NEW YORK — Even though Martha Stewart Living Omnimedia released strong second-quarter results, the stock first took a 20% plunge after chief financial officer James Follo conceded that speculation about his boss’s possible insider trading would affect business.
While Martha Stewart refused to comment on her sale of nearly 4,000 ImClone shares during a conference call Wednesday, she acknowledged its repercussions on her company.
“It has been difficult and painful for me personally to see a private matter of mine create a challenging environment,” she said. However, she added, Omnimedia is “much larger than myself.” (Stewart has denied any wrongdoing in regard to the sale.)
The company reported that revenue was up 16% to $78.6 million compared with the same quarter one year ago. Net income from continuing operation jumped 43% to $8.1 million. During the same period, publishing revenue rose 15% to $47.3 million, as did television revenue, which edged up to $7.2 million from $6.9 million.
But in a statement, Follo said, “We have begun to see some impact on our business resulting from the uncertainty relating to the investigations of Martha Stewart’s stock sale.”
He said the company’s annual 2002 earnings would not meet previous estimates and that third-quarter earnings would fall below current Wall Street expectations. Some print advertisers, he conceded, are in a wait-and-see mode.
Teflon peeling off
Though Stewart has not been charged with any crime, shares of her company stock have slid 50% since the start of the second quarter.
While her brand seems to be made of Teflon these days, a recent study conducted by America’s Research Group indicates the speculation is beginning to stick.
In a survey of 1,000 consumers, one in five who have bought her products in the past say they were less likely to buy her products again based on the controversy surrounding her sale of the ImClone shares in December, the day before the Food & Drug Administration decided against reviewing ImClone’s cancer drug Erbitux. Stewart’s friend, former ImClone CEO Samuel Waksal, allegedly told family members and confidants about the rejection before the news was formally disclosed.
At the end of trading Wednesday, Martha Stewart Living Omnimedia closed at $9.05, down 9.5%.