Omnimedia records $16.6 million loss

NEW YORK— With ad revenue drying up in Martha Stewart's various magazines, and her television show on hold in the wake of ongoing legal woes, Martha Stewart Living Omnimedia Inc. recorded a second-quarter loss of $16.6 million, compared with a prior-year profit of $3.7 million.

With publishing and television revenues skidding sharply, overall sales at Stewart's media and merchandising company were slashed by a third, to $44 million from $65.8 million last year. As advertisers and broadcasters walked away, publishing revenues plunged 50.1 percent, to $23.7 million from $39.6 million, and television revenues nose-dived 53.6 percent, to $3.1 million from $6.6 million.

By comparison, merchandising revenues, including royalties from Kmart, held relatively steady, slipping 7.3 percent, to $10.9 million from $11.8 million, reflecting, the company said, a weak retail environment and the "continuing impact from Kmart store closings that took place in the early part of 2003." The company emphasized, "The decline in royalty revenue from sales at Kmart in the quarter will not impact full-year results from operations, as we are paid based on guaranteed annual amounts."

Sales from Stewart's Internet and direct-commerce business tumbled 18.5 percent, to $6.4 million from $7.8 million, largely due to lower catalog sales stemming from lower circulation.

Given the steep shortfall in sales, margins contracted sharply, while costs zoomed through the roof. Average gross margin thinned to 31 percent from 46.1 percent a year ago. Measured as a percentage of a lower level of sales, costs jumped to 68.7 percent from 40.5 percent during the same period a year ago.

Sharon Patrick, president and CEO, said results, while weak, "were in line with our expectations and previous guidance. We remain encouraged by the support for the company from our large, stalwart core base of readers, viewers and shoppers who remain loyal to our publications and quality products; and by our significant financial resources. Those resources — $158 million in cash and short-term securities and no debt — will allow us to manage through this period and invest in our future."

Following Stewart's conviction and sentencing on obstruction of justice charges, said Patrick, "We are moving ahead with a substantial amount of the uncertainty behind us."

While the company put its Martha Stewart Living TV show on hiatus, it cut a separate deal to supply PBS stations with 26 weekly episodes of a new series — Everyday Food — featuring an ensemble cast of the company's cooks. That, in turn, should generate additional demand for the Everyday Food magazine, the company said.