New York, October 29--Martha Stewart Living Omnimedia Inc.'s losses widened in the third quarter from a year ago, and the multimedia company forecast a larger-than-anticipated loss for the fourth quarter as advertising revenues decline and it continues to reel from the personal legal woes of its founder, former chairwoman and CEO.
Still, the results, announced Thursday, beat Wall Street expectations, and the company said it is "increasingly optimistic" about the company's prospects for an advertising recovery in 2005, when Stewart is expected to return to her company.
Stewart, the founding editorial director who was convicted in March of lying to investigators about her sale of ImClone Systems Inc. shares, is serving a five-month prison sentence that began Oct. 8. After her release, the domestic diva, who owns about 60 percent of the company's shares, will be serving another five months of house arrest. She is appealing her case.
Martha Stewart Living posted a loss of $14.97 million, or 30 cents per share, during the three-month period ended Sept. 30. That compared with a loss of $3.94 million, or 8 cents per share, in the year-ago period.
Analysts surveyed by Thomson First Call expected a loss of 47 cents per share.
Revenue, which dropped across all divisions, fell 24.4 percent to $38.69 million from $51.18 million a year ago.
"Despite the losses in the quarter, we continue to benefit from strong consumer support for our products, which offer that unique blend of 'Martha Stewart' brand attributes -- inspirational 'how-to' ideas translated into products that stand for quality, style, usefulness and affordability," Sharon L. Patrick, president and chief executive, said in a statement.
In a conference call with analysts on Thursday, Patrick said she forsees "a print-based advertising recovery, beginning in the second quarter of 2005, and building momentum as the year progresses" with the closure of Stewart's legal woes.
Richard Hastings, a retail analyst at the Bernard Sands credit-advisory firm, said: "The outlook is starting to appear more positive." He added that there hasn't been much stigma to Stewart's prison sentence and the company has been able to strike new contracts.
The company is in an awkward position of preparing for Stewart's return to the company, while moving ahead, diversifying beyond her name.
Last month, Martha Stewart Living signed a consulting agreement with reality show producer Mark Burnett to refashion the namesake founder's lifestyle television series featuring Stewart and collaborate on other projects. The company said it expects the distribution of the daily syndicated television series to resume in the 2005-2006 season. The agreement also includes the development and production of a prime-time network television series featuring Stewart, which company officials said would air in the fall of 2005.
Company executives did not offer any more specifics on the new TV shows during the conference call, and calls to the company were not immediately returned.
