The insider trading scandal that has dogged Martha Stewart for the past five months has tarnished her name. Now it has also taken a chunk out of her company's bottom line.
Thursday, Martha Stewart Living Omnimedia Inc. reported a 42 percent drop in third-quarter earnings compared with the same period last year. The rest of the year may be just as rocky if federal probes into Stewart's sale of ImClone Systems Inc. stock continue, company executives said. Stewart sold nearly 4,000 shares the day before the Food and Drug Administration rejected ImClone's key cancer-fighting drug.
"Martha Stewart Omnimedia has had to combat a great deal of negative publicity surrounding my personal affairs," Stewart said in a conference call with financial analysts, "which has unfairly overshadowed the great work being done at the company."
The company's performance is the strongest sign yet that the "personal" matter has spilled into the business matters of the empire she took public in 1999.
To distance itself from Stewart's problems, Omnimedia decided against airing her usual holiday prime-time CBS television special for the first time in several years partly because of the "uncertainty surrounding Martha's personal situation," a company executive said.
Omnimedia also kept Stewart's name off the cover of its newest potential moneymaker: Everyday Food, a four-issues-a-year quick-recipes magazine that debuts in January. The company may publish 10 issues a year starting next September if the magazine tests successfully.
Not all the news is bad, and not all the bad news has to do with Stewart's situation, company executives said. The soft economy, which has crippled the advertising that Stewart's magazines and television shows rely on so heavily, also affected third-quarter results.
In the quarter ended Sept. 30, Omnimedia's profit fell to $2.77 million, or 6 cents a share, compared with $4.77 million (11 cents) the previous year.
Ad pages in the company's eponymous flagship magazine have stayed up. But the magazine's subscription renewal rate has slowed slightly since last year.
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