Martha Stewart said Kmart once paid her as much as $65 million a year in royalties, money she says helped fund 'the whole development' of her magazine and business.
Stewart, 85, made the comments on MasterClass's 'Other People's Business' podcast. She said the Kmart partnership became her 'first big money' and that she was 'clearing $65 million a year in royalties.'
According to Stewart, that income helped bankroll 'the whole business' and set the stage for Martha Stewart Living Omnimedia's 1999 public offering. Fortune notes that the company made her America’s first female self-made billionaire.
Kmart first hired Stewart in 1987 as a lifestyle consultant and spokesperson for its home division. The arrangement faded in the early 1990s, but the retailer came back after Floyd Hall became CEO in 1995. In 1997, Kmart launched Martha Stewart Everyday, a line of sheets, towels, shower curtains and other bed-and-bath goods sold only at Kmart.
Stewart said the terms included a 'huge royalty' on every sale of every product she designed. Kmart also covered advertising, including a first-year budget of about $20 million that mostly went to TV commercials. She said the first year produced 'hundreds of millions of dollars of product' in sales, and that the line later reached close to $2 billion worth of merchandise a year at its peak.
The numbers come first. A royalty stream that large can act like private-sector financing without the paperwork of Wall Street. It rewards reach, brand value and distribution instead of bureaucracy.
The partnership also outlasted Kmart's 2002 bankruptcy and Stewart's own legal troubles. Fortune reports that as late as 2008, the Kmart line accounted for 43% of her company's merchandising revenue. The arrangement ended in January 2010, after Sears Holdings declined to renew.
Stewart's fortune later took a bigger hit from a much smaller trade. In December 2001, she sold her shares of ImClone Systems a day before the FDA's rejection of the company's cancer drug became public. Prosecutors never convicted her of insider trading, but a jury found her guilty in 2004 of conspiracy, obstruction and lying to federal investigators about the sale. She served five months at a federal prison camp in Alderson, W.Va., from October 2004 to March 2005, followed by five months of home confinement.
Her company also suffered, and Fortune says shares sank during the scandal. In 2015, Sequential Brands Group agreed to buy Martha Stewart Living Omnimedia for about $353 million.
Still, the Kmart deal remains the cleaner lesson. Capital rewards clear rules, strong brands and a market that can be scaled. Stewart saw distribution before Amazon, and Kmart gave her millions of shoppers every week. That is how a licensing deal becomes an empire, and how free enterprise can turn household goods into serious wealth.
