Looks like those traumatic pre-Christmas firings at Martha Stewart’s struggling media company are finally paying off for the 72-year-old Domestic Diva.
Shares of Martha Stewart Living Omnimedia inched up 2.3 percent on Tuesday, to $4.54, after it reported an operating profit of $2.2 million in the second quarter — only its third profitable quarter in the last 10.
A year earlier it had an operating loss of $636,000.
The return to profitability in the quarter came despite revenue tumbling 11 percent, to $37.6 million.
CEO Daniel Dienst, the scrap metal executive brought aboard last October to cut costs, said: “With the business stabilized, our business unit realignments behind us and efficiencies and productivity measures being rigorously monitored, we are now keenly focused on the many growth opportunities ahead of us across all verticals and all geographies.”
The profit has come mainly by cuts. Production, distribution and editorial costs were chopped 20 percent, to $15.3 million, while selling and promotional costs dropped 17 percent, to $10.2 million.
The cuts outpaced advertising revenue declines in each segment, which continued apace.
In publishing, revenue dropped 8.1 percent, to $22.2 million, but the operating loss narrowed to $1.8 million, from $5.7 million a year earlier.
Beth Lilly, a small-cap portfolio manager at Gamco, said, Dientz’s “goal is to get the publishing business to 5 percent operating margins and if he does that, the stock could really take off.
“To the extent that they generate [future] earnings, they won’t have to pay taxes on it,” Lilly said, noting the company has a net operating loss carry forward of $130 million.
“I have it rated a ‘buy,’ ” said Michael Kupinski at Noble Financial, which upgraded MSO stock from a hold in February.
“The company management indicates that they are at an inflection point,” said Kupinski, although he noted it may not be reflected in third-quarter results.
Kupinski said he expects the company to seek some kind of partnership to leverage its content in the digital realm and is hoping for a bigger international play.
Ken West, the chief financial officer, said the company is “debt free” and ended the quarter with cash equivalents and short-term investments of $61.7 million.
But, he added, “the only thing that we are very, very pleased with is our digital ad sales performance.”
Dienst also said he is looking at expanding into the Chinese market for merchandising and the international market for publishing.
“The opportunity for more juice or explosive growth in our merchandise vertical will likely come from the international arena,” the CEO said.
MSO is in talks with manufacturing partners, licensing partners and off-line and online retail players in places like the People’s Republic of China, Dienst said.
Dienst also said he believes that “there is going to be land grab for branded content over the next 18 months and we fit very well into that potential macro development.”
The minions in the empire of chief content officer and non-executive chairman Stewart may breathe a little easier in the next few quarters.
Dienst, in a conference call with Wall Street analysts, said, “I wouldn’t expect, as we sit here today, unless the world falls apart, to wield the hatchet aggressively here over the next quarter or two.”