Martha Stewart has denied all charges

The company, whose founder Martha Stewart is awaiting trial on obstruction of justice charges, on Thursday unveiled narrower than expected losses, and said it was on track to start making money again by December.

Losses for the July to September period came in at $3.8m, or 8 cents a share, down from a profit of $2.8m one year earlier, while sales slumped by 28%.

But the bottom line result comfortably beat the 14 cents a share loss pencilled in by Wall Street analysts.

Investors welcomed the news, marking Martha Stewart shares 29 cents higher to $10.28 in late afternoon trade.

Sentiment towards the shares was also helped by the company's forecast that it would return to profitability over the next three months, a period which includes the key Christmas season.

Tainted

But the firm, which produces lifestyle magazines and TV programmes, admitted that it would have to battle further adverse publicity in January, when Ms Stewart's trial is scheduled to begin.

Ms Stewart is accused of selling shares in drugs firm ImClone the day before regulators rejected the company's application to market a new cancer drug, sending its stock price into freefall.

It is alleged that she was acting on a tip-off from ImClone founder Sam Waksal, a personal friend.

Ms Stewart has denied all the charges.

She has also tried to shield her company from the court case, resigning as head of the firm and stressing that the charges were a purely personal matter.

The company has tried to distance itself from its former chief, making less frequent use of her image on the cover of its magazines.

But analysts said the company is still paying the price of its close association with its founder.

"The circulation has gone down too much, the ad pages are going down," said Dennis McAlpine of McAlpine Associates.

"I think people are saying 'I don't need Martha Stewart'."