Shares of Martha Stewart Living Omnimedia Inc. surged Wednesday after the media company reported a much smaller-than-expected loss in the second quarter, benefiting from a 47 percent revenue gain fueled by the continued return of advertisers to its magazines.
The New York-based company also approved a special one-time dividend of 50 cents per share, which will be payable on Sept. 14 to stockholders of record as of Aug. 31.
Still, the company issued revenue projections for the year and third quarter that were slightly below analysts’ forecasts.
Martha Stewart Living posted a loss of $1.17 million, or 2 cents per share, in the three months ended June 30, compared with a loss of $33.49 million, or 65 cents per share, in the year-ago period.
Martha Stewart Living recorded revenue of $67.4 million, up from $45.9 million in last year’s second quarter.
Analysts surveyed by Thomson Financial expected a loss of 16 cents per share on revenue of $66 million.
Shares of the company jumped $1.65, or almost 11 percent, to $17.06 in afternoon trading on the New York Stock Exchange, following a downturn in recent months as investors became impatient about when new merchandising deals would help the bottom line. The shares — which are still near the low end of a 52-week range of $14.76 to $34.74 — have been down almost 12 percent this year.
But Wednesday’s results boosted investors’ confidence in the company, which is putting the legal woes of its namesake founder behind it.
‘A clear roadmap for growth’
“We have a clear roadmap for growth that gives us confidence in the future of our business and in our ability to increase shareholder value,” said Susan Lyne, president and CEO, in statement. “We have successfully navigated a difficult period and are enjoying significant gains in advertising revenue and new business opportunities.”
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 new initiatives, from new magazines to developing branded homes with builder KB Home and photo products with Eastman Kodak Co.
The company 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 company reported revenue increases in all its divisions except for merchandising, which saw its sales unchanged from the year-ago period.
Revenues from publishing increased 29 percent to $40.9 million, fueled by more advertising pages and higher rates. The increase was led by 47 percent growth in ad pages at its flagship magazine Martha Stewart Living, and a 22 percent increase in pages at Everyday Food.
Broadcasting revenues on the upswing
Revenues in broadcasting rose to $11.8 million from $1.8 million in the second quarter of 2005. The period included revenue from “Martha,” the nationally syndicated daily show, and the Martha Stewart Living Radio channel on Sirius Satellite Radio Inc., neither of which existed in the prior year.
During a conference call to investors, Lyne said the company is studying broadband opportunities for its TV show.
“What we’ve discovered is that we are selling out our inventory online very quickly,” she said. “So we know there’s an appetite for video among advertisers. So we are looking at a number of different ways to do this. And it might include more sites than just our own.”
Revenues from merchandising were $10.2 million for the quarter, unchanged from the year-ago period. The quarter included revenue from the company’s partnership with KB Home, which offset modestly lower sales of its Martha Stewart Everyday products at Kmart.
Internet revenue doubles
The company’s Internet business revenue more than doubled to $4.6 million, fueled chiefly by higher ad sales resulting from increases in both Web traffic and ad rates. The company is relaunching its Web site to focus on “how to” content next year.
For the third quarter, the company is expecting revenue of $55 million to $57 million, a bit below analysts’ forecasts for revenue of $57 million to $58 million. It also expects an operating loss in the range of $10.5 million to $11.5 million and an adjusted loss in EBITDA, or earnings before interest, taxes, depreciation and amortization, in the range of $5.5 million to $6.5 million.
The company reiterated its previous full-year revenue guidance of $270 million to $280 million. Analysts expected annual revenues of $282 million. The company expects a full-year operating loss in the range of $6 million to $8 million with adjusted EBITDA in the range of $12 million to $14 million.