Gannett profit up, revenue down

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NEW YORK -- Gannett Co. Inc., the largest U.S. newspaper publisher, said Wednesday its quarterly revenue fell because of weaker advertising sales at its local papers, while profit rose with the sale of four papers.

The results are the first in what is likely to be a dismal parade of earnings from U.S. publishers because of falling ad sales and the departure of readers to the Internet.

Second-quarter net income rose 18% to $365.7 million, or $1.56 a share, from $310.5 million, or $1.31, a year earlier. Revenue fell 3.5% to $1.93 billion.

Gannett stock fell 2.3%, and shares of other newspaper publishers including McClatchy Co. and Belo Corp. also traded lower.

"We believe there is nothing here to suggest good news as the rest of the industry reports second-quarter results over the next two weeks," Goldman Sachs analyst Peter Appert wrote in a note to investors.

Gannett, which publishes USA Today and 84 other daily U.S. papers, is overhauling its news operations to make them attractive to online and print readers.

The company also is increasing its coverage of local news, particularly on the Internet, where it is encouraging more interaction between its news Web sites and readers.

But declines in newspaper ad sales are eroding revenue faster than most publishers can make it up online.

Earnings from continuing operations fell to $1.24 a share from $1.28, but beat the analysts' average expectation of $1.22, according to Reuters Estimates.

"It was a respectable performance, although the market is just killing its stock, so I guess other people were more discouraged than I was," said Benchmark Co. analyst Ed Atorino.

At USA Today, ad revenue fell 1% in the quarter, but rose 7.4% in June because of a higher number of ad pages. Gannett's overall newspaper ad sales fell 6.2% last month from a year earlier, with local, national and classified revenue all down.

"We continued to feel the dramatic impact the slowing real estate market is having on advertising demand," Chief Executive Craig Dubow said in a conference call with analysts. "We are working hard to position ourselves to benefit from the eventual turnaround in this cycle."

Gannett's earnings included an aftertax gain of 31 cents per share from the sale of four papers and the donation of one paper to its foundation. It also recorded income of 1 cent per share from discontinued operations.

Newspaper segment operating revenue fell to $1.72 billion from $1.79 billion last year, while newspaper ad revenue declined 5.3% to $1.28 billion. Local ad revenue was off 4%, while national ad revenue dropped 2.8%. Classified revenue declined 7.5%.

McClatchy, Dow Jones & Co. Inc., Media General Inc. and Journal Register Co. are expected to report similar results this week.

Gannett shares were down $1.27 at $53.58, while McClatchy shares fell 3.1% to $26.95, and Belo Corp. shed 2.15% at $20.50, all on the New York Stock Exchange.
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