Martha Stewart Living rfeports unexpectedly high loss
NEW YORK (AP) – Martha Stewart Living Omnimedia Inc., still reeling over the uncertainty surrounding an insider trading investigation of its namesake founder, chairman and chief executive, posted an unexpectedly large loss in the first quarter as revenue fell 15 percent. Its shares fell more than 6 percent in morning trading after Wednesday’s report.
The multimedia company, which produces magazines, TV programs and merchandise, reported a loss of $4.51 million, or 9 cents per share, compared with a loss of $234,000, or break-even on a per share basis, in the year-ago period.
The 2002 first-quarter results include a charge of $3.14 million, or 6 cents a share, related to an accounting rule change.
Its operating loss was $7.5 million, or 9 cents per share, in the latest quarter. Analysts surveyed by Thomson First Call expected a loss of 6 cents per share.
Revenues declined to $58 million from $68 million for the year-ago period. The company offered a downbeat profit outlook, projecting a 3 to 5 cent a share loss from continuing operations in the second quarter. Analysts had projected a 5 cent a share profit.
“Our business results reflect considerable pressure associated with the continuing governmental investigations of my sale of noncompany stock,” Stewart said in a statement.
She added that in the face of these pressures, Martha Stewart Living nonetheless remains focused on creating and producing the original how-to content and quality products that “fuel our company and define our brand.”
She noted that Everyday Food, a new magazine launched in January that was the company’s first without Stewart’s name, as well as a Martha Stewart Signature furniture collection are experiencing “strong consumer response.”
Federal regulators are conducting an investigating on whether Stewart was trading on insider information when she sold her shares of ImClone Systems Inc. stock on Dec. 27, 2001, the day before the Food and Drug Administration announced that it would deny the biotech company’s application to market a promising cancer drug.
Stewart is a personal friend of ImClone founder and former CEO Sam Waksal, who last October plead guilty to bank fraud, securities fraud, conspiracy to obstruct justice and perjury.
Stewart has denied any wrongdoing, and has not been charged with any crime, but since the investigation became public in June 2002, her company has seen its stock price tumble, and has struggled with skittish advertisers, mounting corporate expenses related to the probe, and muted merchandising sales. The company has also been stung by the financial problems of Kmart Corp., whose exclusive Martha Stewart Everyday brand is its biggest label.
Publishing revenues in the quarter were $34.1 million, compared with $43.1 million in the year-ago period. The decline, the company said, was principally due to a reduction in advertising and circulation revenue from Martha Stewart Living magazine, partially offset by revenue from Everyday Food.
Advertising pages in Martha Stewart Living declined 28 percent in the quarter, according to Media Industry Newsletter. In addition to the publication of two test issues of Everyday Food, the company published two special interest publications in the first quarter of 2003, compared to one issue in the first quarter of 2002.
Television revenues were $6.6 million in the current year’s quarter, compared to $6.7 million in the prior year’s quarter.
Increased revenues from cable television programs were offset by lower revenues from the syndicated program and the loss of airtime on CBS’s “The Early Show.”
Merchandising segment revenues in the first quarter of 2003 decreased 7 percent to $10.3 million, from $11.1 million in the first quarter of 2002. Revenues in the 2003 quarter reflect higher revenue from the introduction of Martha Stewart Signature products, offset by lower sales of Martha Stewart Everyday products sold at Kmart Corp., which closed 600 stores nationwide as it works its way out of bankruptcy. The discounter is set to emerge from Chapter 11 bankruptcy on or about May 5. Revenues in the Internet/Direct Commerce segment were $7.0 million, compared to $7.1 million in the same period a year ago, resulting from lower advertising revenues, offset by higher revenues from product sales. The company noted that corporate overhead increased to $10.2 million, compared to $8.0 million in the prior year’s quarter, primarily as a result of higher legal and professional fees.
incurred as a result of corporate issues resulting from the probe, as well as higher insurance costs.
Shares of Martha Stewart Living were down 61 cents, or 6.2 percent, to $9.18 in morning trading on the New York Stock Exchange.