Martha Stewart Living, Macy's Make a Deal

ATLANTA – Martha Stewart Living Omnimedia Inc. (MSO) on Thursday said it would extend its reach by launching an exclusive line of home products in Macy's stores, sending shares of the lifestyle media company up nearly 12 percent.

The Martha Stewart Collection, which will include towels, dinnerware and holiday decor, is expected to make its debut in fall 2007 in Macy's stores and on macys.com.

Martha Stewart already sells plates and other home goods at Sears Holdings Corp.'s (SHLD)Kmart unit and Sears Canada. This new line will be targeted to a more upscale, traditional Macy's consumer, Martha Stewart Living and Macy's said in a statement.

"It gives Macy's a very recognizable brand in a very important sector, the home business," said Stuart Kessler, president of Clear Thinking Group, a New Jersey retail, consumer products and manufacturing consultancy.

"As long as they can pull off the segmentation in the consumers' mind, they're going to have a winner on their hands," he added.

Kessler said Martha Stewart Living may have sought another venue for its products as Sears Holdings Corp. cuts costs and makes other changes to become more competitive. Sears Holdings was formed last year when Kmart acquired Sears, Roebuck and Co.

"It makes all the sense in the world to diversify if the opportunity presented itself because of the lack of clarity relative to Sears' direction in the mid- and long-term," Kessler said.

Macy's, a unit of Federated Department Stores Inc. (FD), also expects to sell other Martha Stewart-branded products over time — potentially including home furnishings, cookbooks and new goods in categories such as outdoor entertainment. The first term of the agreement will extend for five years, the companies said.

Wendy Liebmann, president of consulting firm WSL Strategic Retail, said the new line will help Federated appeal to more consumers as it converts former stores in the May Department chain it acquired last year into Macy's.

"What Macy's now, as more of a national brand department store, is trying to do is find ways to appeal to regional customers in ways that are more appropriate," Liebmann said.

The Martha Stewart brand "still resonates with a lot of American shoppers."

Separately, Federated reported on Thursday that March sales were flat at stores open at least a year and forecast a decline for April.

Analysts, on average, expected a same-store sales increase of 0.7 percent, according to a Reuters survey. Federated had forecast March same-store sales in a range of flat to up 1 percent.

Cincinnati-based Federated, which also operates the Bloomingdale's chain, said total sales jumped 64.7 percent to $2.26 billion in the five weeks ended April 1, boosted by last year's acquisition of May Department Stores.

For April, Federated expects a same-store sales decline of 2.5 percent to 3.5 percent.

For the first quarter, the company still expects same-store sales to decline 0.5 percent to 1.0 percent, within the range that it forecasted on January 26.