MARTHA STEWART COMPANY REPORTS SERIOUS LOSSES

Advertisers Absence Continues to Devastate Media Properties

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NEW YORK (AdAge.com) -- The legal woes of Martha Stewart continue to brutalize the company she founded. Martha Stewart Living Omnimedia's
Martha Stewart's company is suffering massive losses as advertisers continue to abandon its media properties.
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management today -- ironically, Ms. Stewart's birthday -- discussed its second-quarter earnings with analysts, in ways that amply quantified the heavy cost of Ms. Stewart's personal situation.

The company posted a net loss of $19.3 million, compared to a net gain of $931,000 for the same period last year. Revenues for the quarter fell 33.1% to $44.0 million.

'Personal circumstances'
Sharon Patrick, Omnimedia's president-CEO, said the plunge is "due primarily to advertising [results] negatively affected by Martha Stewart's personal legal circumstances."

Ms. Patrick also spoke to the unique bind the company finds itself in; Ms. Stewart is now at a juncture where what may be best for her personally -- such as an appeal of her verdict, which Ms. Stewart has indicated she is pursuing -- is at odds with what's best for Omnimedia and its investors, who would be best served by a quick resolution, even if this involves Ms. Stewart serving time in prison.

"At the end of the day the company believes that only when Martha puts incarceration behind her and/or has successfully completed the appeals process -- and, as importantly, is no longer the subject of chronic negative media attention and events -- will large numbers of advertisers return" to the company.

Ad pages down 53%
Ad pages at its single largest property, the flagship magazine Martha Stewart Living, declined 53% in the quarter, said Chief Financial Officer James Follo. This represents a worsening of previous trends. Mr. Follo forecast the company would record overall operating losses for both the third and fourth quarters, although he said minimum merchandising revenue guarantees would mean fourth-quarter losses would be narrower than those of previous period.

An upcoming trade media campaign, with the Martha-free tagline "Take a new look at Living," will debut this month.

The company announced plans to discontinue its mail-order Living catalog. It will also launch a new TV show, Everyday Food, on a Washington, D.C., PBS affiliate in January.

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