Martha Stewart Living Omnimedia MSO MII Short Presentation

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Martha Stewart Living Omnimedia (MSO)MII Short
Presentation

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History

• Born Martha Helen Kostyra in Jersey
• Barnard model
• 1980s Family Circle
• 1990 MSL started
• 1993 TV program
• 1999 MSO public
• 2002 ImClone
• 2004 Jail

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Martha Stewart Evil?

• Ruthless egotism
• Divorced the day her wedding book came out
• F----- stupid
• If you dont know who I am, you dont deserve
  to be at this table!
  
• Getting employees to obey
• Im rich!
• Domineering Kmart
• Lil Martha the saboteur?

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MSO Products

• Publishing
• Martha Stewart Living
• Body Soul
• Martha Stewart Kids
• Everyday Food
• Television
• Martha
• The Apprentice
• Merchandise
• Martha Stewart Everyday Collection
• Internet

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Competitors

• Oprah et al.
• Food TV
• Home Garden
• Family Parenting
• Food Gourmet
• General Womens Interest

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Corporate Management

• CEO Susan Lyne
• Founder Martha Stewart
• Executive Compensation 13.5m for 7 people
• Insider Trading
• Marthas Proceeds 12.8m
• All Insider Proceeds 88.6m
• Guaranteed Salary and Benefits
• Unique financial arrangements
• Voting monopoly
• 18.5m stock reward

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1999-2004

• Mediocre company
• Amazing brand equity
• Poor execution
• Slow Growth
• Mediocre margins
• Failure to capitalize on huge market advantage

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2004 Year in Review

• Martha in jail
• Worst year in history of the company
• (74.37m) Net Income
• Stock appreciated 186 in 2004
• Rose 187 during jail term
• 50 drop in ads
• Steady decline in merchandise sales
• Plummeting brand equity

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2005

• Individual investors supporting stock
• Trading in la-la land
• Ad sales bottom out in June
• Switch in method of advertising
• Continued merchandising drop
• Some recovery
• The Apprentice
• Martha
• Sirius
• Marthas Rules

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Future Outlook

• Never that great of a company
• Marthapermanently damaged
• Not as unique
• Tremendously overvalued
• Lacking a business plan
• Target market is aging fast

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Brand Equity

• 2000-2002 very strong
• 2002-2004 steep decline
• No better than Enron
• 2004-Present recovery
• Slightly worse than average
• Not enough for profitability

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Financials

• 1.14b Market Capitalization
• Forward P/E 131
• P/E for peak sales year 54.3
• Profit Margin -40.85
• Operating Margin -43.40
• ROA -11.54
• ROE -40.32
• Free Cashflow (13.78m)
• Short Ratio 13.8 of float

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Thesis Points

• Martha Stewartpermanently damaged
• Mediocre business execution
• Pyramid Scheme
• Too much hypeway overvalued

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Thesis Point 1 Damaged Goods

• Tremendous loss in brand equity
• Sole differentiation for company
• Difficult to increase exposure
• Difficult to change perceptions
• Not unique any longer
• Too old to cut it

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Thesis Point 2 What Business Plan?

• Could not capitalize on tremendous brand equity
• Poor sales
• Poor leadership
• Questionable product moves
• All about Martha
• Profits?
• Lack of desirable products

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Thesis Point 3 Pyramid Scheme

• Marthacontrols voting power
• Company serves to enrich her
• Martha sends company the bill
• Lavish benefits to top executives
• Mark Burnetts 18.5m stock reward
• Megalomaniac

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Thesis Point 4 Way overvalued

• Way overvalued
• Blind faith of the individual investor
• Trading independent of fundamentals
• La-la land
• Tremendous volatility
• Trading 50 times peak earnings
• TV shows do not add to companys bottom line
• Poor planning
• Volley of mediocre ideas

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Risks

• Copycat
• Short squeeze
• Tremendous volatility
• Stock trading independent of fundamentals
• Already fallen quite a bit
• Some future potential
• CEO Susan Lyne
• Martha Stewart will claw her way back
• Potential takeover target

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Stock Chart

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Closing Points

• Stock tremendously overvalued
• Company a Ponzi scheme to enrich Ms. Stewart
• Lavish insider benefits
• Poor company fundamentals
• Damaged brand equity
• Little reason to think company will be successful