, a new pinnacle of recognition had to be created. Now the highest achievement is to become a brand.

Of course, what Martha Stewart has done is nothing more than marketing 101, get a good idea, and then see how far you can stretch the brand - from brides to babies, from beds to bathrooms, and beyond. Garden products as fashion statements, why not? STEWART: I still go to work 24 hours a day. I'm working, I'm still working. I'm still on the way up that ladder.

UTLEY: Working to raise even higher her net worth, which is estimated at $600 million. So far, so good, but a brand that is a living breathing person has some investors worried.

UNIDENTIFIED MALE: The downside of that is first of all, Martha in seven or eight years doesn't look so beautiful, and it's what she has to have, she has to institutionalize her business.

UTLEY: In other words, is there life in "Martha Stewart Living" after Martha Stewart? A more immediate question right now is what will she do if Kmart goes bankrupt. For all the speculation about her moving down the street or down the mall to Wal-Mart or to Sears, she may do nothing.

Even in its cripple state, Kmart is accounted for an estimated 80 to 90 percent of Martha Stewart's merchandising income.

UNIDENTIFIED MALE: Her return on investment, it's three-figure. I mean it's embarrassing. It's a - it is a cash machine for Martha.

UTLEY: And that's Martha Stewart ...

STEWART: You don't want to skimp on the lemon and ...

UTLEY: ... Living.

Garrick Utley, CNN, New York.

(END VIDEOTAPE)

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