NEW YORK—Martha Stewart Living Omnimedia Inc. reported a 42 percent drop in third-quarter earnings Thursday and warned that fourth-quarter earnings would fall far short of analysts' expectations, as a federal probe into a stock sale by its namesake founder continues to hurt the bottom line.
The company also announced a four-issue test of a new publication titled Everyday Food, the first magazine that does not bear the name of the domesticity maven.
The multimedia empire -- which markets magazines, books and merchandise under the Martha Stewart brand -- reported a profit of $2.76 million, or 6 cents a share for the three months ended Sept. 30.
That compares with $4.77 million, or 10 cents a share in the year-ago period.
The results matched the estimate by analysts surveyed by Thomson First Call Inc. The estimate was reduced from 15 cents a share in July, when the company acknowledged the scandal was affecting the bottom line.
Revenues totaled $70.9 million, up 4.2 percent from $68 million in the comparable period last year.
The company's publishing division was down 4 percent, to $6.36 million, from $6.63 million. Television revenues were up 21.4 percent, to $10.06 million, from $8.29 million. Its Internet and direct commerce division was down 12.2 percent, to $7.99 million, from $9.11 million.
Martha Stewart Living said it expects fourth-quarter earnings to be approximately 3 cents a share. Thomson First Call analysts expect 10 cents a share.
For the first nine months of the year, the company earned $9.27 million, down 42.7 percent from $16.17 million a year ago. Revenues rose to $217.5 million, from $205.92 million.
Martha Stewart Living's stock has plunged more than 60 percent since early June, when news broke that Stewart's name was linked to the ImClone Systems Inc. insider-trading scandal.
Martha Stewart's shares fell $1.26 each, to $7.20, on the New York Stock Exchange. They closed Wednesday at $8.46 each.
Federal investigators are probing whether Stewart had insider knowledge when she sold her shares of ImClone on Dec. 27, the day before the U.S. Food and Drug Administration said it would deny the biotech company's application to market for a promising cancer drug called Erbitux.
Stewart, who has maintained her innocence, is a personal friend of Samuel D. Waksal, ImClone's founder and former chief executive, who pleaded guilty last month to several counts of bank fraud, securities fraud, conspiracy to obstruct justice and perjury.
Waksal did not implicate Stewart.
Also last month, Stewart received a notice from the Securities and Exchange Commission, notifying her that it plans to recommend civil securities fraud charges against her in connection with her sale of ImClone shares.
The so-called Wells Notice gives Stewart a chance to explain her actions before the full commission makes its final decision.
In most cases, such a notice leads to the filing of charges, legal experts say.