Martha Stewart Living Omnimedia Inc. (MSO), whose founder is trying to mount a big comeback after getting out of prison, posted a first-quarter net loss Tuesday and forecast more losses in the second quarter.

The company is seeing some improvement at its flagship publishing business, which has plummeted in the past several years as skittish advertisers have fled the Martha Stewart Living lifestyle title in the wake of Martha Stewart's (search) legal troubles.

Still, Chief Executive Susan Lyne (search) cautioned that while the improved trends should continue over the long term, "this will not be an overnight recovery."

Shares were down 2.9 percent in New York Stock Exchange (search) trading.

For the first quarter, Omnimedia's loss narrowed to $19.2 million, or 38 cents a share from $19.5 million, or 39 cents a share, a year earlier.

The company reported a loss from continuing operations of 37 cents a share in the first quarter. That is wider than analysts' consensus target of a loss of 31 cents a share, according to a survey by Reuters Estimates.

Quarterly revenue fell to $38.7 million, from $44.5 million a year earlier.

Martha Stewart Living magazine's ad revenue fell in the first quarter, but the company said it expects the magazine to post a more than 30 percent increase in ad pages in the second quarter.

"I was a little encouraged from the long-term perspective that they are going to grow advertising, but if you think about it, the magazine has got so few ads now," said Gary McDaniel, a Standard & Poor's analyst who has a "sell" rating on the stock. "They really have nowhere to go but up."

Omnimedia forecast a second-quarter operating loss of about $31 million, including a noncash charge of about $15 million for the vesting of stock warrants.

The media and merchandising company has been mired in losses over the past couple years, hurt by falling business in the wake of Martha Stewart's indictment and criminal conviction on charges of lying to federal investigators about a stock trade.

Stewart, a domestic trendsetter who built a media and merchandising empire out of tips for gracious living, was released from prison in March after serving five months. She is under house arrest through August, but is allowed out of her home for up to 48 hours a week to go to her office.

The company, which has been busy announcing new ventures recently such as teaming up with Sirius Satellite Radio Inc. (SIRI) for a 24-hour radio channel, said Stewart's return "has energized the entire company." Stewart plans to star in two new TV shows set to air later this year.

Omnimedia also announced on Tuesday that it had reached a deal with Warner Home Video to distribute a line of how-to DVDs on topics such as cooking, holiday entertaining and weddings, drawing from Omnimedia's library of television content.

Omnimedia shares fell 59 cents to $19.75 in morning trading. The stock, which surged while Stewart was in prison, is down about 46 percent from its 52-week high of $37.45 hit in February. But it is still up sharply from a low of $8.25 after her criminal conviction last year.