Probes Hurting Martha Stewart’s Firm

The insider trading scandal engulfing Martha Stewart is hurting nearly every aspect of business at her namesake company, the firm said Thursday.

Martha Stewart Living Omnimedia said in a regulatory filing that investigations into Stewart’s sale of stock in ImClone Systems are hurting advertising revenue at the flagship Martha Stewart Living magazine and television show.

“We cannot currently predict with any certainty the extent of the impact these investigations will continue to have on our business,” the company said in its filing with the Securities and Exchange Commission.

The only sizable segment of Martha Stewart Living’s business that has not been hurt by the scandal is its retail business with Kmart, which sells the Martha Stewart Everyday line of housewares. But because of Kmart’s Chapter 11 bankruptcy filing and declining sales, Martha Stewart Living said it expects “royalties earned under our agreement with Kmart to be at approximately the minimum contractual amount for the full year 2002.”

Stewart’s sale of ImClone shares, which came a day before the drug maker announced a damaging ruling from the Food and Drug Administration on its key cancer drug, is being investigated by the SEC and the Justice Department.

The SEC has notified Stewart’s legal team it has enough evidence to file a civil suit against her, which could result in her being forced to step down as chief executive and chairwoman.

Stewart has denied any wrongdoing.

Shares of Martha Stewart Living Omnimedia rose 3 cents to close at $8.20 on the New York Stock Exchange.