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UPDATE 2-Martha Stewart clarifies Kmart comments after jab
(Adds background on Martha Stewart's reliance on Kmart)
NEW YORK Oct 16 (Reuters) - U.S. home decorating expert Martha Stewart issued a statement on Friday expressing her appreciation for long-time retail partner Kmart, one month after saying the quality of her company's merchandise had been diminished at their stores.
Discount retailer Kmart, and its parent Sears Holding Corp (SHLD.O), are controlled by billionaire investor Edward Lampert. Stewart's long-standing relationship with the store chain is coming to an end just as she is set to begin one with home improvement chain Home Depot Inc (HD.N) in 2010.
"Both Martha Stewart Living Omnimedia (MSO.N) and I appreciate the long and productive relationship we have enjoyed with Kmart and Sears Holdings," the company's founder said in the 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."
A spokesman for Sears declined to comment.
In September, Stewart had harsh words for Kmart during an appearance on U.S. cable business news channel CNBC.
"The new ownership really has let our line deteriorate. It's been kind of ripped off, I would say, and really diminished, and the quality is really not what I am proud of," she said. "Have you been into a Kmart lately? It's not the nicest place to shop.
"The stores are not what they were. The shopping experience is not what it was. The products are not there that people go in for. And it's not a good situation. And as a designer-supplier, I have been extremely disappointed."
According to regulatory filings, the sales of products she licensed to Kmart fell 25 percent in 2008.
While licensing agreements with other retailers such as Macy's Inc (M.N) are providing added revenue for Martha Stewart, it has not made up for the slumping sales at Kmart.
The discount chain provided 10 percent of Martha Stewart's overall revenues in 2008 and 43 percent of the merchandising business, which includes products such as sheets, cookware and candles.
For Sears' chairman Lampert, Stewart's unguarded comments added to a string of bad press that overshadowed company's few successes, such as the popularity of layaway payment plans.
Second-quarter earnings were dismal and fueled critics of the leadership, including the financial weekly Barron's.
The magazine said the company's stock could tumble as extreme cost-cutting weakened Sears' ability to compete, which prompted a letter from Lampert who called the article misleading.
Lampert declined to comment. (Reporting by Robert MacMillan; additional reporting by Joseph A. Giannone in New York and Tom Hals in Wilmington; editing by Michele Gershberg, Leslie Gevirtz and Andre Grenon)
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