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Martha Stewart Swings to Loss

James Mammarella -- Home Textiles Today, March 2, 2009

Martha Stewart Living Omnimedia faces deeply reduced licensing revenues in 2009 even as it fights uphill in the slumping consumer economy, two factors already reflected its fourth quarter and full year 2008 results reported last week.

Quarterly revenues of $72.9 million fell 38.5% from $118.5 million in the same period one year ago; full year revenues of $284.3 million were down 13.3% from $327.9 million in 2007.

The main falloffs were due to lower licensing monies from the Kmart exclusive Martha Stewart Everyday program, and from pulling the plug on Blueprint magazine.

In the merchandising segment, Q4 revenues crashed from $49.8 million in '07 to $13.9 million in '08: a 72.1% reduction. Full year 2008 saw merchandising volume of $57.9 million, a 31.6% drop from $84.7 million in 2007.

In the key soft side replacement program for the merchandising division, MSLO cited “cookware, gadgets and luxury bedding” as the top-selling categories in the Martha Stewart Collection at Macy's during the fourth quarter ended December 31.

In the quarter, MSLO posted a net loss of $8.0 million, or 15 cents per diluted share – a reversal from net earnings of $33.3 million, or 63 cents EPS one year ago. For all of 2008, the net loss of $15.7 million, or 29 cents EPS, contrasted with 2007 net income of $10.3 million, or 20 cents EPS.

MSLO hopes to drive new merchandising revenue from its expanding Chef Emeril Lagasse unit, from deals with partners like 1-800-FLOWERS.com, and by replacing such businesses as the Martha Stewart outdoor furniture line at Kmart, for which a new licensee has yet to be named. February 2010 will bring the termination of the Kmart exclusive.

MSLO declined to make a projection for 2009, citing economic uncertainty, but controller Allison Jacques said in part, “Our business remains healthy with a robust balance sheet, evidenced by $60 million in cash, cash equivalents and short-term investments.”

Martha Stewart Living Omnimedia, Inc.

Qtr. 12/31 (millions) 2008 2007 % change
(loss)
a. Q4 2008 was impacted by a non-cash asset impairment charge of $9.3 million related to the publishing segment, which is a loss per share of 17 cents. Excluding that charge the Q4 net earnings per share were 2 cents, and the FY net loss per share was 12 cents.
b. Not meaningful. MSLO derives revenue from broadcast and publishing sales plus licensing royalties.
c. Selling, promotion, general and administrative expenses as a percentage of sales.
Sales $72.8 $118.5 (38.6)%
Oper. Income (EBIT) (4.5) 33.0 --
Net income (8.0)a 33.3 --
Per share (diluted) (0.15)a 0.63 --
Average gross profit b b --
SG&A expenses 45.1%c 36.0%c --
Fiscal Year
Sales $284.3 $327.9 (13.3)%
Oper. Income (EBIT) (10.8) 7.7 --
Net income (15.7) 10.3 --
Per share (diluted) (0.29)a 0.20 --
Average gross profit b b --
SG&A expenses 49.6%c 48.1%c --


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