Can Daniel Dienst Turn the Martha Stewart Empire Around?

Martha Stewart
Bloomberg Business Week

On Monday, Oct. 28, hundreds of employees at MSLO’s headquarters in Manhattan gathered for a town hall-style meeting inside its “clerestory”—a vast loftlike space where the company throws galas, design exhibitions, and its annual holiday party. Dienst, who is tall and lean and walks with his broad shoulders thrown confidently back, strode in. He was wearing jeans, a starched, white button-down shirt, suede cowboy boots, and a big metal belt buckle. The Manhattan-meets-Montana, SoHo-bolo style is his uniform: He wears the same thing to work every day.

For the next several minutes, according to a person present who isn’t authorized to speak on the record, Stewart introduced Dienst to her staff, gushing about his record of arriving at various companies, improving earnings, and rapidly elevating the share price. She also noted that, like her, Dienst loves the great outdoors. He rides horses, knows his way around a ranch, and has spent time out West.

Stewart knew all of this from personal experience. The lifestyle queen and the scrap metal king have been friends for years. Like her, Dienst and his wife, Jill, own a house in the Hamptons, collect antiques, and attend parties on the design-charity circuit. In August 2013, published a “tastemaker” profile of Jill Dienst, who is the owner of Dienst Dotter, a gallery in Manhattan specializing in Scandinavian antiques and interiors. The feature includes a photo of Daniel and Jill and their daughter smiling over an al fresco breakfast, radiating domestic bliss. Anyone hoping that MSLO would hire someone to break up Stewart’s network of friends within the company faced another possibility: that Stewart had appointed someone well positioned to join their ranks.

To judge by Stewart’s blog, she has been socializing with the Diensts for years. In August 2009, Jill and Daniel accompanied Stewart and a small coterie of her work friends to Montana to visit the ranch of media mogul Ted Turner. Among the snapshots of red-tailed hawks, herds of bison, and taxidermied goats that Stewart posted are several images of the Diensts. Elsewhere on Stewart’s blog, readers can check out a photo circa 2007 from Maine, where she owns a country estate, showing Daniel posing with her dogs Paw Paw and Sharkey.

In mid-December, Dienst made his first cuts at the company: nearly a hundred employees, mostly in the media division. Among those let go were several of the top executives who had been brought in by Gersh. The layoffs effectively left untouched Stewart’s inner circle and their salaries, says one former staff member who isn’t authorized to speak on the record. The company remains on the hook to cover Stewart’s expenses under an ongoing “intangible asset license agreement,” according to SEC filings.

“If they have the ability to cut costs in publishing and get that to break even”, says Noble’s Kupinski, “you’ll start seeing the significant earning power at the company.”

Samir Husni, the director of the Magazine Innovation Center at the University of Mississippi, thinks that if Dienst wants to reverse the media losses, he’ll have to change the culture, starting with the founder, whose magazine-making ideal was forged in the mid-’90s when editorial budgets often ran wild. “It seems like they are frozen in time,” he says.

But at some point, if Dienst trims MSLO’s media properties too much, he risks damaging the merchandising operation by cutting off the fuel that keeps the Martha Stewart brand warm in the hearts of consumers. For now, surveys suggest the brand remains strong. Henry Schafer, the executive vice president of Marketing Evaluations, a consumer research firm, says Stewart scores at the top of the charts in awareness.

“She remains highly influential with the public while simultaneously being on its lower end of the scale in trustworthiness and likability,” says Rob Levy, the president of InterMedia Entertainment, which quantifies celebrities’ potential value for marketers. “Consumers may not have the same love affair with Martha that they once had, but it appears that many of them are still willing to buy into her product endorsements.” Occasionally, she’ll even pitch for other companies. During the recent Golden Globes, Stewart stole the show by appearing in a low-budget ad for Pine Bros. Softish Throat Drops. “They are more than just a throat drop,” said Stewart knowingly. “They are an experience.”

Gillette is a staff writer for Bloomberg Businessweek in New York.