With her jail sentence, her magazines on the newsstand, and hearing about -- if not watching -- her Apprentice reality TV show, you can safely assume most of us have heard of Martha Stewart. But do we want to give her our money?
Maybe we'd pay Martha to decorate our houses, but after this third quarter, I doubt whether we're still willing to pay for her company's stock. Martha Stewart Living Omnimedia
For the quarter ended Sept. 30, the company reported a 5.7% gain in sales revenue to $40.9 million. Sadly, quarterly operating losses increased more than 60% year over year, coming to rest at $26.9 million. The net loss was $0.51 per share, compared to $0.30 per share last year. Excluding a non-cash charge of $0.21 per share, the net loss was the same as last year. Martha, what are you thinking?
Still with me? The nine-month statistics are sure to further depress investors. Sales revenue dipped 1.4% to $125.5 million. The operating loss widened 60% from the comparable timeframe a year ago to $80.1. And the grand finale? The net loss increased by 50%, ladies and gentlemen, to a stunning $78.7 million.
The non-cash charge during the quarter was an interesting twist involving the reality show The Apprentice: Martha Stewart. The charge involved the vesting of warrants, and it was pegged at $0.21 per share, but here's the kicker from the earnings release: Martha Stewart Living Omnimedia only receives promotional value from the show. That's right, they have "no economic interest" in it.
What a shame. While I do understand the practicality of the loss-leader concept, if I were a shareholder in the company, I'm not sure I'd like reading that. Then again, what would I have liked reading in this earnings release? But with the ratings not doing so well (or "tanking," as Rick Munarriz put it in this article), maybe it wouldn't matter much either way.
On the upside, revenue changes in the individual operating segments for the quarter did show some nice appreciation. The publishing segment grew 24% and the television operations went up 54%. The big drop in the online business was attributable to the shuttering of a catalog. Maybe that's further evidence that Martha does need Internet-savvy David, for all you Martha Apprentice fans.
However, operating income before charges for depreciation, amortization, and non-cash equity compensation (OIDA) for all of the operating segments showed a loss except for merchandising, the income of which nevertheless dropped 11.3% to $4.3 million. And going back to the nine-month figures, we see disconcerting decreases in revenues for all operating segments except for publishing, which went up 21.1%.
Martha Stewart's stock just isn't a sensible idea right now. To me, the situation is pretty much the same as when Seth Jayson covered it back in August. I can personally only take a bearish view on the stock right now after seeing such an earnings report and looking at the company's recent negative performance.
It's just too speculative a situation, and the Martha media brand seems to be suffering significantly. You need to be careful with such a stock -- just ask the Fool's own Selena Maranjian, who was brave enough to share her story of her involvement with Martha. Companies in the media/licensing category that you might find more attractive would include Playboy
For more tasteful Foolishness:
- Martha Stewart: Not a Good Thing for Me
- Martha's Open House
- Martha Sings!
- Share your home-improvement (as well as stock-improvement) thoughts at the Martha Stewart Living Omnimedia discussion board.
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