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Dissect The Gannett May Trading Report And You See It’s Not Only Newspapers Doing Terribly, So Is Broadcast, And Then Look At The NYT’s Print Advertising Revenues Down 13.2%; How Long Can This Go On?

Gannett’s May trading report, including performance thus far this year, makes for really dismal reading for not only is the largest US newspaper group experiencing the terrible downturn in print advertising, but even its broadcast properties are doing worse than last year, and this from arguably the tightest run media group there is.

USA TodayPublishing revenues were down 14.3% in May, not as bad as McClatchy’s 16.6% probably because there is not so much exposure to the property classified downturn in California and Florida, but 14.3% is bad enough! But on the broadcast side the numbers are also negative when compared to the year before, TV being down 6.2% with national advertising dipping a huge 11.4% and local advertising down 6.4%

And the company has forecast that for the entire Q2 it expects TV revenues to lag behind last year’s performance in the mid to high single digit percentage digits. So if the business plan called for broadcast to make up what print might lose that one has gone out of the window! And that probably goes for other groups that also may be depending on broadcast revenues such as Tribune although it did see a Q1 3% increase for broadcast and entertainment.

The New York Times Company reported that its News Media Group got hit by a 13.2% ad revenue hit in May – the worst monthly drop this year -- but that masks a whopping 24.8% drop for classifieds in May, and for the year so far classifieds are down 23.1%.  The company said total Internet revenues grew 9.0% with Internet advertising revenues increasing 14.0% in May.

The Internet business now accounts for 12.1% of total revenues in May versus 10.4% in May 2007 but the web performance  of the various newspaper sites are lumped together in the total figures so it’s not possible to see just how much of print’s losses are made up by the Internet’s gains.  So when the company boasts that Internet revenue is now 12.1% of total revenue do we applaud because of the Internet’s growth or do we sigh because newspaper revenue is tanking making the Internet numbers a higher percentage of the remaining total? Wall Street lopped more than 2% off the shares at Wednesday’s close.

But back to the Gannett numbers. Go through the revenue and statistics summary and the one thing that stands out is that every comparison percentage for the month compared to May last year and for the year to date compared to year to date for the same period last year is in () – it’s all negative percentages.

And these are the kind of numbers that jump off the page for the month of May comparison -- classified ads down 18.8%, national ads down 15.4%, circulation revenue off 2.3%, broadcast revenue off 5.9% daily net paid circulation down 3.9%.

On a year-to-year basis classifieds are off 16.5%, total print advertising is down 11%, broadcast revenue is down 6.2% and total revenue is down 8.7%.  In dollar terms total revenue for the year to date is off $273 million. Total daily circulation is off 4.5% (348,316) with Sundays off 5.4% (319,665).

And the numbers for USA TODAY, the nation’s largest circulation newspaper, were appalling.  Advertising revenues down 18.4% with paid ad pages dropping from 324 last May to 260 this year, a 19.8% fall.

About the only good news – and even that the company didn’t say and one had to go and compare last May’s numbers to this year’s numbers – was that monthly unique users to its various Internet sites rose 16%.

Given these numbers it’s easy to understand why Gannett is laying off employees -- 55 New Jersey staff at four newspapers earlier this month -- and why management did what it did last week in taking a $2.3 billion non-cash assets write-down, primarily for the declining value of its Newsquest UK regional newspaper group which suffered a 15% classified advertising fall in May compared to a 9.1% fall in Q1. And then there was the freezing of the defined benefit pension plan and changing the 401 (k) plan contributions so that the company nets about $30 million in savings next year. 

Wall Street didn’t like the May figures. Gannett’s shares closed Wednesday at $24.42 having hit a 52-week low of $23.81. Gannett’s shares have not closed that low since September, 1992. A typical comment came from J.P. Morgan, commenting not just on Gannett but really the US newspaper business, “We see no reason for upside in the stock given the ongoing deterioration in fundamentals.”

And Gannett’s numbers had a ripple effect across the Atlantic. Given the Newsquest numbers other regional UK newspapers groups took major hits -- Trinity Mirror shares down 12%, and Associated Newspapers off 4.5%.

The Newspaper Association of America reported at the weekend that Q1 was the industry’s worst performance, bar none since it started keeping records. The sad truth for US newspapers that have suffered eight straight quarters of declining ad sales is that they will be announcing the ninth such quarter when the June numbers are complete and there is absolutely nothing out there – save perhaps political advertising and the Olympics that may help a bit – that will prevent that losing streak extending through the rest of the year.

 


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When a Company Starts Messing With Pension Plans It’s Usually A Warning Sign Of Financial Problems, But This Is Gannett, The Largest US Publisher, Surely Things Can’t Be So Dire There?
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