Martha Stewart Living Omnimedia Inc (MSO) reported a smaller-than-expected quarterly loss as higher revenue from its merchandising business helped offset declining sales at its publishing business.    

Merchandising revenue, which accounts for nearly a third of total revenue, rose 12 percent to $14.5 million. Publishing revenue fell 16 percent to $34.1 million.    Total revenue at the diversified media and merchandising company fell 13 percent to $47.9 million.

"While our publishing strategy is gaining traction, it will take additional time to yield the targeted results," CEO Lisa Gersh said. 

"This will slow our planned return to profitability, but we continue to anticipate improving performance for the company in 2012."    

A state judge temporarily blocked plans by Martha Stewart Living to sell some branded products at J.C. Penney Co Inc (JCP) stores recently.

Net loss for the first quarter narrowed to $2.7 million, or 4 cents per share, from $2.9 million, or 5 cents per share, a year ago.      

Analysts had expected a loss of 7 cents per  share, excluding items, on revenue of $51.8 million, according to Thomson Reuters I/B/E/S. (Reporting by Sayantani Ghosh in Bangalore)