Company loses $4.5 mil amid ImClone probe
Martha Stewart Living Omnimedia lost $4.5 million last quarter as its eponymous founder and CEO said Wednesday an ongoing probe into her sale of ImClone stock continues to erode the mini-media empire’s bottom line.
The loss was steeper than expected and compares with nearly breakeven a year ago. It includes a $3.1 million accounting charge. The company said Wednesday it expects to post a loss in the current quarter as well.
Investors pounded the stock, which plunged 11.34% to $8.68 Wednesday.
Revenues fell sharply to $58 million from $68 million in the quarter. The company works in TV, magazines and retail merchandise all built around the Martha Stewart brand.
The hunted homemaker had been upbeat three months ago that her personal legal travails would soon be over.
“During our last earnings teleconference this past March, I expressed that I was increasingly hopeful that my personal legal situation regarding the ongoing governmental investigation of my sale of noncompany stock would be resolved in the near future,” she said. “Obviously that has not happened and I can make no predictions as to when it will.”
Stewart is being investigated for selling shares of biotech company ImClone just before an unfavorable FDA ruling on one of its high-profile drugs sent the stock into a free fall. The probe became public just over a year ago and has cost Stewart and her shareholders billions of dollars.
Friend pleaded guilty
Former ImClone topper and Stewart family friend Sam Waksal pled guilty to charge of insider trading.
Stewart has denied wrongdoing and hasn’t been charged with any crime.
She said the company continues to forge ahead, launching Everyday Food, a new mag that’s a first for the company without Stewart’s name.
Stewart’s company has also been stung by the financial problems of bankrupt Kmart Corp., whose exclusive Martha Stewart Everyday brand is its biggest label.
Falling ad and subscription revenue at flagship magazine Martha Stewart Living knocked revenue down by more than 20% to $34 million.
TV revenue was about flat at $6.6 million. Higher revenue from cable TV shows was offset by loss of airtime on CBS’ “The Early Show.”
Merchandising sales fell 7% to $10.3 million.
Higher legal fees pushed corporate overhead up by $2 billion to $10 billion.