Martha Bats Around

Big merchandising deals are 'in our wheelhouse,' CEO Lyne says.
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Martha Stewart Living

(MSO)

kept the momentum going Tuesday with a solid first quarter.

The New York media company rose 5% in midday trading after posting its second straight decent quarterly performance. The New York-based company saw its first-quarter loss

narrow from a year ago, beating analysts' forecasts. The stock, though still far off last summer's peak near $35, is up some 20% this year.

CEO Susan Lyne, speaking on Tuesday's earnings conference call, pointed to recent merchandising deals that Martha Stewart Living has notched with

Federated

(FD)

and

KB Home

(KBH) - Get Report

. The Macy's housewares deal gives Martha "broad upscale distribution" that has been lacking in a previous tie-up with

Sears'

(SHLD)

Kmart unit. The pact with KB costs the company nothing and should generate revenue of $12 million to $15 million, Lyne adds.

Asked if more merchandising deals are on the way in 2006 and beyond Lyne says that the company is "very comfortable with merchandising deals we have signed. They are all right in our wheelhouse." Lyne acknowledged that "some smaller deals" connected to KB and Macy's might materialize, along with some new Internet partnerships.

The turnabout at Martha Stewart Living has come after a rough patch late last year. The company drew the ire of investors last fall when it came to light that founder Martha Stewart's primetime TV show was lining her pockets and those of uber-reality producer Mark Burnett, at the expense of shareholders. The third quarter of 2005 included a charge of $11 million related to the vesting of Burnett warrants connected to

The Apprentice: Martha Stewart

, which along with a sorry lack of earnings left a sour taste in many investors' mouths. The setback accompanied a plunge that saw the stock slide from the mid-$30s into the teens in just over a month.

Since then a major rebound in ad pages at the publishing division has been coupled with some moves -- such as Martha Stewart's channel on

Sirius Satellite Radio

(SIRI) - Get Report

-- that have struck the fancy of Wall Street. Still, the recovery has been gradual, and the company remains in the red.

On the publishing side, the company said that revenue growth "was driven by higher advertising sales across the magazine group, led by a 70% increase in ad pages at

Martha Stewart Living

and an approximate 40% increase in pages at

Everyday Food

, with ad revenue per page increasing faster than ad page growth."

The company has decided to roll the dice on a new lifestyle magazine called

Blueprint

, the first issue of which hits newsstands in May. According to Lyne, the new magazine should help the company to "extend demographic reach." Advance subscriptions have hit 70,000, and Lyne says advanced ad bookings are healthy with new advertisers not in the company's other publications hopping on board.

To generate further goodwill among investors, the company will need to grow its Internet presence. Martha Stewart Living has indicated that the company is making investments on that front. "We continue to believe that the Internet is a vast and untapped opportunity for our company and our brands," says Lyne, who also noted that work is well under way for an early 2007 relaunch of the company's Web site.

On Tuesday, shares of Martha Stewart Living rose 86 cents to $20.60.