Martha Stewart loss narrows and lowers forecast
NEW YORK (Reuters) - Martha Stewart Living Omnimedia Inc (MSO.N) reported a quarterly loss on Friday, and lowered its 2007 profit forecast because of the weak U.S. housing market and higher expenses, sending shares down 3.7 percent.
The outlook overshadowed the company's narrower third-quarter loss, which beat average market expectations and sent the company's shares up more than 4 percent in early trading.
The publisher of magazines Martha Stewart Living, Blueprint and Body + Soul said it is "well-positioned" to turn a profit in 2007, but lowered its profit forecast as it hires sales staff for its media business and "Marthapedia," a Web site with lifestyle, crafts and cooking information.
The change also reflects the weak U.S. housing market, which affects the company through its homebuilding project with KB Home (KBH.N).
Martha Stewart Living said its third-quarter net loss was $4.4 million, or 8 cents a share, compared with a loss of $25.2 million, or 49 cents a share, a year earlier. Last year's quarter included a charge for a litigation reserve.
Revenue increased 13 percent to $69.3 million.
Analysts were expecting a loss of 13 cents a share on revenue of $69.2 million, according to Reuters Estimates.
"They did really well in publishing," said Morgan Joseph analyst David Kestenbaum. "Internet was light, but they addressed that with a new head of Internet, so that ought to lead to better results going forward."
Publishing revenue increased 27 percent, while ad pages rose at Living, Everyday Food and Body + Soul magazines.
Merchandising revenue fell 7.6 percent to $11 million, though last year's results included a gain from the settlement of a dispute with a former merchandising licensee. Without the gain, revenue would have risen $2.1 million, the company said.
The company's plan to launch a food line with Costco (COST.O) will begin in early 2008, with one item -- a smoked ham -- coming out in time for the 2007 holiday season.
"Many people consider ham the ultimate holiday entree, and you know Martha's ham will be the ultimate of the ultimate," Chief Executive Susan Lyne said on a conference call with analysts. "In January we'll launch with soups."
Online revenue rose 17.9 percent to $3.3 million, while broadcast revenue fell 12.9 percent to $8.8 million on lower cable distribution revenue and a lower daytime TV audience.
The company said it is "well positioned to return to profitability and generate positive free cash flow in 2007."
For the year, it forecast revenue of about $330 million, compared with its previous estimate of $330 million to $340 million. It saw adjusted EBITDA at $33 million to $35 million, versus the previous $34 million to $37 million. Continued...
