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Heat in kitchen bakes Martha’s bottom line

Company profits drop like a souffle in 2Q

Martha Stewart’s personal travails continue to beleaguer the company from which she resigned as CEO in June. On Monday, Martha Stewart Living Omnimedia posted an 86% drop in earnings in the second quarter.

Revenue was down 16.3% to $39.62 million from $47.32 million in 2002.

MSO, which produces TV programs, magazines and merchandise, reported a profit of $931,000 for the three months ended June 30, compared to $6.7 million for the same period last year. Although the company beat analysts’ projections (they had predicted a loss), the outlook for the rest of the year is not upbeat.

“We believe that the Martha Living core brand will continue to be under pressure until resolution of Martha Stewart’s personal legal situation,” said MSO prexy and chief exec Sharon L. Patrick.

Lower ratings and ad revenue for Stewart’s nationally syndicated daily show caused a 9% drop in revenues at the company’s TV division to $6.6 million from $7.2 million for the April-June period.

“Martha Stewart Living” distributor King World recently announced clearance in 80% of national markets for the show’s fall season, but in some cases it has been pushed to latenight slots from its favorable 9 a.m. time period.

Mags most vulnerable

The company’s publishing division is the most vulnerable to Stewart’s fallen favor. Ad pages for Stewart’s flagship mag have been down almost 30% monthly in 2003, compared to last year when pages were up 5.5% for the year, according to Steve Cohn, editor of the Media Industry Newsletter.

Publishing losses were partially offset by higher revenues for the magazines Martha Stewart Weddings and Everyday Food. Latter, which will debut next month, is the first MSO publication without Stewart’s name in the title.

Although the magazine industry is still in a slump — total ad pages were up a marginal 1.8% for the first half of the year compared to the same period in 2002 — shelter magazines, such as Time Inc.’s Real Simple and Meredith Corp.’s Better Homes and Gardens, have bucked the trend, with ad pages up 21.1%.

“The niche is doing pretty decently, in part because they’re not dependent on the financial sector, but on home and family, a part of the business that is doing really well,” Cohn said. “Clearly, Martha is losing market share to the others because of what she allegedly did.”

Stewart was indicted in June for her sale of ImClone stock in 2001 the day before the Food and Drug Administration issued a negative report on the company’s cancer drug. She has denied wrongdoing and will be tried in January.