• by Paul Gough , March 5, 2003

Buffeted by its namesake's legal trouble, Martha Stewart Living Omnimedia's publishing and TV sectors faced a rocky road in the fourth quarter and the company said things weren't going to improve anytime soon.

Fourth-quarter revenues dropped slightly in the publishing division and dropped sharply in the television and Internet direct commerce units. The publishing unit had revenues of 45.66 million in the last three months of 2002, down compared to 2001. The television revenues, which include a daily syndicated Martha Stewart Living program and several cable shows, fell 33% from $9.55 million in 2001 to $6.35 million in 2002. Annual revenues were up 2.9% in publishing and down 9.6% in TV.

"As I think you will all appreciate, 2002 was an exceptionally difficult year for Martha Stewart Living Omnimedia," said Stewart, who serves as the company's chairman/CEO.

President/COO Sharon Patrick said that while advertising pages increased in the fourth quarter in the flagship magazine, Martha Stewart Living, some advertisers have been waiting until the federal investigation of Stewart concludes before going forward with advertising plans. Patrick said the year-over-year decline in ad pages began to show up in the January 2003 issue, while page counts have remained with the company's goals.

She said subscription and renewal rates have also been "significantly impacted" beginning late last year "but it will become more pronounced in 2003." The company also expects some softness in newsstand sales in 2003. Martha Stewart Living's circulation continues to perform in excess of its rate base of 2.3 million.

Ratings for the syndicated show have also been lower in the fourth quarter, with a 1.3 compared to 1.41 during the same period in 2001. Recent ratings have returned to the 1.4 level. In cable, new programs have been launched on The Food Network and HGTV within the past year or so. Patrick said ratings were good.

She said the company's problems will continue as long as its founder's legal woes continue. Stewart declined to comment on them, other than to say that she was increasingly hopeful that they would be resolved soon.

Publishing revenues were down 20% so far in the first quarter and ad pages were down about 25%. Revenues from subscription and newsstand sales were in line with the second half of 2002, where they were down 20%. An executive said TV revenue will be largely unchanged.

The company was waiting until the second quarter to decide whether to push ahead with the regular publication of Everyday Food, a digest-sized publication that focuses on easy meals that could be prepared within a half hour. Stewart said it was well received by advertisers and consumers.

"We're encouraged by its performance to date," Stewart said.

But the company was planning to restructure its Internet direct commerce unit, slashing jobs and cutting frequency and size of catalogs. The change would focus on proven products and profitable marketing strategies, such as more sophisticated email marketing.