Archive for the ‘Earnings’ Category

Bulletin: Gannett laying off 10% of newspaper staff; Dickey warns in memo: ‘fiscal crisis is deepening’

October 28, 2008

Reeling from a second consecutive quarter of big revenue declines, Gannett just announced plans to lay off 10% of its newspaper employees — up to 3,000 workers — by early December, as the nation’s top newspaper publisher struggles to right itself. Newspaper division president Bob Dickey (left) disclosed the mass layoffs in a memo sent to employees just moments ago.

The unprecedented cuts follow the elimination of more than 1,000 jobs since August in GCI’s biggest and most troubled division: U.S. Community Publishing. But those cuts amounted to only 3% of the unit’s employees. Other publishers, including Miami Herald owner McClatchy Co., have sliced much deeper; that chain has exacted two rounds of 10% cuts since June alone.

The division’s 84 dailies plus USA Today account for nearly 80% of Gannett’s revenue, and 65% of its 46,000 employees. Today’s job reductions appear confined to those dailies. I don’t see any reference in the memo to cuts at GCI flagship USAT; it rivals The Arizona Republic as Gannett’s single-biggest employer.

Publishers in dark; Wall Street applauds
In Iowa, Des Moines Register Publisher Laura Hollingsworth told employees about the cuts in an e-mail, but warned she was unable to say “what that will mean in terms of number of layoffs,” the paper is now reporting. Hollingsworth is one of GCI’s most powerful publishers; she’s head of the West region of newspapers.

Investors rallied around Gannett’s shares today, after an initially tepid response. GCI’s beleaguered stock, down more than 70% from a year ago, closed at $10.22 a share, up $1.09, or 12%. Still, Wall Street had a similar reaction to the August layoffs, before sending shares back into the toilet.

Employees wonder what’s next
“Here’s a question for Mr. Dickey,” one worker said: “Do the layoffs and cutbacks stop here, or should Gannett employees keep that resume up to date and keep looking at CareerBuilder and Craigslist for job openings?” (More questions.)

Reflecting new uncertainty that could pinch productivity in weeks ahead, another employee writes: “I’m supposed to start groundwork on a big project this week, but am thinking about asking my bosses what the chances are that I’ll be able to finish it. I’d much rather spend my last few weeks on the job wrapping up some of those smaller, community-focused stories that I’ve been pushing to the back burner, instead of something that’ll never see the light of day.”

Related Gannett Blog posts

Please post your reactions 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.

In new data, a stark portrait of digital’s newsroom

October 26, 2008

Two years ago this month, Gannett unveiled what it called the newsroom of the future: the Information Center, a strategic shift designed to bolster readership and advertising sales by emphasizing digital over traditional print distribution.

“Breaking news on the Web and updating for the newspaper draws more people to both those media,” CEO Craig Dubow told employees at the time. “Appealing to more and different readers helps bring us more and different advertisers.”

Now, new data show, Dubow’s Information Center strategy is failing to turn around Gannett’s biggest and most troubled business: the community newspaper division; its 84 dailies plus USA Today account for nearly 80% of revenue, and 65% of GCI’s 46,000 employees.

For the first time, Dubow is conceding that online advertising sales are now falling across those newspapers, following months of increasingly narrow gains. Online sales fell 7% in the third quarter from a year ago, Dubow told Wall Street media stock analysts in a Friday teleconference.

It was Dubow’s starkest concession that a cornerstone of his strategic plan was not delivering the goods, raising troubling questions about Gannett’s viability as the 102-year-old newspaper publisher steams into uncharted waters.

Newspaper losses accelerate
The fall in newspaper online revenue came despite higher website traffic, company documents show. Gannett captured 15.6% of the U.S. Internet audience last month, up from 15% in September 2006, according to Nielsen//NetRatings.

What’s more, the online revenue decline comes as newspaper advertising losses accelerate: Ad sales plunged $210.6 million, or 18%, in the third quarter from a year ago — the single-biggest drop since sales started falling early last year.

Meanwhile, Gannett’s purely digital businesses aren’t making up the difference, other data show. Digital sales totaled $77.6 million, up from $17.2 million in last year’s third quarter. This newly created revenue category comprises jobs site CareerBuilder, ad services company PointRoll, plus other ventures.

Tweak vs. fatal flaw
The bottom line: Gannett’s profit plunged 32% in the third quarter on a 9% decline in operating revenue, shaking investor conference, and guaranteeing another round of job reductions by year’s end, Chief Financial Officer Gracia Martore told the Friday teleconference.

Advocates of the Information Center model might argue that the newspaper division’s revenue losses would have been even worse without a big change in how Gannett gathers and distributes news. Rather than abandoning it, they’ve begun revising the concept.

But a mere tweaking will not address the Information Center’s fatal flaw: It was to be launched while Gannett simultaneously reduced employment in the newspaper division. Dubow didn’t make that clear in his original Information Center memo. It became obvious over the past two months, as GCI cut more than 1,000 newspaper jobs through layoffs and other means.

You cannot do this simultaneously and succeed: build an innovative digital start-up (the websites, moms microsites, Metromix, etc.) while also putting out 85 traditional daily newspapers — all at Internet speed, but with fewer employees, shoveling as much cash as possible to investors.

Gannett is now spreading the Information Center strategy to its TV stations and U.K. newspapers, even as the company plans more job cuts amid a likely global economic downturn. In Friday’s earnings statement, Dubow made clear he won’t turn away from that strategy. “While our results this quarter reflect the difficult and volatile economy both here and in the U.K., they also highlight our determination to move forward with our strategic plan,” he said.

And, yet: Is it determination — or desperation?

Please post your thoughts 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: yesterday’s News-Press in Fort Myers, Fla., Newseum. The paper was one of the test sites for the information center concept]

No. 6: You get comprehensive earnings news here!

October 25, 2008

Part of an occasional series of reasons to support Gannett Blog‘s pledge drive; it ends Nov. 2. I’m trying to earn $6,000 quarterly, through advertising and voluntary subscriptions of $5 per reader.

Yesterday’s totals:

  • Advertising: $13.43
  • Subscriptions: $0

To buy a $5 subscription, please use the “Donate” tool in the green sidebar, upper right. Any amount appreciated! Post feedback in the comments section, below. Send e-mail to gannettblog[at]gmail[dot-com].

Briefs: Online ad sales fall; Newsquest staying put?

October 25, 2008

Odds ‘n’ ends left over from yesterday’s third-quarter earnings report, and Wall Street teleconference.

Online revenues down
In what may be a first — and not a good one — online advertising sales in the 84-daily community newspaper division have fallen.

Such sales fell about 7% in the third quarter from a year ago, CEO Craig Dubow (left) told Wall Street stock analysts. In contrast, he said, U.K. newspaper division Newsquest was up about 10%, in British pounds Sterling. Broadcasting rose about 15%. (These figures are in the teleconference transcript; I can’t find the same dataset in the earnings release, however.)

Dubow’s breakdown for domestic and U.K. is the first I’ve seen in a year; earlier 10-Q filings with the U.S. Securities and Exchange Commission gave one figure for all of GCI’s papers. Indeed, the last time Gannett reported a separate figure for U.S. papers — in 2007’s third quarter 10-Q — domestic online revenue rose 11% from a year before. So, the U.S. papers have gone from 11% quarterly growth to a 7% decline. This is not a good thing.

Four-state squeeze
Arizona, California, Florida, and Nevada have had much larger declines in classified advertising relative to the rest of Gannett’s markets, and that continued again in the third quarter. Properties in those states produced about 23% of the community newspaper division’s ad revenue — but they drove 36% of the ad revenue decline.

Here’s what this boils down to: The Arizona Republic and four Florida newspapers pumped up Gannett’s revenue during the housing bubble. They had booming real estate markets — and all the ad sales that came with a boom. But when the bust hit, advertising withered, and they contributed more than a third of the 18% dive in third-quarter newspaper ad sales.

Newsquest stays put?
Responding to a question from a stock analyst, Dubow didn’t sound like he’s interested in selling Gannett’s troubled U.K. division — despite published speculation to the contrary. “We have been very proud of what the Newsquest folks have done for us for a number of years and we are very, very aware of the impacts that have occurred because of the economy. . . . They are a bit behind us. I think it is quite clear when you take a look at it, maybe six to nine months or so in what we are seeing that’s already occurred here in the U.S.”

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 Republic, Newseum]

Sounds like Martore is signaling a dividend cut

October 24, 2008
“When you look at our share price, we are clearly not being paid for that dividend.”

— Chief Financial Officer Gracia Martore, in response to a stock analyst’s question yesterday about a possible dividend cut.

I’ve just re-read a transcript of yesterday’s third-quarter earnings teleconference, and I’m left with the impression a dividend cut is more likely. That’s hardly surprising: The yield is now 17%. Following are exchanges between Martore and media stock analysts.

Q: Do you have discussions around the dividend, and would you change the dividend?

Martore: I think given the current credit crisis and the economic backdrop, as with all companies in the United States, frankly, we are evaluating our capital allocation. We’ve discussed it, we will continue to discuss it with the board. We are going to weigh it against having flexibility within our balance sheet, while at the same time doing the right thing by our shareholders. But obviously when you look at our share price, we are clearly not being paid for that dividend at this point.

Q: Is that on the table in terms of cutting the dividend?

Martore: You know, as we’ve said, we talk with our board on a regular basis about capital allocation. We will be meeting with them next week and we will meet with them again in December and certainly our dividend, share repurchases, debt, our balance sheet, will all be topics of discussion.

Please post your thoughts 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.

[Transcript: Seeking Alpha]

Martore: More job cuts coming at newspapers

October 24, 2008

Gannett advised investors today about more job reductions by the end of the year, with details to come in early December. Chief Financial Officer Gracia Martore did not say whether the cuts would involve buyouts, layoffs, attrition — or a combination.

“We will be looking at additional (full-time equivalent) reductions in the fourth quarter, certainly on the publishing side, here on the Corporate side, and in other divisions,” she told a third-quarter earnings teleconference of stock analysts. (Her reference to the “publishing side” mostly applies to the 84 revenue-losing community dailies.)

Martore continued, according to the conference transcript: “We are in the planning process right now and looking out to 2009, so when we do, we will try to report on that for you, give you a better sense of it, when we are up on Wall Street in early December.”

Her remarks followed CEO Craig Dubow‘s warning last week that another round of layoffs could be announced by year’s end. Based on Martore’s comments, I now suspect that those proposed spending cuts I posted on last week — as high as 7.5% — may apply to 2009’s budget, rather than to current spending.

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.

In new disclosure, digital less than 5% of total sales

October 24, 2008

Gannett began breaking out its digital revenue with today’s third-quarter earnings report — and the results are eye-opening.

Revenue from jobs site CareerBuilder, ad services division PointRoll, and other digital subsidiaries totaled $77.6 million — 4.7% of the $1.64 billion in operating revenue during the period. That’s way up from $17.2 million a year ago, although it remains just a tiny fraction of Gannett’s overall operations — underlining the challenge ahead, given digital’s importance in the future.

In a fresh comment, a reader says: “It’s only sort of correct that digital division revenue is 4.7% — Q3 only included 1 month of CareerBuilder revenue. By Q4 the division will be 11% or more of GCI revenue. Chief Financial Officer Gracia Martore said:

‘Revenue in the digital segment was about $78 million this quarter …. On a pro forma basis, assuming we owned CareerBuilder and Shop Local for the entire third quarter in 2008, digital revenue would have been in the range of $175 million to $185 million …'”

Bye-bye, monthly stats
The digital breakout came in lieu of the familiar monthly statistical report, which Gannett said today it had discontinued, citing big fluctuations in digital revenue. Yet, media stock analysts told Corporate in an earnings teleconference that they still wanted the monthly report. “You guys don’t stop printing a newspaper when the news is really bad,” said Craig Huber of Barclays Capital. “Why is this being stopped now? I mean, you guys have been doing this for well over 15 years.”

Chief Financial Officer Gracia Martore rushed to correct that impression, however, saying the report wasn’t significant because GCI isn’t run on a month-to-month basis. Still, sensing dissatisfaction on the conference call, she suggested the report could return. “At a point, we may re-institute it,” she said. (Conference transcript.)

It sure seems like an odd move. The trend among publicly traded companies like Gannett has been toward more disclosure, more “transparency.” Discontinuing the monthly report now, when there’s so much uncertainty, only sows suspicions about ulterior motives. “This is like the very worst time you could possibly pull it,” Huber said.

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.

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

October 24, 2008

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]

First edition: Today’s earnings, your reaction

October 24, 2008

Gannett discloses third-quarter earnings this morning in a statement that should hit news wires by about 8:30 a.m. ET. East Coast readers will probably see it before I do, since I’m on the West Coast.

So, please post details — including text from the earnings statement itself — in the comments section, below. And don’t be shy about flagging the most interesting stuff you find; that’ll give me a running start. (Yes, it’s crowdsourcing!)

I’m pretty sure Gannett will move the statement on PR Newswire. You might also check Business Wire. Eventually, it will show up in the online investor relations section.

Wall Street has forecast sharp declines for the quarter. If Gannett doesn’t at least meet these already marked-down third-quarter figures, the company’s beleaguered stock could fall further:

  • Profit: 75 cents a share vs. $1.01 a year ago
  • Sales: $1.62 billion vs. $1.81 billion
In a comment, a reader warned today’s teleconference with Wall Street analysts could be “absolutely brutal. It’s certainly not coincidental that the note announcing Corporate buyouts came out the day before.”

I plan to monitor that 10 a.m. ET listen-only conference call, where top GCI executives will answer questions from media stock analysts. The call will be webcast, and is open to the public, although only analysts get to pose questions. (Webcast details.)

In late-day rally, Gannett shares close higher

October 23, 2008

The company’s stock closed this afternoon at $9.64, up 3.5%, after trading as low as $8.49 earlier in the day — less than 24 hours before Gannett is scheduled to release third-quarter earnings. The shares’ recovery came as newspaper industry stocks overall were beaten down by a dividend cut warning by the New York Times Co. this morning. GCI’s rise followed a jaw-dropping 11% plunge in the stock yesterday.