Return to Transcripts main page

CNN Saturday Morning News

Interview With Vera Gibbons

Aired July 06, 2002 - 07:48   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.
ROBIN MEADE, CNN ANCHOR: Can you separate Martha Stewart the person from Martha Stewart the empire? Let's talk about that now. Joining us to talk more about Martha Stewart and her recent market troubles is writer Vera Gibbons, she is with "Smart Money" magazine. Vera, nice to see you, thank you for your time this morning.

VERA GIBBONS, SMART MONEY MAGAZINE: Nice to see you, thank you for having me.

MEADE: Thanks, no problem. So, what about her relationship with K-Mart? Will consumers continue to buy all of her goods? What's she got -- sheets, towels, and all kinds of different household goods there in K-Mart? I guess the bottom line is, can people separate what's going on with this possible scandal and the goods themselves?

GIBBONS: Well, jumping back to your question about K-Mart, I think analysts are pretty much on the fence on this one, but I think short-term consumers will continue to shop at K-Mart. The real danger, really, is whether or not K-Mart will actually stay in business because of this scandal. I mean, they sort of hinged their comeback on the Martha Stewart Everyday brand, a brand that generates about $1.5 billion in sales in the U.S. every year, so this is a huge money-making brand for them, it really separates them from the Targets and the Wal-Marts of the world.

So, the real danger here is whether or not K-Mart can sustain this kind of scrutiny. I think if Martha Stewart continues to be -- her name continues to be dragged through the mud and if the brand takes any more hits, then K-Mart really could be the biggest loser in all of this, second to investors and second to the Martha Stewart company itself.

MEADE: You know, it does appear that Wall Street is buying her story, her story that she had this ImClone stock and she sold it based on a price that she told her broker that it should not go below and if it did go below that that she should sell the stock.

GIBBONS: Right, well, the stock has taken some hits since June 6 when Martha Stewart's name was first revealed in connection with this trade. The stock is down about 40 percent, so clearly Wall Street isn't buying what she's saying.

Now, Martha Stewart has released statements saying that the transaction was "entirely proper and lawful," but as is reflected in the stock prices today, which is about $11 or $12, Wall Street isn't buying her story. So, there you have it.

MEADE: You know, could a business like hers, the Martha Stewart brand, go on without her?

GIBBONS: You know, analysts are also on the fence on this on this one. Some of them are saying that the brand is durable enough to go on with out her but if history is any indicator, I'd say it's going to be tough. I mean, if you look back at other companies, generally speaking when a company founder either falls from grace or passes away, the company suffers big time or completely goes under.

You remember John DeLorean. When he got into trouble for cocaine trafficking, his sports car company collapsed.

When Laura Ashley passed away back in 1985, her company suffered big-time. It really hasn't been the same since she passed away.

So, I think a company like Martha Stewart's empire would have some real difficult times going on without her. I mean, part of the problem, as you pointed out earlier, is that very few people do separate Martha Stewart the person from Martha Stewart the company. They're pretty much one and the same. I mean, there's Martha Stewart Living Magazine, there are bridal spin-offs, there are baby spin-offs, she's got her web site, she's go her show. She's got it all. She is the company, and the company is her, and that's a huge risk to the company.

MEADE: Vera Gibbons, nice to talk to you. Smart Money Magazine. You take care and have a good weekend, what's left of it.

GIBBONS: Thanks, you too.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com