Martha's Out and Down

Despite the slack-jawed celebrity press interest in the face of the flagship, Martha Stewart Living Omnimedia (NYSE: MSO  ) continues to deliver losses to its shareholders. In fact, the numbers in the first-quarter earnings release -- which is extra confusing due to some interesting positive/negative diversions in the "% change" column -- don't give shareholders a lot to be happy about.

First things first, don't get too excited about those headlines out there proclaiming a "narrowing loss." The actual "improvement" in the loss is a tiny 1.6% (or $313,000). The bigger "gain" per share was owed to a nice 2.8% increase in the float over the last year -- a number that cuts to the negative when (or if) the profits ever turn positive.

Basically, this quarter Martha Inc. managed to drop revenues by a full 13% from last year, despite the August acquisition of Body + Soul magazine. Thereafter, it ratcheted operating costs up to 138.5% of sales. That's right. There's plenty of red ink even before accounting for amortization and non-cash compensation. All told, the firm ended up $19 million in the hole.

Publishing revenue inched up slightly, 6%, but fell at the namesake mag, Martha Stewart Living. Revenue for Martha TV dropped from $4.2 million to $0.8 million. The "hot selling" Martha products at former K-mart, now Sears Holdings (Nasdaq: SHLD  ) ? I've warned before that the press buzz here was bogus. Proof came again today, as those revenues declined to $9.4 million from $10.8 million last year. Hmmm. Could it be that all the alleged enthusiasm of Martha's return to good graces is just an artifact of the tabloid press? So far, it's doing diddly for MSO shareholders.

Last Halloween, I warned investors to keep an eye out for fancy bookkeeping that would push formerly seasonal marketing expenses into this quarter instead of those coming up next. That happened too, clearing the way for the firm's sunny outlook for the future.

The earnings release is full of impressive-sounding jargon, like how to "leverage the brand, our content, and our strong consumer relationships to create long-term value." By this, management means it pins its hopes on much-hyped upcoming deals with the likes of Sirius Satellite Radio (Nasdaq: SIRI  ) and GE (NYSE: GE  ) broadcaster NBC's Apprentice -- the (divorced) homemaker edition.

Shareholders shouldn't be fooled. Revenues are one thing, profits are another. Unless things change drastically on both the top and bottom of the income statement, the only people profiting from Martha's empire will be the domestic diva herself and a group of well-paid execs.

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Seth Jayson feels like making a salad. Yes, he just wants to concentrate on his salad now, thank you. At the time of publication, he had positions in no firm mentioned. View his stock holdings and Fool profile here. Fool rules are here.

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