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Martha and Macy's: A Good Marriage?

Can Martha make the leap from Kmart, where her curtains, bedspreads and knickknacks have long been sold, to the more stylish chain of Macy's? To some observers, the trip uptown seems like a good thing for both Macy's and the rehabilitated Ms. Stewart. “It would be a very good marriage,” says George Whalin, president of Retail Management Consultants. Martha Stewart gets to move up to a higher class of merchandising and an expanding national platform, while Macy's gets a proven brand. “Martha is magic.”

The magic's apparently gone out of the marriage with Kmart. Edward Lampert, the hedge fund manager who engineered the merger of Kmart and Sears last year, asked the household diva to accept less money while expanding her Kmart license to include Sears stores, the Chicago Tribune has reported.

Martha Stewart would likely upgrade her products for Macy's in order to appeal to a more upscale audience, and, in so doing, upgrade her image as well.

Kmart, on the other hand, could lose a much-need profitable brand. Its contract with Stewart ends in 2009. Neither would discuss the future of their relationship.

Analysts are wondering why Lampert wouldn't fight harder to keep Martha in the Sears fold at a time when his attempts to straighten out Sears and Kmart have gained little traction. Analysts and competitors say it's hard to discern Lampert's strategy for the long-suffering chains.

Recently, for example Sears Holdings announced a prototype new store — Essentials — that was slated to be located in shuttered Kmarts and would showcase a mix of products from both chains. But in March, the company said it was canning the Essentials concept and combining it with the Sears Grand group of stores, an off-mall concept that predates the merger.

What does that portend? No great merchandising breakthroughs, says Jeff Green of Jeff Green Partners, a retail consultant. His assessment? “He probably wants to keep it going as Sears for a while before selling off some properties.”

Martha, meanwhile, also has her eye on property. As in homes. Her company, Martha Stewart Living Omnimedia Inc., in April said it would build a second townhouse and single-family community with KB Homes outside Atlanta.

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