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Martha Stewart Company Returning to Profitability

More than one Good Thing: Revenues Up and Operating Loss Down

New York — Martha Stewart Living Omnimedia (MSLO) reported a second-quarter operating loss of $1.8 million, dramatically narrowed from the $34.2 million loss for the same period a year ago.

The company said the loss per share from continuing operations was $0.01 for the second quarter of 2006, ahead of a prior year second-quarter loss of $0.65 and well ahead of the consensus estimated loss of $0.16.

Revenues rose 47.0% to $67.4 million compared to $46.0 million for the second quarter of 2005.

Susan Lyne, president and ceo, said publishing and Internet were the leading business segments, noting that advertising revenues were the key driver in the improving performance.

In the merchandising segment, revenues were $10.2 million for the second quarter of 2006, as compared to $10.2 million in the prior year's second quarter. Acting cfo Howard Hochhauser said comp-store sales for Martha Stewart Everyday at Kmart were down 4.6%, with year-to-date sales there down by less than 1.0%. His projection for the third quarter saw $8.5 million in overall merchandising revenues, primarily generated by licensing fees.

In response to an investment analyst's question, Lyne noted that the new licensed home program with Macy's has the operational potential for “70% margins,” essentially the same as for the Kmart program.

Hochhauser is newly promoted to cfo; he joined the company in 2000 and served as vp finance and investor relations.

MSLO also announced new hires in the Internet division. Holly Brown is named president; Thomas Mueller is vp, creative director; Christine Cook is vp, interactive advertising sales; and Robert Kernen is assistant vp director of product management for the Internet.

Brown, who has worked as a consultant at MSLO since October 2005, was previously chief of staff for Yahoo coo Dan Rosensweig.

Mueller was creative director at ArnoldOne New York, working on integrated marketing campaigns for clients including Hershey's, Royal Caribbean and Pfizer. He had also worked at Web marketing design firm Razorfish.

Cook was most recently vp sales at IAC Partner Marketing, serving such sites as Expedia and Ticketmaster. She previously worked at the Financial Times and The New York Times.

Kernen was director, advanced television and emerging platforms at A&E Television Networks, and previously worked with Women.com Networks and WebTV Networks.

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