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NEW YORK -
Martha Stewart's name has been maligned, and her multimedia company's stock has taken a beating.
Now, the domesticity maven's legal problems are starting to take a toll on the empire's bottom line.
Martha Stewart Living Omnimedia Inc. warned Wednesday that third-quarter and full-year earnings estimates will be below Wall Street expectations because of the cloud surrounding a federal scrutiny of her sale of ImClone Systems Inc. stock in December.
The company's shares sank on the news.
"We have begun to see some impact on our business resulting from the uncertainty relating to the investigations of Martha Stewarts stock sale," said chief financial officer James Follo.
On Wednesday, Martha Stewart Living said that earnings for the third quarter should be in the range of 6 cents to 7 cents a share, far below the 15 cents a share expected by analysts polled by Thomson Financial/First Call Inc.
Since the investigation is pending, company officials said it would not be able to provide an accurate forecast for the fourth quarter and full year, but said that full-year earnings will not meet the previous goal of 53 cents per share.
Wall Street analysts had expected 54 cents a share.
Analysts had expected the company to deliver 19 cents in the fourth quarter.
As for advertising, Follo said that ad pages for the September Martha Stewart Living magazine issue were up 10 percent, mirroring the performance of the August issue, but for the October issue, the company is seeing a wait-and-see attitude from advertisers.
Meanwhile, Kmart Corp.'s financial woes and inventory problems have limited sales of the company's Martha Stewart Everyday product line, the discounter's top sales generator.
"It has been difficult and painful for me personally to see a private matter of mine create a challenging environment," Stewart, chairwoman and chief executive of Martha Stewart Living, said in an address to analysts during a conference call.
Nevertheless, Stewart, who declined to discuss details of the federal investigation, made a concerted effort to convince investors that the business is "much larger than myself."
And she took time to highlight a list of seasoned executives who have worked with her for years.
Company officials also stressed that Stewart would soon be sharing the spotlight on TV and in her magazines with other personalities.
The company announced that it has hired a new president of television -- Heidi Diamond, whose job is to create new TV shows that highlight additional personalities, according to Sharon Patrick, president of the company.
Officials also said the company will add more columns in the magazine from other writers.
Such moves, company officials said, already were in the works and haven't been accelerated because of the highly publicized investigation, but analysts said this was the first time that the company offered specifics.
Investors weren't impressed. Shares of Martha Stewart fell 95 cents, or nearly 9 percent, closing at $9.05 on the New York Stock Exchange.
"I didn't expect to see the falloff in the business yet," said Laura Richardson, an analyst at Adams, Harkness & Hill. "I am kind of surprised."
"They are trying to present it as a personal issue," she added. "When the person is the brand name, and when the company is paying some of the expenses, it isn't all that separate."
Richardson added, "Consumers haven't pulled back yet, but I am starting to see that it may be sinking in."
Company officials said during the call that it would incur higher corporate expenses in the third quarter because of increased spending in public relations related to the ImClone probe.
Martha Stewart Living Omnimedia's stock has taken a beating since news broke in early June that federal investigators were looking into whether Stewart had insider knowledge when she sold nearly 4,000 shares of ImClone Systems Inc. on Dec. 27 -- the day before the company said that the Federal and Drug Administration had refused to review its application for the cancer drug Erbitux.
Stewart is a friend of Samuel Waksal, the former ImClone CEO who was arrested June 12 on charges of insider trading for allegedly trying to sell his stock and tipping off family members after learning of the FDA's decision.
The domesticity maven has repeatedly denied any wrongdoing, and said that her sale was "entirely proper and lawful" and based on public information at the time.
For the second quarter ended June 30, the company reported earnings of $6.74 million, or 14 cents a share, compared with $5.2 million, or 11 cents per share.
The company posted revenues of $78.6 million, up 16 percent from $67.8 million from the year-ago period.
Now, the domesticity maven's legal problems are starting to take a toll on the empire's bottom line.
Martha Stewart Living Omnimedia Inc. warned Wednesday that third-quarter and full-year earnings estimates will be below Wall Street expectations because of the cloud surrounding a federal scrutiny of her sale of ImClone Systems Inc. stock in December.
The company's shares sank on the news.
"We have begun to see some impact on our business resulting from the uncertainty relating to the investigations of Martha Stewarts stock sale," said chief financial officer James Follo.
On Wednesday, Martha Stewart Living said that earnings for the third quarter should be in the range of 6 cents to 7 cents a share, far below the 15 cents a share expected by analysts polled by Thomson Financial/First Call Inc.
Since the investigation is pending, company officials said it would not be able to provide an accurate forecast for the fourth quarter and full year, but said that full-year earnings will not meet the previous goal of 53 cents per share.
Wall Street analysts had expected 54 cents a share.
Analysts had expected the company to deliver 19 cents in the fourth quarter.
As for advertising, Follo said that ad pages for the September Martha Stewart Living magazine issue were up 10 percent, mirroring the performance of the August issue, but for the October issue, the company is seeing a wait-and-see attitude from advertisers.
Meanwhile, Kmart Corp.'s financial woes and inventory problems have limited sales of the company's Martha Stewart Everyday product line, the discounter's top sales generator.
"It has been difficult and painful for me personally to see a private matter of mine create a challenging environment," Stewart, chairwoman and chief executive of Martha Stewart Living, said in an address to analysts during a conference call.
Nevertheless, Stewart, who declined to discuss details of the federal investigation, made a concerted effort to convince investors that the business is "much larger than myself."
And she took time to highlight a list of seasoned executives who have worked with her for years.
Company officials also stressed that Stewart would soon be sharing the spotlight on TV and in her magazines with other personalities.
The company announced that it has hired a new president of television -- Heidi Diamond, whose job is to create new TV shows that highlight additional personalities, according to Sharon Patrick, president of the company.
Officials also said the company will add more columns in the magazine from other writers.
Such moves, company officials said, already were in the works and haven't been accelerated because of the highly publicized investigation, but analysts said this was the first time that the company offered specifics.
Investors weren't impressed. Shares of Martha Stewart fell 95 cents, or nearly 9 percent, closing at $9.05 on the New York Stock Exchange.
"I didn't expect to see the falloff in the business yet," said Laura Richardson, an analyst at Adams, Harkness & Hill. "I am kind of surprised."
"They are trying to present it as a personal issue," she added. "When the person is the brand name, and when the company is paying some of the expenses, it isn't all that separate."
Richardson added, "Consumers haven't pulled back yet, but I am starting to see that it may be sinking in."
Company officials said during the call that it would incur higher corporate expenses in the third quarter because of increased spending in public relations related to the ImClone probe.
Martha Stewart Living Omnimedia's stock has taken a beating since news broke in early June that federal investigators were looking into whether Stewart had insider knowledge when she sold nearly 4,000 shares of ImClone Systems Inc. on Dec. 27 -- the day before the company said that the Federal and Drug Administration had refused to review its application for the cancer drug Erbitux.
Stewart is a friend of Samuel Waksal, the former ImClone CEO who was arrested June 12 on charges of insider trading for allegedly trying to sell his stock and tipping off family members after learning of the FDA's decision.
The domesticity maven has repeatedly denied any wrongdoing, and said that her sale was "entirely proper and lawful" and based on public information at the time.
For the second quarter ended June 30, the company reported earnings of $6.74 million, or 14 cents a share, compared with $5.2 million, or 11 cents per share.
The company posted revenues of $78.6 million, up 16 percent from $67.8 million from the year-ago period.
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