From: Reuters
Published April 21, 2008 12:12 PM

Gannett quarterly profit falls

By Robert MacMillan

NEW YORK (Reuters) - Gannett Co Inc <GCI.N>, the largest U.S. newspaper publisher, posted a 9 percent drop in quarterly profit and sharply lower classified advertising on Monday as a weaker U.S. economy deepened a print industry ad slump.

The USA Today publisher said first-quarter net income fell to $191.8 million, or 84 cents a share, from $210.6 million, or 90 cents a share, a year earlier.

The results included a gain of 7 cents a share on a land sale. Excluding that gain, earnings were 77 cents a share, a penny short of the average Wall Street forecast, according to Reuters Estimates.

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Revenue fell 8.4 percent to $1.7 billion, in line with analysts' expectations.

"They made the number," said Benchmark Co analyst Edward Atorino. "In a perverse way, in today's environment, that's probably not bad news."

Chief Executive Craig Dubow called the advertising environment challenging, citing particular economic weakness in the second half of March.

"We are focused on positioning the company for the future from both a revenue and expense perspective as we navigate the uncertain economic environment," he said.

In the month of March alone, revenue fell 10.3 percent from a year earlier, and publishing ad revenue dropped 12.8 percent. Real estate revenue was hit particularly hard, down 26.3 percent. USA Today ad revenue fell 14 percent.

Gannett, which publishes regional U.S. newspapers like the The News Journal in Wilmington, Delaware, and The Daily Journal in Vineland, New Jersey, is fighting a steady decline in print advertising that has hurt the newspaper industry as a whole.

Lee Enterprises Inc <LEE.N> on Monday reported quarterly earnings of 8 cents a share before special items, down from 19 cents a year earlier.

New York Times Co <NYT.N> last week posted a quarterly net loss, though it broke even on a per-share basis. Media General Inc <MEG.N> also reported a quarterly loss last week.

Gannett shares rose 16 cents to $28.14 in midday trade on the New York Stock Exchange.

RETAIL ADVERTISING SLIDES

First-quarter advertising revenue in Gannett's publishing unit fell 8.3 percent to $1.1 billion, with retail ad revenue falling 7.8 percent and national revenue flat.

Ad revenue in the United States, home to most of Gannett's operations, dropped 11.2 percent. Ad revenue rose 2.1 percent at USA Today, but paid advertising pages fell.

Total publishing revenue fell 8.6 percent to $1.5 billion, while broadcast revenue fell 7 percent to $170.2 million.

Online revenue rose 6.5 percent, Dubow said on a conference call with analysts. U.S. online revenue rose 3 percent, "tempered by a decline in employment advertising that masked the strong growth we are seeing in auto as well as retail and national advertising," he said.

Gannett has been retooling its newspaper newsrooms to better serve a growing Internet audience, and also is a co-owner of the quadrantONE ad network, which wants to build local online newspaper ad sales by making it easier for businesses to place ads on multiple papers' Web sites.

Gannett and other newspaper publishers hope that such moves will compensate for the loss of print revenue that is hurting their business, but they cannot say when this will happen. In the meantime, they are trying to cut costs to please shareholders.

In the first quarter, Gannett's operating expenses fell 6.9 percent to $1.3 billion, in part because of lower newsprint usage and expense.

(Editing by John Wallace)

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