March 4, 2003, 12:00 AM

Martha Stewart will reorganize Internet/direct commerce segment

With a companywide net loss of $3.4 million and Internet/direct commerce segment revenues down by 20%, the company takes a Q4 $7.7 million write-down on inventory and web development costs.

 

Saying it would significantly scale back on its Internet/direct commerce operations in efforts to reach break-even status in that segment, Martha Stewart Living Omnimedia Inc. announced a total net loss from operations of $3.4 million on revenues of $77.6 million for the fourth quarter of 2002, a 132% drop from net income of $10.6 million in the year-ago quarter. The division contributed revenues of $13.7 million for the quarter, less than the $45.7 million from the company’s publishing segment, but more than the $6.3 million from its television segment and the $11.8 million from its merchandising segment.

For the year, the company reported that total revenues rose 2.2% to $295 million. Revenues in the Internet/direct commerce segment dropped 20% to $36.9 million, while revenues from publishing rose 2.9% to $182.6 million, merchandising revenues rose 37.5% to $48.9 million, and television revenues dropped 9.6% to $26.7 million.

The company will take a restructuring charge of $7.7 million on the Internet/direct commerce segment, reflecting the write-down of inventory and web site development costs at MarthaStewart.com. Going forward, Internet/direct commerce operations will consist of a reduced circulation catalog offering a more tightly focused product assortment that is highly branded and seasonal in nature, says Sharon Patrick, president and COO. “Additionally, we will continue to evolve our online capability to support subscription acquisition and renewal efforts and other promotional activities that are part of our publishing, merchandising and television initiatives,” she says.

The company has been struggling not only with fallout from a highly-publicized Securities and Exchange Commission investigation of the personal sale of ImClone stock by CEO Martha Stewart, but also with a general economic downturn for retail, including catalog business that’s declined across the board, says Jupiter Research retail analyst Ken Cassar. “The Martha Stewart business has been suffering in general because of the SEC cloud, but the direct business has been suffering too,” he says. “It’s possible the segment may be in the uncomfortable position of being hit with two major forces at the same time.”

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