Sales Solid at Martha Stewart

Before charges, the loss is narrower than expected.
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Updated from 8:09 a.m.

Martha Stewart Living's

(MSO)

second-quarter loss ballooned by 88% from a year ago, swollen by the cost of stock warrants issued to promote a new syndicated television program.

The publishing and television company lost $33.5 million, or 65 cents a share, in the quarter, compared with a loss of $17.8 million, or 36 cents a share, last year.

The 2005 second quarter included a charge of 33 cents a share related to the warrants. It also has an "other employee-related charge" of 6 cents a share. Backing those out, the loss was 26 cents a share.

Analysts were forecasting a loss of 28 cents a share.

Second-quarter revenue rose 4.3% from a year ago to $46.0 million in the latest quarter, about $2.7 million better than expected. By segment, publishing revenue rose 33.5% from a year ago to $31.7 million; merchandising revenue fell 6.8% to $10.2 million; television revenue fell 40% to $1.8 million; and Internet/direct commerce revenue fell 65% to $2.2 million.

Speaking on an earnings call this morning, chief executive Susan Lyne touted strengths at the company. Lyne noted that ad pages at magazines including

Martha Stewart Living

were up 42%. She also noted "strong upfront sales" for the newly syndicated

Martha

and other coming events, like the release of four DVDs through an agreement with Warner Home Video in October. Lyne also said that production on

The Apprentice: Martha Stewart

had wrapped.

The company expects up to $45 million in revenue from the TV segment. Martha has achieved 96% coverage so far for

Martha

, for which ad revenue will make up 50% while station, cable and international license fees make up the rest.

Where merchandising is concerned, Lyne said "sales are erratic, gardening

products are doing well, ready to assemble furniture is also doing well."

CFO James Follo and Lyne declined to describe the terms involved in the newly announced

Discovery

(DISCA) - Get Report

cable deal or the DVD agreement with

Time Warner

(TWX)

. After the four DVDs are released this October, sixteen more will follow in 2006. TLC will air

Martha

on cable in the evening, in a deal with a range of other components between the two companies.

Martha Stewart expects to report an operating loss of $25 million to $26 million in the third quarter and an operating loss of $1 million to $2 million in the fourth quarter.

Operating income before depreciation and amortization should be a loss of $12 million to $13 million in the third quarter, and income of $11 million to $12 million in the fourth quarter.

Analysts expect the company to lose 21 cents a share in the third quarter and earn 21 cents in the fourth quarter.

Martha Stewart Living Omnimedia was trading down nearly 3% or 81 cents to $27.20 on Wednesday.