Martha Stewart (MSO) Higher On Home Depot Deal; Analyst Positive

September 15, 2009 9:40 AM EDT

Shares of Martha Stewart Living Omnimedia Inc. (NYSE: MSO) are 8% higher today after announcing a deal with home improvement giant Home Depot (NYSE: HD) to develop an exclusive Martha Stewart Living brand of home improvement products in select categories including Outdoor Living, Home Organization and Home Decor.

Home Depot CEO Frank Blake called the partnership with Martha Stewart a "natural fit". Martha Stewart said she was "thrilled" about the deal.

Products in the Outdoor Living category will begin to launch in January 2010 in the U.S. and February 2010 in Canada. Products in the Home Organization categories will launch in February 2010. The Outdoor Living line will consist of many different styles of patio dining and conversation sets ranging in price from $399 to $1,999, while the Home Organization category will feature a new closet organization system and a versatile nine-cube organizational unit.

Morgan Joseph analyst David Kestenbaum commented on the deal in a research report his morning. Kestenbaum said the deal with Home Depot is a "fine replacement" for the problematic K-Mart (Nasdaq: SHLD) agreement, which ends next February. Kestenbaum notes the deal does not involve a minimum payment; however, it does include an annual marketing commitment. He sees "huge upside over the long-term" from the agreement and said the deal has the potential to more than replace the lost K-Mart revenue. He also expects Home Depot to get the Martha Stewart paint business as the Lowe's (NYSE: LOW) deal winds down.

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