"We have begun to see some impact on our business resulting from the uncertainty relating to the investigations of Martha Stewart's stock sale," chief financial officer James Follo said in a press release.
Wednesday, the New York-based company said it could not provide a full-year forecast, but said it will miss its previous earnings projection of 53 cents a share for the year.
The mean estimate of analysts surveyed by Thomson First Call was for 2002 earnings of 54 cents a share. In 2001, Martha Stewart Living earned $21.9 million, or 45 cents a share, on revenue of $295.6 million.
The company also said it will report third-quarter earnings of 6 cents to 7 cents a share, well below the 15 cents a share forecast by First Call. In the year-ago third quarter, the company earned $4.8 million, or 10 cents a share, on revenue of $69.6 million.
In early trading on the New York Stock Exchange, shares of Martha Stewart Living were down $2.30, or 23 percent, at $7.70.
The stock traded above $18 before the investigation.
Federal investigators are questioning whether Stewart had inside information when she sold nearly 4,000 shares of ImClone Systems Inc. on Dec. 27, the day before the company disclosed that the Food and Drug Administration had refused to review the drug application for its cancer drug Erbitux.
The value of ImClone stock plummeted following the announcement. Federal prosecutors and Congress subsequently opened insider trader investigations into the stock sale.
Stewart is a friend of former ImClone Chief Executive Samuel Waksal, who allegedly tipped family members before the FDA decision was made public.
In June, Martha Stewart said her sale of ImClone stock was "entirely proper and lawful."
Stewart and her Merrill Lynch stockbroker, Peter Bacanovic, said the stock was sold in accordance with a previously established "stop-loss" order to sell the ImClone stock if the price slipped below 60.
Bacanovic's assistant, Douglas Faneuil, executed the Stewart trade. According to the Washington Post, Faneuil has told Merrill Lynch lawyers that no "stop-loss" existed, and that Bacanovic allegedly urged him to lie by saying there was such an order.