Martha Stewart and Kmart: Putting on appearances

Martha Stewart has never shied away from a tough situation, but it looks like the domestic mogul feels the need to put a soft spin on some hard stuff she said about her former friends at Kmart.

A month to the day after the founder of Martha Stewart Living Omnimedia (MSO) trashed the store chain in a live TV interview, her company issued a statement about her remarks. It wasn't quite an apology, but probably as close as Kmart is going to get.

"Both Martha Stewart Living Omnimedia and I appreciate the long and productive relationship we have enjoyed with Kmart and Sears Holdings," said Stewart's statement. "Although we were not able to agree on terms that would have allowed us to continue working together, we wish our friends at Kmart and Sears Holdings all the best. To the extent my recent comments were taken by anyone to be inconsistent with this sentiment that was not my intent."

In case you forgot, Stewart made an appearance on CNBC in mid-September to talk about her new deal to develop products for Home Depot (HD) and had a few not-so-good things to say about Kmart stores. She said she was glad her contract will expire at the end of the year because she's "extremely disappointed" by shabby stores and poor-quality merchandise. She blamed Kmart's parent company Sears Holdings (SHLD) and its chairman, Edward Lampert for neglecting her Martha Stewart Everyday brand.

Stewart's remarks were not well received by Sears management, which issued a statement that was seething, if you read between the lines. Since Martha and her team created the items, oversaw their manufacture and approved them for sale "Ms. Stewart should accept responsibility for her product," said the statement.

It was never a happy marriage -- the relationship was plagued by back-and-forth meetings about sales levels and guaranteed payments and Kmart sued Omnimedia in 2004 (they later settled). But there are a few reasons why both sides would want to put on a happy face until Dec. 31, when the divorce is final.

For one thing, Stewart is still a popular draw for Kmart stores. If comments on this site are any indication, there are many people who will miss her products even if Kmart, as it has announced, beefs up its other brands and launches new home lines into the breach. Kmart can't afford to give up one dollar in sales, especially going into the make-or break holiday season, which is going to be especially tough this recessionary year.

Stewart, for her part, can't afford to tick off customers right now. Her contract goes on through Dec. 31. Even if she can offset it with deals with Home Depot and Macy's (M), she still has to honor her commitment to Kmart until then. Nasty comments could be interpreted as a breach of her contract.

The winding down of the Kmart contract has already caused Stewart's company to post losses this year and its publishing arm is suffering from low advertising revenue due to the economy. Martha Stewart Living Omnimedia posted a $6.1 million loss in the second quarter and analysts expect more of the same when it reports third-quarter earnings on October 26. Stewart doesn't want to walk into a conference with analysts on that day and have to answer questions about a public spat with Kmart.

Stewart seemed to acknowledge as much as she put in a plug for her last Kmart products in her statement: "We hope in particular for a strong performance for the Martha Stewart Everyday line of holiday ornaments and decorations for this upcoming holiday season."

Looks like Martha and Kmart at least appear to be on good terms until the Christmas ornaments are packed away.

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