New York, NY, Mar. 5--Martha Stewart said that the legal troubles that have tarnished her image and affected her company may soon be resolved.
Speaking during a Martha Stewart Living Omnimedia conference call to discuss the company's fourth quarter loss, Stewart hinted that the investigations into her sale of ImClone Systems stock could be coming to a close.
"Although I am increasingly hopeful that my personal legal situation will be resolved in the near future, it’s still inappropriate for me to discuss anything relating to them on this call," Stewart said.
Her company, which publishes Martha Stewart Living magazine and sells a line of products at bankrupt retailer Kmart, said the investigations into Stewart had hurt nearly every aspect of its business.
The company posted a fourth quarter net loss of $2.0 million, or $0.04 per share, largely due to a restructuring charge to pare back its Internet and catalog retail business. Excluding the charge, it recorded a profit of $0.06 per share.
Amid uncertainty about Stewart's fate, the company canceled her lucrative Christmas TV special, and said newstand sales of Martha Stewart Living magazine had fallen.
"The economy is not helping, but the advertising page numbers I've seen recently show that Martha Stewart Living has been significantly weaker than other home related publications," said Laura Richardson, an analyst at Adams, Harkness & Hill.
"The tarnish on the brand name affects the valuation of the stock, just like it affects consumers and advertisers interested in doing business with the company," she added.
The company said it does not see any improvement in the first quarter. It expects a loss of $0.06 to $0.08 per share from continuing operations in the first quarter. Analysts had expected a profit of $0.03, on average, according to research firm Thomson First Call.
The stock is unlikely to rebound as long as the unresolved probes hang over the company, said Kathleen Heany, an analyst at Brean Murray & Co. The SEC and federal prosecutors have been investigating Stewart's sale of stock in ImClone, a day before the company received a damaging ruling from the Food and Drug Administration.
"Most investors have decided the company can survive without her as CEO. The problem is there's (been) no resolution, and uncertainty is the worst thing in the stock market," Heany said.
The same holds true for the company's customers and advertisers. While the investigations drag on, business is unlikely to improve. "Until this situation is resolved, we will likely continue to face challenges throughout our businesses," said president and COO Sharon Patrick.
