Ms. Stewart, who is chairman-CEO of Martha Stewart Omnimedia, has been engulfed in a federal investigation into her stock dealings involving drugmaker ImClone Systems. Last week it was reported that the Securities and Exchange Commission will recommend filing civil securities fraud charges against her. Ms. Stewart has contended her stock sale was the result of a pre-existing arrangement with her broker and not due to inside information.
During a conference call with analysts to discuss the company's weak third-quarter results, Ms. Stewart refused to discuss the ongoing government probes, but continued to stress Omnimedia has extensive executive ranks beyond herself.
Income down 42%
Those executives admitted the probe has begun to affect operations. The company reported net income of $2.8 million, down 42%, even as revenues rose 4.2% to $70.9 million. Some of the difference was due to increased overhead costs related to the investigation. While publishing revenue rose 5.7% and advertising pages rose 9% in the
Ms. Patrick said it is too soon to tell if the ImClone probe is the reason, and she added that advertising pages have been up in every issue since the news of the investigation broke in June.
TV special canceled
She said ratings for the syndicated TV show Martha Stewart Living have dropped due to a combination of reasons, including station scheduling and news of the investigation. TV revenue for the quarter was down 4%, though the decline was partly offset by increased revenue from new programming added to the cable network HGTV. Ms. Patrick announced that Omnimedia is canceling its annual prime-time network holiday special this year, citing cost reasons and Ms. Stewart's uncertain future.
"Clearly, our business is feeling some degree of pressure," Ms. Patrick said, but she added the company's lifestyle positioning and customer loyalty remain strong.
During the conference call, management announced it will launch a four-issue test of a new publication, Everyday Food, which, if successful, will go to a 10-issue annual schedule in September 2003.
"This trying quarter has not left us unscathed, but it has not left us skittish, either," Ms. Patrick said.