Martha Stewart Living Posts Loss on Shrinking Ad Sales

Martha Stewart Living Omnimedia Inc., whose founder will be released from prison next month, said Wednesday that it had a fourth-quarter loss as advertising sales plunged. The shares rose to their highest price in five years after the company said ad sales would rebound once Martha Stewart returns to work.

The net loss was $7.33 million, or 15 cents a share, contrasted with net income of $2.37 million, or 5 cents, a year earlier, the New York-based company said. Revenue fell 15% to $60.2 million.

Chief Executive Susan Lyne said advertisers were embracing Stewart’s planned talk show that debuts in September. That may help stem a revenue slide that extended into its ninth consecutive quarter as the company canceled a TV show and advertisers deserted Martha Stewart Living magazine.

The shares rose $2.92 to $37.40 on the New York Stock Exchange, their highest price since October 1999.

The company Wednesday forecast a first-quarter loss of 35 cents a share. Stewart, 63, was convicted of obstructing justice last year and is due to be released from prison March 6.

When Stewart leaves prison, she must serve five months in home confinement. During that time, she’ll be allowed to work 48 hours each week outside the house.

Revenue at the publishing unit, the company’s largest by revenue, fell 21% to $26.1 million as advertisers shunned Martha Stewart Living magazine. The publication had to cut ad rates as circulation fell to 1.89 million at the end of December, 20% lower than a year earlier.

Ad sales at the magazine, which features tips on cooking, gardening and decorating, fell 56% to $71.7 million in 2004, according to the Publishers’ Information Bureau, which tracks advertising for the Magazine Publishers of America.

“The biggest question is whether this is a dead franchise or can they rejuvenate it,” said Dennis McAlpine, an analyst at McAlpine Associates of Scarsdale, N.Y. “Ad pages are still down, and that’s not an encouraging sign.”

Revenue at the television division, the company’s smallest by sales, plunged 82% to $1.07 million after Martha Stewart Living stopped producing its daily show. The company in September plans to begin production of a new daily talk show that will be distributed by General Electric Co.’s NBC Universal.

The merchandising unit, which licenses the Martha Stewart brand to Kmart Holdings Inc. and other retailers, boosted sales 6% to $23.7 million. The revenue increase came partly from guaranteed payments from Kmart, the company said.

Sales at the catalog and online division were little changed at $9.33 million. The company last year discontinued the catalog, which sold items such as vases and craft kits. It will continue operating its website and a profitable flower-delivery service, the company said.

Stewart, who is serving a five-month sentence at the Federal Prison Camp in Alderson, W.Va., has agreed to star in two television shows to be produced by “reality” television producer Mark Burnett.

Besides the talk show to be distributed by NBC Universal, Stewart will be featured in a version of Burnett’s and Donald Trump’s hit series “The Apprentice,” in which contestants will compete for a $250,000-per-year job with Stewart.