Martha Stewart Living's loss widens

/ Source: The Associated Press

Martha Stewart Living Omnimedia Inc. said Wednesday its second-quarter loss widened, weighed down by charges associated with its upcoming daytime TV show. But the company scored its first revenue gain in 10 quarters, boosted by advertisers returning to its flagship magazine as the founder puts her personal legal woes behind her.

The New York-based multimedia company also said it expects operating losses to narrow at the end of the year, as it enjoys the benefit of its new syndicated TV show called "Martha" and the continued improvement in advertising revenue.

The company reported a loss of $33.5 million, or 65 cents per share, for the three months ended June 30. That compared with a loss of $17.8 million, or 36 cents per share, in the year-ago period.

The 2005 results included a $16.8 million, or 33 cents per share, non-cash charge related to the vesting of warrants granted in connection with the production of its new syndicated television show and other employee-related charges of $3.2 million, or 6 cents per share.

Revenue rose 4.3 percent to $46 million from $44 million in the year-ago period. The amount surpassed analysts' expectations of $43 million.

"The momentum we began to build early in 2005 is starting to deliver a quantifiable improvement in performance," said Susan Lyne, president and chief executive officer, in a statement.

In a conference call to investors Wednesday, Lyne said the company is moving "beyond repair mode and into aggressive execution."

Stewart, the founder and former chairman and chief executive of Martha Stewart Living Omnimedia, is completing a five-month term at her home in Bedford, N.Y., after recently completing five months in a West Virginia federal prison for lying about a stock sale.

To turn around its fortunes and to restore its brand's image, the company has signed a number of deals, ranging from new radio and TV programming to a new line of "how to" home video releases based on the company's TV programming library.

The latest, announced Tuesday, is with cable company Discovery Communications, which will rebroadcast "Martha," starring Stewart, and air a new home improvement reality series.

The company expects to launch "Martha," which is being created by reality TV guru Mark Burnett, on Sept. 12.

Second-quarter publishing revenue, fueled by higher advertising revenue in both Everyday Food and Martha Stewart Living, rose 34 percent to $31.7 million, compared with $23.7 million in the year-ago period. Adjusting for Body & Soul, which the company acquired in August 2004, revenue increased 24 percent. Advertising pages in Martha Stewart Living rose 42 percent, while advertising pages rose 65 percent at Everyday Food.

Advertising revenue in both publications increased ahead of page growth, the company said.

Capitalizing on its strong circulation trends, the company will increase the circulation it guarantees advertisers for Martha Stewart Living to 1.9 million copies from 1.8 million per issue, effective with the January 2006 issue.

The company posted television sales of $1.8 million, down from $3.1 million, primarily due to the absence of its daily syndicated TV show while its namesake founder was in prison.

But "Martha" will help increase the company's TV revenue to between $45 million and $50 million, Lyne said. The company said the show has been cleared in more than 96 percent of the country and sold in all top 20 U.S. television markets.

Martha Stewart Living also is hoping to get more brand exposure from Stewart's own version of Donald Trump's "The Apprentice," which also will air this fall. The show is unaffiliated with the company.

Merchandising revenues in the second quarter were $10.2 million, down from $10.9 million. The lower revenue was principally due to lower sales of its Martha Stewart Everyday products at Kmart stores.

The company's Internet/direct commerce business, which has been pared down to an online flower business called, had revenues of $2.2 million, compared with $6.4 million a year ago.

Martha Stewart Living projected a third-quarter operating loss of $25 million to $26 million and a fourth-quarter operating loss of $1 million to $2 million. Both quarters will include non-cash charges of about $13 million, principally reflecting charges related to the vesting of warrants.