Friday, October 24, 2008

Breaking: Gannett's third-quarter profits dive 32%; ad revenue slide worsens; dividend remains safe

Gannett said third-quarter earnings plunged 32% on a worsening decline in newspaper advertising sales, spurring more job cuts by year's end -- and encouraging the once-unthinkable: slashing the company's unusually generous dividend.

The results were largely in line with Wall Street's expectations. But CEO Craig Dubow and other top executives failed to rally influential Wall Street stock analysts during an occasionally contentious teleconference on the quarterly results.

Chief Financial Officer Gracia Martore (left) ruled out an immediate dividend cut. But she said management and the board of directors continue to study how best to allocate capital. She said directors are scheduled to meet next week, although she didn't disclose their agenda. "We'll continue to discuss it with the board,'' Martore said.

She also indicated severance expenses would rise in the current quarter -- reflecting Dubow's warning last week that more layoffs are in the works. Martore didn't offer any details, however, including any target for job cuts, or a timetable.

Some analysts were unhappy with Gannett's disclosure today that it had stopped reporting revenue through the familiar monthly statistical reports. They also questioned GCI's failure to more aggressively buy back shares, now down 78% from a year ago. (Conference transcript.)

Gannett Blog reader reaction came fast. "I love it,'' one said. "A newspaper-media company withholding news. In the conference call, they disclosed they will no longer publish the monthly ad revenue figures, but will only put them out quarterly. Stock analysts didn't like this . . . and Corporate had some lame response about monthly not fully counting digital revenues, etc. The other ominous thing I got out of the conference call was that Corporate has no interest at buying back GCI stock, even at this low level."

Ad revenue collapse accelerates
For the quarter, Gannett reported net income of $158 million, or 69 cents a share, on revenue of $1.64 billion -- down from $234 million, or $1.01 per share, a year before.

Revenue exceeded the $1.61 billion forecast by analysts, but was nonetheless 9% lower than a year ago. Excluding severance costs for a big newspaper division layoff in August, Gannett would have earned 76 cents a share, a penny above what analysts expected.

Newspaper ad revenue plunged about 18% from last year's third quarter -- the steepest year-over-year decline since revenue began falling early last year. The revised newspaper division ad revenue trend:
Flagship USA Today's ad sales fell 7.1% in the third quarter vs. a year ago, the company said. Paid ad pages totaled 713 vs. 803 last year.

Stock closes down
shares closed at $9.47, down about 2%, after recovering from an earlier low of $8.61. Still, GCI's dividend yield has soared to nearly 17%, spurring speculation that the company would move today to cut the payout -- a step considered by industry rivals. In its third-quarter earnings report yesterday, the New York Times Co. said it was considering a reduction in its dividend.

Please post your replies in the comments section, below. To e-mail confidentially, write gannettblog[at]gmail[dot-com]; see Tipsters Anonymous Policy in the green sidebar, upper right.

[Image: today's USAT front page, Newseum]


  1. Jim, did you hear mention of layoffs as mentioned in the anonymous posts?

  2. Um... Yes, I heard Layoffs. Why would severance expenses. And I take it that if they're going to happen in the current quarter then layoffs would happen before the end of the year. Do you all get the same impression

  3. Um... Yes, I heard Layoffs. Why would severance expenses. And I take it that if they're going to happen in the current quarter then layoffs would happen before the end of the year. Do you all get the same impression

  4. This comment has been removed by a blog administrator.

  5. the last post is stepping over the line completely.

  6. I've just deleted a comment that appeared to reveal the home address of an individual. Please don't do that.

  7. 12:51 I got the impression layoffs by December, and planning already underway.

  8. About monthly statistical reports: I remember thinking when Gannett started these around 2000 that it was a classic example of sucking up to Wall Street, "managing" earnings and focusing on the short term. Let the analysts do their homework. Some companies don't even provide "guidance" on the range of future earnings.

  9. Does anyone know if this is the first quarter that Newsquest figures have been identified and addressed separately...


Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

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