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Martha Stewart Trims Forecast

The company expects to break even on an operating basis for the fourth quarter.
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Martha Stewart Living


posted a third-quarter loss and guided to a soft fourth quarter, as consulting fees hit the bottom line.

The New York-based magazine publisher lost $26 million, or 51 cents a share, for the quarter ended Sept. 30, compared to a year-ago loss of $15 million, or 30 cents a share. Latest-quarter numbers included a charge of $11 million, or 21 cents a share, related to the vesting of certain warrants granted in connection with the airing of

The Apprentice: Martha Stewart

, "a show in which we have no economic interest, but which provides great promotional value," the company claimed. Excluding that charge, the third-quarter loss was in line with the Thomson First Call analyst estimate.

Revenue rose to $40.9 million from $38.7 million a year ago. Publishing revenue rose 24% to $27.6 million, and television revenue rose to $3.4 million from $2.2 million a year earlier. Merchandising revenue rose to $8.3 million from $8 million a year earlier, but sales of Martha Stewart Everyday products at the Kmart unit of

Sears Holding



Initial viewer response to the new daily syndicated television show


"has been strong, though ratings for the first five weeks were below our expectations," CEO Susan Lyne said. "With a clearer sense of what viewers respond to, we are tweaking the format and promotion to drive more consistent ratings. Recent trends confirm our modifications: the past two weeks saw increases in both households and demo ratings; however, both remain below our budgeted expectations.

"We continue to make investments necessary to support future growth, including costs incurred in connection with new agreements with KB Home, Sirius Satellite Radio, and Warner Home Video. Overall, we had a very productive summer and early fall and we are all energized by the launch of new product ideas and new businesses. We expect that our results will show strong year-over-year improvement in the fourth quarter and for the full year."

The company also guided to results that will be in line with Wall Street revenue targets but weak on the bottom line. Revenue should be $80 million, but operating income will be break-even, where analysts had expected a 24-cent net profit.

"These results will reflect significant revenue growth in publishing principally due to higher advertising revenues, and in television principally due to the revenues from the


program," finance chief James Follo said. "Operating results will reflect significant year-over-year improvement, principally in publishing and merchandising, offset by higher corporate expenses principally due to higher consulting and professional fees."