NEW YORK — Can Martha Stewart's company survive the latest troubles of Martha Stewart, the executive?
Her die-hard fans appear to still love her branded merchandise, but some advertisers have been skittish about appearing in her magazines and on TV.
"Without Martha, the company is only a shell. She's it," said Terry Gaudet, a stockholder from West Hartford, Conn., who was at Tuesday's shareholders' meeting.
Others, however, haven't lost faith.
"The brand will survive because Martha has gone beyond being a person who represents a brand," said Jerry Della Femina, chairman of Della Femina Rothschild Jeary, an advertising company, who has remained a fan of Stewart's.
The nine-count indictment against the domesticity maven may well diminish her role at the company she founded, Martha Stewart Living Omnimedia Inc. Stewart, known for her wholesome image, could face big fines or even a jail term.
The company has been reeling since news broke a year ago that Stewart's name was tied to an insider trading scandal involving the shares of ImClone Systems Inc. Shares in Stewart's company have fallen by 50 percent and earnings have suffered: its first-quarter loss was wider than expected.
Advertising and circulation revenues for Martha Stewart Living magazine have taken a hit. Some of her consumer base appears to have eroded, with company officials acknowledging in a recent conference call that magazine renewal rates have dipped.
Now, analysts expect some advertisers to pull back even more and believe that the charges will keep retailers from striking new relationships with the company. What's more, readers of her magazine and buyers of her goods might react to the charges by turning away from her brand, says Seth Siegel, co-founder of the Beanstalk Group, a licensing agency.
"Up until now, it has been a financial page story. An indictment is something that everybody can understand," Siegel said.
In a related action, the Securities and Exchange Commission filed a civil suit in Manhattan seeking to bar Stewart from being in charge of any public company.
However, Stewart executives are hoping that consumers will behave like Lisa Schroeder, 39, who was at Kmart in Overland Park, Kan. "If I like the stuff, I'm going to buy it anyway," she said.
History has many examples of brands that collapsed in similar situations, as well as others that continued to thrive during crises.
Steven Madden went to prison last year to serve a 41-month sentence for stock fraud and money laundering, but Steve Madden Ltd. has been doing well and continues to report strong sales of its chunky shoes.
But unlike Madden, Stewart has become synonymous with tasteful living for legions of fans. In addition to founding her company, Stewart was also the company's chairman and chief executive. Through television shows and public appearances, she is also the embodiment of its brand.
In an apparent effort to reduce that dependency, Martha Stewart Living recently began testing a magazine, Everyday Food, which does not carry her name.
In a statement, Martha Stewart Living said its directors "have been planning for a number of possible contingencies, are evaluating the current situation and will take action as appropriate."
Laura A. Richardson, an analyst at Adams, Harkness & Hill, said that executives "should be able to maintain a company without Martha." But she said, "They are not very far along in that transition process. They need a turnaround plan."
Wendy Liebmann, president of WSL Strategic Retail, a consulting firm, said she expects the publishing side of the business, which accounts for 60 percent of the company's revenues, to continue to be most vulnerable to fallout from the indictments, more so than sales of Stewart-branded retail products such as towels and housewares.
Ad pages, a key monitor of a magazine's health, fell 28 percent at Martha Stewart Living magazine in the first quarter compared to the same period last year, according to Media Industry Newsletter.
Television revenues were $6.6 million in the first quarter, compared to $6.7 million in the prior year's quarter.
At least some major advertisers are sticking by Martha Stewart's magazines, however. Campbell's Soup Co. spokeswoman Michelle Davidson said her company has no plans to change its advertising arrangements with Martha Stewart Living magazine.
"We don't think her personal legal difficulties have anything to do with the quality of the organization and the publications it puts out," Davidson said. "We think highly of the company and its ability to put out a good product."
Sears Canada said it hasn't changed plans to launch a line of home products under the Martha Stewart label this fall. The company has found from surveys that consumer attitudes toward the brand were "positive" despite the scandal, said Vincent Power, a company spokesman.