Martha Stewart Living Omnimedia Inc. Wednesday said its fourth-quarter profits fell 3.3 percent, as a rough advertising and retail environment weighed on sales -- but met analyst expectations.

The New York-based company said net income fell to $5.7 million, or 12 cents a share, from $5.9 million, or 12 cents a share on a larger number of shares, in the year-earlier period.

Analysts polled by research firm First Call had expected Martha Stewart to report fourth-quarter profits of 12 cents a share to 13 cents a share, with the average estimate at 12 cents.

In a news release, Martha Stewart Living remained mum about whether it planned to continue selling its Martha Stewart Everyday brand to Kmart Corp., which filed for Chapter 11 bankruptcy on Jan. 22. It only said it "continues to closely monitor the situation with Kmart."

The media and merchandising firm also warned that it expects its 2002 earnings per share to come in at the low end of Wall Street estimates.

"I think it may be hitting home now that 2002 may be a little difficult for them," Kathleen Heaney, an analyst at Brean Murray & Co., said. "But I think the quarter was decent considering the business they are in."

Led by Chairman and CEO Martha Stewart, the celebrated arbiter of tasteful home decorating and entertainment, the company produces lifestyle magazines and television shows and sells products for the home on the Internet and in catalogs.

Most media companies saw advertising revenues drop off sharply as the U.S. economy slipped into recession. The situation was exacerbated by the Sept. 11 attacks.

Martha Stewart Living said it continues to closely monitor the situation with Kmart and is in discussions with the company. Its accounts receivable due from Kmart totaled about $11 million at Dec. 31 and about $13 million as of the date of Kmart's bankruptcy filing.

Martha Stewart Living has not yet written down any value on the Kmart receivables, but it said it will make any necessary adjustments to its balance sheet as the situation unfolds.

Kmart sells linens, cookware, and other household products under the Martha Stewart Everyday brand, which generated about $1.6 billion in sales for Kmart in 2001.

Fourth-quarter earnings for Martha Stewart Living, before interest, taxes, depreciation and amortization, rose 21 percent to $13.2 million from $10.9 million a year ago.

Quarterly revenues declined to $85.1 million from $85.5 million. Publishing revenues fell 10.1 percent to $47.3 million, while television revenues declined 13.3 percent to $9.6 million.

For all of 2001, Martha Stewart earned $21.9 million or 45 cents per share, up from $21.3 million or 43 cents in 2000. Revenues rose to $295.6 million from $285.8 million.

Reuters contributed to this report.