Martha Stewart Living Posts Wide 2Q Loss

Martha Stewart Living Omnimedia Inc. (MSO) — still reeling from the personal legal woes of its founder and former chairman, who was sentenced to prison last month — posted a wider loss than Wall Street expected in the second quarter, and warned of bigger-than-expected losses in the third quarter.

In a move to focus on the company's strongest assets, the New York-based company also announced Tuesday that it will eliminate its direct commerce business by the end of the year, though it will continue with its direct-to-consumer floral business, marthaflowers (search ), as well as its content Web site,

It also announced the launch of "Everyday Food," a new television program that will air on PBS stations nationwide, building its success of its new magazine that bears the same title. It's the latest step to distance itself from Stewart's name, which is on an array of products.

Martha Stewart Living (search ) posted a loss of $19.29 million, or 39 cents per share, in the three months ended June 30 in contrast to a profit of $931,000, or 2 cents per share, in the year-ago period.

Analysts surveyed by Thomson First Call expected a loss of 33 cents in the second quarter.

Total revenues were down 33 percent to $44 million from $65.8 million a year ago, dragged down particularly by its publishing division, which has suffered from a defection of advertisers.

The company said it expects to post a loss of 50 cents per share in the third quarter, reflecting higher marketing costs in the period. Analysts anticipated a loss of 33 cents per share.

However, the company predicted that fourth-quarter losses should be "substantially reduced" compared to third-quarter levels largely due to the significant amount of revenues to be recognized by its merchandising segment as a result of certain minimum royalty guarantees.

Stewart, who was convicted in March on charges she lied to investigators about a stock sale, was sentenced July 16 to five months in prison and five months of house arrest. She was also fined $30,000. The sentence was stayed pending appeal.

Stewart resigned as chief executive and chairwoman of the company in June 2003, after her indictment. Following her conviction, she stepped down as chief creative officer and resigned from the company's board, but remains as founding editorial director.