Monday, October 24, 2011

Three reasons to expect first-quarter furloughs

1. History and 'comps'
Gannett has ordered one-week unpaid furloughs every first quarter since 2009, mostly for U.S. newspaper employees. Yet, each one has created a dilemma known among investment professionals as bad "comps" -- short for comparables. Here's what that means.

Wall Street expects companies to crank out higher profits every quarter. As GCI's revenue has nosedived, the only way to bolster profits has been through cost-cutting. In this year's first quarter, for example, Corporate saved $10 million furloughing workers.

But absent another round of furloughs in next year's first quarter, Corporate must gin up $10 million in extra revenue just to stay even with this year's first quarter. That doesn't seem likely, however.

2. Wither revenue?
GCI's overall revenue has fallen, year over year, in each of the past three quarters because advertising sales in the biggest division -- U.S. newspapers -- keep tumbling. In the most recent quarterly report, published last week, total revenue fell 3.5% from a year ago, to $1.27 billion. Print advertising was worse: It plunged 8.5%, the biggest quarterly decline in nearly two years.

That's especially worrisome because print ads accounted for nearly half the quarter's total revenue -- nearly the same as a year ago.

Corporate has tried to make up for those losses by investing in new businesses -- for example, the DealChicken daily deals site that is now in nearly 50 U.S. markets.

But any gains from those initiatives will take many months to produce tangible results. Meanwhile, other once-promising investments have withered: GCI just shut down its Moms Like Me network amid heightened competition for the female consumers it targeted. And, I've been told, the PointRoll advertising services subsidiary has lost its footing.

3. Investor impatience
Ultimately, Wall Street cares about one thing: the company's stock price. And Gannett's has been heading south nearly all year long.

Friday, it closed at $11.16 a share -- way off the most recent high, $18.93, reached last February. To be sure, other newspaper publishers' stocks have plunged, too.

But investors don't have to bet on newspapers. Indeed, some are pulling out. Earlier this month, GCI's single-biggest investor -- JP Morgan Chase -- disclosed in a regulatory filing that it had slashed its stake in the company. As of Sept. 30, Morgan owned nine million shares, or 3.7% of all GCI's stock. That was down from 22 million only three months before, when it held 9% of all.

Furloughs alone may not reduce payroll costs enough, depending on what happens with ad sales during the current quarter. That's because GCI simply has fewer employees to furlough, so the savings aren't as great.

This year's $10 million in furlough savings was less than the $12 million in Q1 2010 -- and only half the $20 million in Q1 2009. No wonder. GCI had 41,500 employees at the start of 2009 vs. 32,600 at the start of this year.

If revenue falls even more in the current quarter, GCI might take more drastic steps, such as layoffs. Wall Street wouldn't mind.

During last week's quarterly conference call with media stock analysts, the first question put to CEO Gracia Martore was about plans for more cost cutting. She tried steering the conversation in another direction. "What we are much more focused on is creating revenue opportunities to grow the top line,'' she told one analyst, Craig Huber.

Still, Martore left little doubt about the alternative. "We will continue," she said, "to do the good job that Gannett has always done in being fiscally disciplined."

Earlier: Corporate's January memo ordering the last round of furloughs.


  1. You know, I've always been one not to begrudge people who have worked hard, built a business or had great talent from earning a better paycheck than me. If Bieber can sing, pay the kid.

    But when we had to touch 30,000 employee households four times so that one person could eventually take home 37 of that 67 million? That's crazy.

    I make more than my staff does. More responsibility, more accountability, more education, more experience all play a part. But I don't send around a bosses' day card and expect them to chip in a week's salary.

    I get that the CEO's job is maximizing stock performance, either now or in the future. What I don't get is why stockholders keep the board with performance as it is - either on the board or at the top at the Crystal Palace.

  2. All USCP sites are well into the budget planning process. They have been told to budget furloughs for the 1st and 2nd quarters. But, in a piece of rare good news, some have been told to pull back on their contigency expense cuts (payroll reductions) until we get a better picture of how 4th Quarter revenue is trending.

    By the way, I "like" 6:45 a.m.'s comments. I'm a boss, too. Here's something sad to do: Take last year's NIBT number for your site, then divide it into the $37 million we paid to Craig for his backache. You will then get a rough idea of how many years you and your employees worked, or will need to work, just to pay that bill. For many of the NT-31 sites, his payout represents more than a decade's worth of work.

  3. Well If they would cut some of the Dead weight here at The Tennessean, in say Tech Serv and IT that get paid way to much to sit around and look at women all day..That would be a Start..Then maybe we would not need to Furlough the working folk.

  4. Jim, you make an excellent point that never occurred to me -- that as the number of employees declines, the savings from furloughs are harder to achieve. Obvious, but I never thought of it.

    And good lord -- what 6:45 and especially 9:20 say is financially startling and morally despicable. Entire newspapers working for 10 years to funnel it all to one man? Jesus effing Christ, this country has lost its way.

  5. furloughed Fury10/24/2011 10:41 AM

    I'm surprised they're not looking at fourth quarter furloughs, given the self fore filling prophesy of the last quarters lackluster results. Time to broil the deal chicken to feed the family!

  6. "self fore filling". And you folks wonder why company execs do not take seriously anything said here. Regardless of the points made, it is way too easy to dismiss the people who regularly post here as not smart enough to see the big picture. And I am not defending the execs. It's just that day after day, post after post, things like this diminish the arguments against the company and give execs cover.

  7. I am an exec and I will not belittle the posters on this site. You're obviously a pompous ass. Not everyone is as educated as we were fortunate to be, but that doesn't make them any less able to decipher what's going on and to feel the very real pain of the reality of what's happening to Gannett Corporation. Shame on you, 11:18. Stop trying to defend what everyone sees as an egregious payout to the corporate execs for running this company into the ground.

  8. I'm fine with first-quarter furloughs - I expect it now. But they really need to give us solid notice so that training and planning can occur in departments decimated by layoffs. I'm in a department of three, and after the last round of layoffs, I'm expected to back up a fellow coworker during off time. But I really don't understand what this person does, and there's been no time for training.

  9. Hey 1:18. You obviously can't read. I wasn't defending anybody. Simply reporting the opinions of several upper mgt types I know. And trying to point out that incoherent arguments are easy to belittle and dismiss.

  10. Sorry 11:18, I skimmed over the comments the first time and misread what you wrote. The sentiments are the same, wrong grammar, spelling, and all.

  11. Once corporate starts feeding at the furlough trough, they cannot stop. Q1 furloughs are coming....

  12. First quarter furloughs will not be enough.Furloughs alone do not give long range and permanent expense reductions.

  13. 2:59 PM, that's why there will be more layoffs in addition to furloughs. Pure speculation on my part, but Martore made it abundantly clear that Gannett will continue to reach into its same bag of tricks (ie, a combination of furloughs and layoffs) "as [they] always have".

    It's not a case of if, but when... at least, as far as the immediate future is concerned. I hope a time will come when layoffs are finally off the table.

  14. 2:59,
    Agree that furloughs don't provide long range expense reduction. But, this company has become some dependent on them they are impossible to pass-up. Martore said Gannett needs to be a sales company, but we're really an expense management company.

  15. I think it's funny that people continue to debate and wonder whether there will be furloughs, layoffs, etc. Folks: THERE IS NO GROWTH STRATEGY. There will be more furloughs, more layoffs, etc. End of discussion.

  16. Why must we all be so negative? Yes Gannett sucks. I get it. But I still have a job with lousy health insurance, furloughs and no raises. Get that too. I'm just too tired from working at Gannett to even try to look for another job. They have beaten me down and I have no drive to do anything else. I have to tell you at my age, I will just wait and see. Call me stupid, call me whatever you want. I'm tired. After a 10 plus years with this company let the chips fall where they will. I'm here for the long haul. I have other irons in the fire and can survive if I am laid off, but I'm not moving at this point. Let the youngsters move on. I am great at what I do and will continue to do it til the end. I am too old and too tired to move on. I am tired of being negative because it does nothing for me. I see hope with Gracia. She is not Craig. Yes, she came out of the same mold, but she is now free from his BS. She is trying. Lets at least see what she can do. Being negative does nothing for us. Screw the company. It's about the workers. Can we please try to see a bit of light at the end of the tunnel and see what happens. A woman is now leading the biggest media company out there. Give her support and lets see what she can do. She has already proven to me she will lead this company a thousand times farther than old craig, good old boy network, will ever do. She has ambition, drive and the intelligence to make things work. Sorry, but I am not falling for this negative BS. I think this woman can change things. It's about time a woman took charge of this company and I am going to support her 100%

  17. Business 101 Boy10/24/2011 10:25 PM

    8:17, you hit it on the nose. As long as the money saved from furloughs and lay offs is funneled into the pockets of a few on the top and not back into THE COMPANY, where it belongs, GCI will be in a vicious cycle of losing customers, losing revenue and making more cuts and losing customers, losing revenue and making more cuts and losing customers, losing revenue and making more cuts and losing customers, losing revenue and making more cuts and losing customers, losing revenue and making more cuts and losing customers, losing revenue and making more cuts. Until there is nothing left except a pay out for the people that made it happen.

  18. I'm cross-posting this comment I made earlier on another thread, because it's relevant to this one post:

    A reader who has been accurate in the past now tells me that, yes, there will be another round of unpaid furloughs in the first quarter of next year. These will be at least for U.S. newspaper workers. I do not know whether other divisions will be affected, too, however.

    These would be the fifth round of unpaid furloughs across a broad swath of Gannett's workforce. And it would be the fourth Q1 furlough in a row since 2009, suggesting that Corporate is now stuck in an early-year furlough cycle.

    The reader also confirms that certain higher-paid newspaper employees are being furloughed in the current quarter. I don't know the salary range at which these furloughs are effective.

  19. The argument that stupid mistakes in writing don't affect the message is brainless and always will be brainless. Stop hiding behind it.

    If you can't put in the right words, then do some work to find them. But stop trying to defend sloppy posts.

  20. Yes, Gannett is losing customers and will continue to do so. Why? Because Gannett is out of touch with its customers.

    Recently, Gannett lost a huge customer base it could of tapped, had it not abruptly and callously shut down the MLM website. Those users could of been used as a platform to make DealChicken a huge success. Oh well, when the top does not understand simple marketing strategies, every one in the company loses except for those top execs.

    Bummer to the worker ants who will soon be without a colony.

  21. Just found out I'm done after a 13-year career next Friday. But I'm fine with it. No more design hub bull to worry about, furloughs, etc.

  22. (Anonymous said...Just found out I'm done after a 13-year career next Friday. But I'm fine with it. No more design hub bull to worry about, furloughs, etc. 10/27/2011 1:51 AM )

    Sorry to hear this, but it does get better. The air is sweeter (no b.s. to breathe), the sun feels great (no more STUPID meetings), things will be so much clearer ( no more constant lies), and your health will improve. I worked at the "Death Star" for almost 23 years. Thank God I got my walking papers. I feel free! Bless you my fellow x-gannettoid. Godspeed.

  23. If you had a product to sell, and you burned 20,000 employees, most of whom chose to remain in those very communities where you sold your product, would you expect your sales to go up?

  24. Occupy Gannett!


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