Martha Stewart Living Takes a Hit on Weak Q4 as Macy's/J.C. Penney Trial Gets Underway

Michael Teague |

Martha Stewart Living Omnimedia, Inc. (MSO) released its fourth quarter earnings figures Tuesday, with results showing that the company is being dragged down by the ongoing dismal performance of its publishing and broadcasting operations.

The company cited declining circulation as well as print and digital advertising revenues for the company’s $1.1 million in earnings, $0.02 cents-per-share, for Q4, down from $4.2 million, or $0.07 per share, from Q4 of 2011. Revenue was also down on the prior year-period, from $61.7 million to $56.4 million.

Full-year revenues were down 11 percent to $197.6 million from $221.4 million, as the company lost $56.1 million (or $0.83 per-share), as compared to a loss of $15.5 million ($0.28 per-share) on the prior year.

The bad news was accompanied as opening statements in the lawsuit brought by the department store Macy’s Inc. (M) against both J.C. Penney (JCP) and Martha Stewart Living Omnimedia are set to begin in a New York state courtroom in Manhattan on Wednesday.

The trial is actually a consolidation of two lawsuits filed by Macy’s, one against MSO for breach of contract, and the other against JCP in order to block it for proceeding with its agreement with Martha Stewart Living.  The plaintiff has also made claims that Martha Stewart Living gave proprietary information to its J.C. Penney rival, based apparently on evidence of a “mass of correspondence” between the two.

"I was completely shocked and blown away," said Macy's CEO Terry Lundgren, who also added that he no longer considered Stewart a friend. "I was literally sick to my stomach."

Macy’s claims it had an exclusive deal to sell certain Martha Stewart products such as bedding and cookware in its stores, a deal threatened by the one between MSO and J.C. Penney. Back on Dec. 7, 2011, JCP announced that it was buying 17 percent of Martha Stewart Living and would be opening 700 boutiques under her company’s brand in its stores in 2013.  The deal was kept secret until the actual announcement was made, and Macy’s claims that this was done in order to prevent them from taking legal action sooner.

MSO’s shares dropped 4.65 percent to $2.87, while JCP was down almost 2.9 percent to $20.89.  Macy’s, on the other hand, was up nearly 3.4 percent to $39.82 based on strong a Q4 earnings report that beat analyst expectations. For Q4, Macy's reported earnings per share of $2.05, beating Wall Street estimates of $1.99. The $9.35 billion in revenue also surpassed analyst estimates of $9.3 billion on the prior year.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
RGSE Real Goods Solar Inc. 0.43 -0.03 -5.78 338,238
M Macys Inc. 42.58 0.16 0.38 2,114,741
MSO Martha Stewart Living Omnimedia Inc. n/a n/a n/a 0
JCP J.C. Penney Company Inc. Holding Company 9.84 0.31 3.20 14,837,453

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