Martha Stewart Living (MSO) reports EPS loss of ($0.14); beats consensus estimates on better-than-expected results from Merchandising business

Feb.24.05 | About: Martha Stewart (MSO)

Martha Stewart Living Omnimedia (NYSE:MSO) reported results  on February 23, 2005 for
the fourth quarter and year end 2004.  Below are some highlights.

Results 4Q04 vs. 4Q03:

  • GAAP EPS: ($0.15) vs. $0.05
  • EPS from continuing operations: ($0.14) vs. $0.05
  • Consensus EPS: ($0.17)
  • Previous EPS guidance: ($0.20)
  • Total revenues: $60.2M vs. $70.9M (-15%)
  • Operating income before D&A (OIDA): ($1.8M) vs. $7.0M
  • Operating income: ($9.5M) vs. $2.3M
  • Income from continuing operations: ($7.2M) vs. $2.6M
  • Net Income: ($7.3M) vs. $2.4M
  • Cash + ST investments: $140M vs. $169M (-17%)
  • Debt: none
  • Employees: 478 vs. 558 (-14%)

Segment Breakdown 4Q04 vs. 4Q03:

Publishing
Revenue: $26.1M vs. $33.1M (-21%)
Operating Income before D&A: ($11.1M) vs. $0.4M
Operating margin: NA

Television

Revenue: $1.1M vs. $5.9M (-82%)
Operating Income before D&A: ($1.4M) vs. (0.9M)
Operating margin: NA

Merchandising
Revenue: $23.7M vs. $22.5M (+5.5%)
Operating Income before D&A: $20.0M vs. $18.5M (+8%)
Operating margin: 84.5% vs. 82.4% (+210 bps)

Internet/Direct Commerce:
Revenue: $9.3M vs. $9.4M (-0.5%)
Operating Income before D&A: ($0.8M) vs. ($1.0M)
Operating margin: NA

1Q05 Guidance:

  • Revenue: $38M for total company; $28M for publishing unit
  • Operating income before D&A: loss of $6.5M-$7.0M
  • EPS: ($0.35)
  • Television segment: less than $1M in revenues; operating loss of $1.5M-$2.0M
  • Merchandising: $10M in revenues; operating income of $6.0-$6.5M
  • Internet/Direct Commerce: $2M in revenues; operating loss of $1.5M
  • Corporate expense: $9M
  • Amortization of non-cash stock expense: $2M

Quick comments:

  • Martha Stewart Living magazine: decline in advertising revenue due to: (1) 50% decrease in ad pages to 137 and (2) lower ad rates of $1.8M; newsstand sales down 3.5% despite sales of 500,000 copies of the December issue (15%).
  • Everyday Food magazine: revenues increased 40% to $3.4M; subscriptions increased 250% to $608k from $239k as subscriptions base increased to 800,000 from 500,000 in September 2003.
  • Body & Soul magazine: revenues of $2M; expenses increased to $4.6M ($3.1M was acquisition related)
  • Television revenues suffered from absence of the daily syndicated program; the program will resume in Q2 2005 and will be distributed by NBC.
  • Merchandising revenues benefited from (1) Kmart meeting minimum revenue provisions resulting in revenues of $10.7M, and (2) the termination of the Signature flooring program, resulting in royalties of $1.6M
  • Closed down Internet site during Q4 and shipped last catalog; no major write-downs expected, but lower overhead and technology costs
  • Direct commerce business will focus on the profitable flowers business and delivering content

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