Martha Stewart Q2 Earnings Drop 86%

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Continuing a downward spiral, Martha Stewart Living Omnimedia Inc. reported earnings were down 86 percent on revenue that fell 16.3 percent in the second quarter.

The outlook for the third quarter and the year is expected to be no better, according to the New York media and merchandising brand whose namesake founder awaits a January trial alleging insider trading.

"We believe that the Martha Stewart Living core brand will continue to be under pressure until resolution of Martha Stewart's personal legal situation," Sharon Patrick, company president/CEO, said in a statement.

"Our strategy until then," she said, "will be to continue to invest in sustaining our core Martha Stewart Living brand equity, brand labels and other assets, all the while investing in new properties like Everyday Food [magazine] and controlling costs wherever doing so does not conflict with those goals."

That said, the company reported operating income of $1.5 million for the second quarter, down from $13.1 million in the year-ago period. Second-quarter revenue was $39.62 million, down from $47.32 million.

The company is banking on the success of Everyday Food based on a positive consumer response to its four test issues. A new Martha Stewart Signature furniture collection also is reported to have appealed to consumers.

Improvements to the company's Internet and direct commerce division in the quarter have worked as well. Better results were generated from improved operating efficiencies and a lower cost structure. Still, second-quarter revenue from this division was $7.8 million, down from $8.1 million in the year-ago period.

The company said the second-quarter results do not reflect the operating benefits expected in the third quarter from reduced and more targeted catalog circulation and a more focused merchandise assortment.

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