The current MSLO’s position in the market remains rather unbeneficial due to the fact that the company has become highly dependent on external shareholders and parent companies since 2015. Over the past six years, the firm has changed two parent companies: Sequential Brands and Marquee Brands, with the latter buying the company for an unprecedently low price -$215 million (Fickenscher, 2019). The primary reason for selling was Sequential Brands’ objective to reduce their debt and sell a subsidiary that performed decreased revenue rates and increased expense rates (US Securities and Exchange Commission, 2019). Hence, considering this information, it would be fair to assume that the most insightful ratio for the firm is the return on total assets, as the firm’s ability to pay off the Marquee Brands’ investment is crucial for its potential cooperation with the shareholders.
When speaking of the ability to decide whether the ratio results are positive or negative, it is of paramount importance to reflect on the ratio’s potential impact on the company’s net worth and revenues. Thus, the vast majority of ratios related to income, including such notions as the net profit margin, current ratio, fixed charge coverage, total assets turnover, and a price-earnings ratio, are to result positive to reinforce the firm’s position in the market. On the contrary, debt-related ratios such as debt-to-asset and debt-to-income ratios should be low to attract new shareholders. In the case of MSLO, the recent ratios cannot be calculated due to the absence of information in the public access. As of 2015, the year before the firm’s merge, the debt-to-equity ratio of the MSLO was 0.0, which is not a satisfying result for such a large conglomerate. Considering the publicly available data and a rapid worth loss of the company in 2019, it becomes evident that currently MSLO’s net profit margin and current revenue ratios are alarming due to the firm’s questionable reputation in the target market and severe competition scopes.
The current strategy of MSLO is to merge with parenting enterprises to find more reputable and relevant shareholders in the market. Indeed, such a strategy should be considered as the most reasonable option for the company that suffered a series of reputational and financial losses. However, on the other hand, relying entirely on mergers and lease obligations affects the company’s recognition and brand image. The current tendency has revealed a more than $100 million loss in the company worth in four years. Once this tendency is not affected, the company is at risk of bankruptcy and inability to pay off its liabilities and obligations. For this reason, the current strategic pattern is alarming from the long-term perspective.
As far as strategic alliances are concerned, it should be noted that currently, MSLO already operates with the help of this strategy. However, when speaking of the potential risks of such an alliance, the first and arguably the most relevant concern is the fact that the current reputation of the company, while recovering from brand damage, remains uncertain in the market. For this reason, pooling efforts with a parenting company does not eliminate the risks that MSLO will be blamed with the slightest inconvenience for the parenting firm with a better reputation. Another risk concerns the loss of a long-term and devoted audience due to the partial loss of the brand’s identity.
When analyzing the potential of any strategic alliance, the category most likely to reveal the alliance’s effectiveness is the shareholders’ return ratios. Essentially, the primary reason for the strategic alliance is gaining a competitive advantage in the market, making such ratios as price-earnings and cash flow crucial in terms of estimating the firm’s current value in the market. The price-earnings ratio is especially important, as it showcases the stakeholders’ perception of the alliance in the market. As far as the firm’s position in the market and image are concerned, it would be reasonable to assume that MSLO will not be able to quickly acquire the funds necessary to increase the market price, especially with its latest fall. Theoretically, the capital could come from either private investments or high-yield bonds, as these methods are more appropriate for large enterprises.
The publicly available data on the firm’s interest rate indicates that since 2011, MSLO has had a 0% interest rate on debt. Hence, it would be reasonable to assume that the situation is not likely to change over the next years since the firm has now become a daughter company for Marquee Brands. In case the capital is borrowed, the current ratio and quick ratio will be impacted by the capital influx.
References
Fickenscher, L. (2019). Martha Stewart brand sold for $215 million. New York Post.
Last10K. (2015). Martha Stewart Living Omnimedia Inc (MSO) SEC Filing 10-K annual report for the fiscal year ending Wednesday, 2014.
US Securities and Exchange Commission. (2019). Sequential Brands Group, Inc.