updated 8/1/2007 9:37:15 AM ET 2007-08-01T13:37:15

Martha Stewart Living Omnimedia Inc. reported Wednesday its second-quarter losses were much broader than last year, weighed down by one-time charges and declining sales at Kmart, but predicted a return to profitability later this year.

The New York-based media company said it lost $6.74 million, or 13 cents per share, compared with $1.17 million, or 2 cents per share in the year-ago period.

The results for the second quarter included $2.2 million, or 4 cents per share, of nonrecurring separation costs for a senior executive. The prior year period included a one-time newsstand expense reduction adjustment of $3.2 million, or 6 cents per share.

Analysts polled by Thomson Financial expected losses of 9 cents per share on the quarter, though one-time items are typically excluded in those forecasts.

Revenues rose 7.7 percent to $73.45 million, up from $68.17 million in the year-ago period, fueled by a 23.1 percent growth in ad revenue for the company's publishing segment. Analysts surveyed by Thomson Financial had expected $71 million in revenues in the quarter.

"In the second quarter of 2007, we continued to deliver solid near-term gains and made strategic adjustments to accelerate the company's long-term expansion," Susan Lyne, president and chief executive, said in a statement. "We're on track to return to profitability this year and foresee a strong second half."

Lyne noted that the company's merchandising initiatives are "all moving along well." Last quarter, the company launched its Martha Stewart Crafts line at more than 900 Michaels Stores Inc., an arts and crafts store chain, and on marthastewartcrafts.com. Lyne added that the initial performance of the line has been solid and the company will be expanding its distribution to independent retailers this fall.

This initiative and other merchandising programs offset declining sales of Martha Stewart Everyday product at Kmart, the company said.

Martha Stewart Living expects a big revenue boost from the summer launch of Martha Stewart Collection of home products that will be sold exclusively at Macy's stores and on macys.com. The introduction, however, is taking place amid a weakening home market that investors fear will drag down consumer spending.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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