Not even the homemaking specialist herself can dress up this earnings report. Martha Stewart Living Omnimedia (NYSE:MSO) today reported a sharply lower second-quarter profit, and said it would wind up losing money for the entire year. And, although it's no real surprise, practically all of the problems can be blamed on Ms. Stewart's tarnished reputation.

First, a look at the ugly numbers. Earnings per share fell 86% from $0.14 in the year-ago period to $0.02 this quarter, while revenue dropped off 16%. The company lowered its outlook for the months ahead, saying it will likely lose about $0.15 per share in the third quarter and $0.18 to $0.20 for the full year.

We need look no further than the company's core publishing business to get to the root of the problem. Revenue was down 16% in that division, primarily because of lower advertising and circulation sales in Martha Stewart Living magazine. It was inevitable that advertising would be affected by Ms. Stewart's legal woes; the only question was by how much. The 16% drop follows a 21% plunge in the previous quarter.

"We believe that the Martha Stewart Living core brand will continue to be under pressure until resolution of Martha Stewart's personal legal situation," said Sharon Patrick, the firm's CEO since Ms. Stewart resigned to focus on her defense in the ImClone (NASDAQ:IMCL) insider-trading scandal.

Apparently, investors have already figured as much and the stock price reflects that information. Despite the gloomy report today, shares were off only 3% in morning trading, and they're up 28% since David Gardner recommended the stock in Motley Fool Stock Advisor.

What lies ahead? It's not unreasonable to think the advertising decline may be near a bottom. However, with the company now losing money on both a GAAP and a free-cash-flow basis, suddenly Patrick is reminding investors of the $172 million in cash and short-term investments in the coffers. While comforting in a way, that's not the kind of message you want to hear your CEO deliver during an earnings report.

What you do want to hear is that The Motley Fool is celebrating its 10th anniversary this month with 10 Ways to Make More Money Now!