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Gannett’s newspaper ad woes drag down 1Q earnings
A prolonged slide in Gannett Co.’s newspaper business overshadowed improvements in the company’s broadcast and online operations as the publisher of USA Today reported a sharp drop in first-quarter earnings.
The results released Monday marked the 17th straight quarter in which Gannett’s publishing division has brought in less revenue than the previous year.
Most other major newspaper publishers also have been struggling during the same stretch, which included the longest U.S. recession since World War II. With the economy slowly recovering, newspapers are still trying to adapt to a marketing shift that has driven advertisers from print to less expensive and more abundant alternatives on the Internet.
Digital revenue from newspaper websites and other businesses grew 12 percent, but that wasn’t enough to offset a 7 percent drop in newspaper advertising revenue, the bulk of which still comes from print. Net income fell 23 percent.
Gannett, which publishes more than 80 daily newspapers including USA Today, is the first major newspaper publisher to detail its performance for the first three months of the year. The New York Times Co. is scheduled to release its results Thursday. McClatchy Co., publisher of The Miami Herald and The Sacramento Bee in California, is set to report next week.
To cope with its downturn, Gannett has eliminated thousands of newspaper jobs in the past few years and imposed other cost-cutting measures such as requiring employees to take unpaid furloughs.
Gracia Martore, Gannett’s chief operating officer, told analysts Monday that about 1,000 workers at the company’s smaller newspapers will take furloughs in the current quarter, which ends in June. That’s 3 percent of the company’s work force of 32,600.
Gannett imposed more drastic furloughs in the first quarter, when most workers at all its U.S. newspapers except USA Today and the Detroit Free Press had to take one week of unpaid leave. The company did not say how many workers took the leave.
The cost-cutting has enabled Gannett to remain profitable and earned the company’s top executives larger bonuses. Gannett CEO Craig Dubow, for instance, received a $1.75 million bonus last year, a 21 percent increase from $1.45 million in 2009.
Shareholders also stand to benefit from the savings. During Monday’s conference call, Martore said that with the belt-tightening and an economy that is gradually improving, the company may be able to use its cash to buy back stock or restore part of the quarterly dividend. The dividend had been cut to 4 cents, from 40 cents, two years ago.
That prospect seemed to please investors. After initially falling on the first-quarter earnings news, Gannett shares gained 59 cents, or 4 percent, to close Monday at $15.39. The stock has dropped 75 percent since Gannett’s publishing revenue began falling in 2007.
Gannett earned $90.5 million, or 37 cents per share, in the three months ended March 27. Net income was $117 million, or 49 cents per share, a year earlier.
If not for charges to account for staff cuts and facility closures, Gannett said it would have earned 41 cents per share. That figure was a penny below the average estimate among analysts polled by FactSet.
Revenue fell 4 percent to $1.25 billion from $1.3 billion.
Gannett’s broadcast division saw revenue decline 2 percent to $164 million, in line with what the company indicated last month.
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