Martha Stewart Company Profits Suffer

Martha Stewart Living Omnimedia Inc. Wednesday said the investigation into a stock deal by founder Martha Stewart is hurting its profits.

"We have begun to see some impact on our business resulting from the uncertainty relating to the investigations of Martha Stewart's stock sale," chief financial officer James Follo said in a press release.

Federal investigators are questioning whether Stewart had inside information when she sold nearly 4,000 shares of ImClone Systems Inc. on Dec. 27, the day before the company disclosed that the Food and Drug Administration had refused to review the drug application for its cancer drug Erbitux.

Stewart is a friend of former ImClone Chief Executive Samuel Waksal, who allegedly tipped family members before the FDA decision was made public.

In June, Martha Stewart said her sale of ImClone stock was "entirely proper and lawful."

Wednesday, the New York-based company said it could not provide a full-year forecast, but said it will miss its previous earnings projection of 53 cents a share for the year.

The mean estimate of analysts surveyed by Thomson First Call was for 2002 earnings of 54 cents a share. In 2001, Martha Stewart Living earned $21.9 million, or 45 cents a share, on revenue of $295.6 million.

The company also said it will report third-quarter earnings of 6 cents to 7 cents a share, well below the 15 cents a share forecast by First Call. In the year-ago third quarter, the company earned $4.8 million, or 10 cents a share, on revenue of $69.6 million.

In early trading on the New York Stock Exchange, shares of Martha Stewart Living were down $2.30, or 23 percent, at $7.70.

The stock traded above $18 before the investigation.