Martha Stewart Living Posts Loss, Sees Ad Pickup

Martha Stewart Living Omnimedia Inc. (MSO) reported a much wider quarterly loss Thursday, as the criminal conviction of its founder kept it struggling to attract advertisers and customers.

But the company, founded by homemaking icon Martha Stewart (search), said it is "increasingly optimistic" about an advertising recovery next year and is preparing for the return of Stewart in spring 2005, after her release from prison. It also said a prime-time network TV show featuring Stewart, under development with reality TV producer Mark Burnett (search), would debut next fall.

Omnimedia reported a net loss of $15 million, or 30 cents a share, in the third quarter, compared with a loss of $3.9 million, or 8 cents a share, a year earlier.

The media and merchandising company said it expects further losses of about 20 cents a share in the fourth quarter.

"For a couple quarters more now we're still going to see some ongoing weakness as they try to work through some of the obvious difficulties they are having," said William Mack, an analyst at Standard & Poor's who tracks the company.

Revenue fell to $38.7 million, from $51.2 million.

Each of the company's four segments — publishing, TV, merchandising and Internet/direct commerce — saw revenue slip. Publishing revenue decreased to $22.3 million, from $29.1 million, hurt by advertising declines at its flagship magazine, Martha Stewart Living.

Robert Passikoff, president of brand consultancy Brand Keys, said the company faces problems trying to reignite advertiser interest because many consumers still consider the brand tainted because of Stewart's high-profile legal woes. Stewart, whose personal image is closely tied to the company, was convicted in March on charges of lying to investigators about a stock sale.

The company also faces greater competition for advertiser dollars from some newer magazines, such as Time Inc.'s Real Simple (search) or Hearst Magazines' O, The Oprah Magazine (search), he said.

Omnimedia's shares were little changed, up 5 cents to $18.14, in morning trading after earlier gaining more than 1 percent.

The stock has jumped more than 60 percent since Stewart announced last month that she wanted to go to prison as soon as possible instead of waiting for her appeal to be heard. She began serving a five-month term in West Virginia on Oct. 8.