As the picture continues to grow more bleak for Kmart, market speculation has increased on whether Martha Stewart will cook up a deal with another retailer. 

With over a quarter of Martha Stewart Living Omnimedia's income and almost all of its profits coming from the mass merchant, industry experts expect Stewart to make a move. 

And the upscale mass merchant Target tops the list of potential new homes for Martha. 

"Target would be a natural as they've been inviting designers to sell there. They're almost made for each other," said Marc Gobe, branding and design expert at Desgrippes/Gobe. "Target is attracting the client Martha Stewart is talking to. It loves innovation and is design-driven," he said 

"Martha Stewart is the quintessential brand without borders," he added. 

Other contenders mentioned include Wal-Mart, Sears, and J.C. Penney. 

"She could only take it to another retailer on the same level," said Marc Balet, owner of Mixed Business, an imaging and custom publishing company. "You can always downgrade a brand, but you can't upgrade it." 

Balet believes Stewart has to go with a big national brand. "She's on TV and in magazines - she'll find another outlet to plug into." 

Regardless of where the Martha Stewart Living Everyday collection ends up, it's a sure bet her deal will not be as sweet financially - nor will as much floor space be devoted to her wares. 

"The challenge would be getting that much space in any new stores," said Laura Richardson, better living analyst at Adams, Harkness & Hill. "She's been with Kmart since the mid-1990s and starting over would be a significant step back." 

However, Richardson noted that Martha Stewart and Kmart have always been thought of as a mismatch. "Kmart's never had the cachet that Martha Stewart has," she said. Target or Sears may make more sense. 

Sears has been selling her paint for years. It likes private labels and has a strong image with hard goods, Richardson said. 

A spokesman for Martha Stewart Living Omnimedia reaffirmed the company's commitment to Kmart. 

"We have a contract with Kmart and we are committed through our contract term." 

Kmart, home to Martha's brand of homewares, was downgraded four levels to "B-" by Standard & Poor's yesterday. The slash falls on the heels of Moody's lowering the company's bond rating on Friday, fueling speculation that a Chapter 11 bankruptcy filing is imminent. Shares for the beleaguered mass merchant closed at $2.84 yesterday, down 46 cents.