Video: What's behind Martha's comeback?

updated 10/31/2006 11:13:33 AM ET 2006-10-31T16:13:33

Martha Stewart Living Omnimedia Inc. reported on Tuesday a smaller loss in the third-quarter versus a year ago as the multimedia company benefited from a 48 percent rise in revenue fueled by a surge in advertising.

The New York-based multimedia company recorded a net loss of $25.21 million, or 49 cents per share, for the three months ended Sept. 30. That compares to a loss of $26.07 million, or 51 cents per share, in the year-ago period.

Loss per share from continuing operations was 49 cents in the third quarter compared to a year-ago loss of 51 cents per share. Excluding a litigation reserve related to a securities class action against the namesake founder and two former officers, the company lost 13 cents a share in the latest quarter.

Revenues rose to $61.05 million, up from $41.32 million in the year-ago period. Analysts polled by Thomson Financial expected a loss of 18 cents per share on $56 million in revenue for the quarter.

“Our return to growth is evident in increased advertising revenue within our existing properties as well as in the success of our diversification efforts, with new magazines and new licensing agreements,” said Susan Lyne, chief executive officer at Martha Stewart Living, in a statement.

Lyne, in an interview on CNBC Tuesday, declined to comment on recent rumors that the company might be taken private.

“We are very focused on business.” Lyne said.

Martha Stewart completed her prison sentence in March 2005 for lying to investigators about a stock sale. Since then, Martha Stewart Living has stepped up a number of initiatives, from new magazines to developing branded homes with builder KB Home and photo products with Eastman Kodak Co. Earlier in October, Martha Stewart Living announced a paint color program with Lowe’s Cos., the nation’s second-largest home improvement retailer behind The Home Depot Inc.

Martha Stewart Living also expects a big revenue boost from its partnership with Federated Department Stores Inc. to produce an exclusive collection of Martha Stewart home merchandise for Macy’s stores. The collection will be unveiled at Macy’s in the fall of 2007.

Revenues in the company’s publishing division rose 32 percent to $36.3 million, fueled by higher advertising page and rates. The increase was led by a 39 percent gain in ad pages at flagship Martha Stewart Living and an 81 percent increase in pages at three-year-old Everyday Food, which features simple recipes made from ingredients found at supermarkets.

The company’s broadcasting division posted revenues of $10.1 million, up from $2.9 million in the year-ago period. The period included a full quarter of revenue from The Martha Stewart Show, the company’s nationally syndicated daily show, and the Martha Stewart Living Radio channel on SIRIUS Satellite Radio.

Merchandising revenues rose to $11.9 million for the third-quarter, compared with $9.3 million in the year-ago period. The latest quarter included revenue from the company’s partnership with KB Home, which offset modestly lower sales from the company’s Martha Stewart Everyday products at Kmart.

Revenues at Martha Stewart Living’s Internet division, which the company is rebuilding, rose 82 percent to $2.8 million, fueled chiefly by higher ad sales resulting from gains in both Web traffic and sell-through rates. In addition, results benefited from the recognition of a portion of a guaranteed payment associated with the company’s Kodak agreement.

For the fourth quarter, Martha Stewart Living said it is expecting revenue in the range of $91 million to $95 million, operating income in the range of $10 million to $11 million and adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, in the range of $16.5 million to $17.5 million. EBITDA can often be a good measure of a company’s cash flow.

For the year, Martha Stewart Living said that it expects revenues to be at the high end of its guidance of $270 million to $280 million. The company also anticipates that it will report an operating loss in the range of $6.5 million to $7.5 million with adjusted EBITDA in the range of $14.5 million to $15.5 million. The figure includes an investment in Blueprint magazine, a lifestyle publication for women, of $6 million to $7 million, as well as nearly $4 million in expenses associated with the development of the company’s Internet business and the expenses related to the company’s new merchandising initiatives.

Analysts polled by Thomson Financial estimate revenue of $91 million in the fourth quarter and $283 million for the fiscal year.

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