- The Washington Times - Wednesday, March 5, 2003

NEW YORK (AP) The insider-trading investigation surrounding Martha Stewart is taking a toll on her namesake company, contributing to the media and retailing company's first-ever quarterly loss and projections of larger losses ahead.
Among the fallout at Martha Stewart Living Omnimedia: an expected 25 percent decline in advertising pages at the company's flagship Martha Stewart Living magazine during the first three months of this year.
"Certain advertisers are opting to wait until they see the resolution of the investigations involving Martha before committing to run pages," company President and Chief Operating Officer Sharon Patrick said yesterday during a conference call to discuss the company's fourth-quarter earnings and outlook for the first quarter.
For three months ending Dec. 31, the company lost $2 million, or 3 cents per share, in contrast to a profit of $5.7 million, or 13 cents per share, in 2001. The results marked the first time the company has reported a net loss for any quarter since it went public in 1999.
Excluding a $7.7 million restructuring charge related to its Internet/direct commerce division, the company earned 6 cents per share in the fourth quarter putting it ahead of the 3 cents per share that analysts surveyed by Thomson First Call had forecast on a comparable basis.
But the company warned of more difficulties ahead, saying it expects a first-quarter loss of 6 cents to 8 cents per share. Analysts were looking for a profit of 3 cents a share in the first quarter. Along with the ad page decline, the company predicted a 20 percent drop in newsstand sales for Martha Stewart Living and a 20 percent decrease in revenues at the company's publishing division. The Internet/direct commerce division is also expected to post further losses.
Wall Street responded to the news by selling the stock. Shares of Martha Stewart Living Omnimedia fell 30 cents, or 4 percent, to $7.25 on the New York Stock Exchange.
Founder and Chief Executive Martha Stewart said that although she is hopeful that the government investigation into her trading activities will be resolved soon, the issue continues to hurt business.
Federal regulators want to know whether Mrs. Stewart was trading on insider information when she sold shares of ImClone stock in December 2001. Mrs. Stewart has denied any wrongdoing.
, but since the investigation became public in June, her company's stock price has tumbled more than 50 percent.
"2002 was an exceptionally difficult year for Martha Stewart Living Omnimedia, and our disappointing fourth-quarter results reflect both a substantial negative impact of the ongoing governmental investigations relating to my personal sale of stock, as well as the generally unfavorable U.S. economy," Mrs. Stewart said. "So long as the investigations are ongoing, our business segments will continue to be negatively impacted."

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