NEW YORK (AP) – Ten days after being convicted in a stock scandal, Martha Stewart resigned Monday from the board of the homemaking empire that bears her name and stamps it on everything from magazines to bedsheets.

Stewart, 62, also stepped down as chief creative officer of Martha Stewart Living Omnimedia.

But she was given the new title of founding editorial director, meaning she will probably remain an influential part of the company, despite an impending prison sentence that could last more than a year.

The move showed that the company is not ready to completely sever its ties with the homemaking queen, who owns 61 percent of the stock.

Chief executive Sharon Patrick said the company and its shareholders will “benefit most if we are able to continue to take advantage of Martha’s creative inspiration and capitalize on her prodigious skills and experience in the domestic arts.”

In Stewart’s new role, she will provide creative inspiration for the design and development of new products; write two books, “Homekeeping” and “Baking”; and provide advice on the company’s brand and strategy, the company said.

Stewart resigned as chairman and CEO last June after being indicted. She said the move to step down as board member and chief creative officer was “in the best interest” of the company.

“I am heartsick about my personal legal situation – and deeply sorry for the pain and difficulties it has caused our employees,” she said in a statement. “I look forward to continuing to collaborate on a wide range of creative ideas with the amazing, talented and hardworking people at this very special company.”

The company said Stewart will have a role in choosing her successor on the board.

Meanwhile, the company offered a downbeat outlook in its annual report, filed late Monday with the Securities and Exchange Commission. Because of the trial’s outcome, Martha Stewart Living Omnimedia said it could sustain substantial financial losses.

The company said it’s exploring various strategies such as rebranding certain products, developing new personalities, selling assets and slicing staff.

Stewart had been expected to relinquish her board seat ever since the verdict, but reportedly had been pressing to keep some creative non-officer role. Had she not stepped down, the SEC probably would have forced her to do so, because she is a convicted felon.

The shuffle is the latest fallout from Stewart’s March 5 conviction on charges she obstructed justice and lied to the government about why she sold stock in a pharmaceutical company just before it plummeted in 2001.

Some marketing experts said her departure was a smart move for the company. Others said that that her name is now so tainted that it would have been better for the company to separate from its founder completely.

“I think they are walking a tight rope between her as an asset and her as a liability,” said Jamelah Leddy, an analyst at McAdams Wright Ragen who owns 1,000 shares of Martha Stewart Living. But Leddy added that with Stewart still the largest shareholder, she will remain extremely influential in the company.

Seth Siegel, co-founder of The Beanstalk Group, a trademark licensing agency, said that retaining Stewart in a creative role was a “generous fig leaf that the company gave her.”

“It allows them to say they stepped away from Martha, but still allows them to keep all options open,” he said. “They can still further distance her or renew their relationship.”

Robert Passikoff, president of Brand Keys, a New York marketing research company, said the move will probably have mixed results.

“They should have announced that Martha was going away for a while to deal with her problems,” he said. “By moving away, you regain trust. It looks like she’s getting her cake and eating it too, and that’s not the way you rebuild trust among consumers.”

Since Stewart’s name was tied to the scandal, her company has seen its stock plummet 40 percent and suffered from declining sales, financial losses and defections among its advertisers.

The company suffered more fallout after the verdict. Stewart’s syndicated TV show, “Martha Stewart Living,” was dropped by Viacom, and The New York Times said two syndicated columns would be renamed to drop any references to Stewart and would be written by others.

But sales of the company’s merchandise, from furniture to housewares, have held up well.

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On the Net:

http://www.marthastewartliving.com

AP-ES-03-15-04 2122EST