Martha Stewart Living Omnimedia, Inc. Announces Second Quarter 2007 Revenue Up 7.7%

Martha Stewart Living Omnimedia, Inc. Announces Second Quarter 2007 Revenue Up 7.7%

Advertising Revenue in the Publishing Group Grew 23%; Merchandising Initiatives on Track for Strong Second Half 2007

Martha Stewart Living Omnimedia, Inc. today announced its results for the second quarter, showing revenue up 7.7% to $73.4 million, including 23.1% growth in ad revenue for the company’s Publishing segment. Excluding non-recurring items, the loss was $(0.09) in the current period compared to a $(0.07) loss in the prior year period.

President and Chief Executive Officer Susan Lyne said: “In the second quarter of 2007, we continued to deliver solid, near-term gains and made strategic adjustments to accelerate the company’s long-term expansion. We’re on track to return to profitability this year and foresee a strong second half. Advertising sales are thriving and our Martha Stewart Collection exclusively at Macy’s is currently rolling into stores. To improve our long- term adjusted EBITDA performance, we are reallocating some of our investment in Publishing to Internet.

“Advertising revenue is growing across our business segments. Publishing was particularly strong with a 23% increase; advertising revenue growth exceeded page growth, a significant trend that continues from previous quarters. We also struck an agreement to publish 10 books over the next five years with Clarkson Potter/Publishers, a deal that is already contributing to our financial performance.

“Our Merchandising initiatives are all moving along well. In the second quarter, we launched our Martha Stewart Crafts line at more than 900 Michaels arts and crafts stores and on marthastewartcrafts.com. The initial performance of the line has been solid, and we will be broadening our distribution to independent retailers this fall.

“We recruited Wenda Harris Millard, former Chief Sales Officer of Yahoo! and a founder of DoubleClick, to leverage our media assets in the newly created position of President, Media. We now have in place the right people and the right strategy to achieve our near and long-term objectives.”

Second Quarter 2007 Summary

Revenues rose 7.7% to $73.4 million, compared to $68.2 million for the second quarter of 2006. The second-quarter results benefited from ad revenue growth and the Clarkson Potter deal.

Operating loss for the second quarter was $(7.8) million, compared to $(1.8) million for the second quarter of 2006, due to previously discussed investments in the Internet and Merchandising segments and a decline in sales at Kmart. The Merchandising group is now fully staffed in advance of new product launches in the second half. The results for the current period include $2.2 million ($0.04) of non-recurring separation costs (cash and non- cash equity compensation); the prior year included a one-time newsstand expense reduction adjustment of $3.2 million ($0.06 per share) related to the settlement of certain newsstand-related fees. Excluding these items, operating loss would have been a loss of $(5.5) million compared to a loss of $(5.0) million in the prior year period.

Adjusted EBITDA loss for the second quarter of 2007 was a loss of $(0.8) million, including non-recurring cash separation costs of $1.3 million. This compares to adjusted EBITDA of $3.2 million in the prior year period. Excluding $1.3 million of non-recurring cash employee separation costs in the current period and the $3.2 million reduction in newsstand-related fees in the prior year period, adjusted EBITDA would have been $0.6 million in the current period compared to breakeven in the prior year period.

Loss per share from continuing operations was $(0.13) for the second quarter of 2007, compared to $(0.01) for the second quarter of 2006. Excluding non-recurring items, the loss was $(0.09) in the current period compared to a $(0.07) loss in the prior year period.