NEW YORK (Reuters) - A sharp drop in classified advertising sales brought on by free Internet listings and a cooling real estate market helped push U.S. newspaper publishers’ financial results lower in the first quarter.
Gannett Co. Inc., New York Times Co. and Journal Register Co. reported drops in revenue and profit on Thursday, while Tribune Co. and Media GeneralInc. both swung to losses from a year earlier.
“The theme here is severe, almost unprecedented declines in classified advertising, particularly real estate and auto,” Benchmark Co. analyst Ed Atorino said.
The Times, Tribune and Media General posted results that beat analyst forecasts, according to Reuters Estimates, while Gannett and Journal Register narrowly missed expectations.
Newspaper shares fell in Thursday trading, with the Times taking the biggest drop at more than 2.5 percent.
Classified sales were hurt by tough economic conditions in some U.S. regions, as well as slowing home sales and winter storms, publishers said. But beyond that, the industry is still reeling from Web sites such as Craigslist.org that offer free classifieds.
Newspapers are making deals with the likes of Yahoo Inc. and Google Inc. to expand their Web advertising reach, and online sales are rising as a result. But that only accounts for 10 percent or less of total revenue.
“I don’t think this is some kind of death knell,” Atorino said. “The numbers were in line with some of the low expectations.”
Online operations improved for most publishers. But the Times pulled back from its digital revenue growth forecast of 30 percent for 2007, citing a slower rise in ad sales.
The news comes as some Times shareholders try to get the company to eliminate a dual-class share structure that allows the Ochs-Sulzberger family to control the company’s direction.
POOR WEATHER AND AUTO WOES
Gannett cited severe winter storms in parts of the United States for curtailing ad spending during the quarter as well as a weak real estate market.
“The housing cycle, and it is a cycle, will also pass, though we can’t predict when,” Chief Financial Officer Gracia Martore told analysts on a conference call. “But when it does, we will be well positioned to capitalize on those better revenue results.”
Net income fell to $210.6 million, or 90 cents a share, from $235.3 million, or 99 cents a share, last year. Revenue fell to $1.87 billion from $1.88 billion a year ago.
Pro forma ad revenue at Gannett’s U.S. newspapers fell 4.8 percent, while at USA Today it fell 7.9 percent.
Journal Register cited difficult economic conditions in Michigan, where it publishes several papers, particularly as the auto industry based there overhauls its business. Ad revenue fell 6.9 percent to $86.4 million.
Tribune, which swung to a loss on special charges, said ad revenue fell 6 percent, with classified ad revenue down 14 percent. Especially hard hit were South Florida and Orlando, with real estate down 15 percent, help-wanted down 14 percent and auto revenue down 16 percent.
“Tribune’s first-quarter results were largely in line with our expectations and highlight continued newspaper softness,” Morgan Stanley analyst Lisa Monaco wrote in a note to clients.
Tribune is going private in an $8.2 billion deal involving Chicago real estate magnate Sam Zell.
Ad revenue at the New York Times media group fell 4 percent during the quarter. Residential real estate ads dropped 8 percent due to a decline in local and national markets.
Media General, which publishes the Tampa Tribune, also saw poorer results in Florida, though its Richmond Times Dispatch paper in Virginia saw a 2.8 percent increase in revenue on higher average rates and real estate linage.
Overall Media General classified sales fell 13.8 percent.
Gannett shares fell 71 cents, or 1.2 percent, to close at $57.60 on the New York Stock Exchange. Journal Register shares dipped 7 cents, or 1.2 percent, to $5.84. Media General shed 57 cents, or 1.5 percent, to $38.52. New York Times dropped 66 cents, or 2.7 percent, to $23.90. Tribune declined 21 cents to $32.48.
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