Frank Franklin Ii  /  AP file
Despite the gains, there’s concern that Martha Stewart is spreading herself too thin as she puts her legal woes behind her and takes back the spotlight.
updated 2/22/2006 1:25:08 PM ET 2006-02-22T18:25:08

Martha Stewart Living Omnimedia Inc. swung to a fourth-quarter profit, helped by a continued rebound in advertising revenue at its flagship Martha Stewart Living magazine.

For the three-month period ended Dec. 31, the New York-based multimedia company said Wednesday it posted net income of $2.95 million, or 6 cents per share. That compares with a loss of $7.33 million, or 15 cents a share, in the year-ago period when its namesake founder was serving a five-month prison sentence for lying about a stock sale.

Excluding non-cash equity compensation, earnings per share for the fourth quarter were 19 cents per share compared to a year-ago adjusted loss of 3 cents per share, which also excludes non-equity compensation.

Analysts polled by Thomson Financial had expected a profit of 15 cent per share. Total revenues rose 40 percent to $84.46 million from $60.21 million in the year-ago period. The company’s revenue beat the $83 million projection from Wall Street.

“The results for the quarter show meaningful improvement in all areas of our business,” said Susan Lyne, president and CEO, in a statement.

Still, there’s concern that Stewart is spreading herself too thin as she puts her legal woes behind her and takes back the spotlight.

The company announced Wednesday it was expanding its relationship with KB Home, one of the nation’s largest homebuilders, to design and create additional Martha Stewart-inspired neighborhoods throughout the country beyond the companies’ initial venture in Cary, N.C. The new areas include Atlanta, Orlando, Fla., Houston, Charlotte, N.C., Las Vegas, Southern California and Dayton Beach, Fla.

The contract also calls for Martha Stewart Living to create a line of interior and exterior home products or design options. These products, called Martha’s Choices items, will be available exclusively to KB Home customers.

Meanwhile, Martha Stewart Living is set to launch a lifestyle magazine aimed at women aged 25 to 45 that will make its debut in May.

Stewart’s post-prison TV comeback has been mixed. Stewart’s prime-time role as the boardroom boss in “The Apprentice”, a spin-off from the popular Donald Trump series, was short-lived. And while Stewart’s new daytime show “Martha” is being renewed for a second season, the company has had to do some tweaking to boost ratings.

And the company said Wednesday that sales of its how-to DVDs were below initial forecasts; it aims to focus on more gift-driven events and related content to improve sales.

Publishing revenues for the fourth-quarter period rose sharply to $41.1 million, compared with $26.1 million in the year-ago period. The revenue growth was fueled by higher advertising revenue in its flagship magazine Martha Stewart Living.

Based on current trends, the company expects first-quarter advertising pages in Martha Stewart Living to increase approximately 70 percent from the year-ago period.

In the company’s broadcasting division, which includes television and radio, revenues were $11 million compared to $1.1 million in the year-ago period. The quarter included the contribution of its new syndicated daily show, which did not exist in the prior year, for the full period.

The segment results also include six weeks of revenue for Martha Stewart Living Radio, which was launched in mid-November.

Merchandising revenues were $28 million, compared with $23.7 million in the year-ago period.

The revenue increase was fueled by the contractual minimum royalty guarantees from its program with Kmart. Actual sales of Martha Stewart Living Everyday products at Kmart declined modestly in the quarter, but the company will be looking to boost overall merchandising revenues with its new relationship with KB Home and the launch of Martha Stewart Crafts products.

Revenues in its Internet/Direct Commerce division, which had been pared down, were $4.3 million, compared with $9.3 million in the year-ago period.

For the year, the company had a loss of $75.8 million, or $1.49 per share, compared to a loss of $59.6 million, or $1.20 per share, in the previous year. Revenues rose $209.46 million, compared to $187.44 million in the prior year.

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