Martha Stewart Probe Scaring Off Advertisers

Martha Stewart Living Omnimedia Inc. reported a 30% rise in quarterly profit but its shares fell after the company said an insider-trading probe involving its founder is scaring off advertisers.

The shares tumbled 95 cents, or 8.5%, to $9.05 on the NYSE after the media and housewares company said third-quarter and full-year profit will miss estimates.

The stock had lost 47% of its value since early June, when a congressional panel began investigating Martha Stewart’s sales of ImClone Systems Inc. shares.

Advertisers are waiting to place new ads until the investigation is resolved, Chief Financial Officer James Follo said.

Stewart has said she did nothing wrong when she sold ImClone shares the day before regulators rejected the company’s application for a new cancer drug.

The company said net income rose to $6.74 million, or 14 cents a share, on a 16% rise in sales to $78.6 million.