NY Times misses Wall Street revenue forecast
NEW YORK --As shifting reader habits and ad spending combine with the worsening economy to knock newspaper publishers on their heels, the New York Times Co. reported an 11 percent drop in second-quarter advertising revenue Wednesday.
That drop contributed to an 82 percent plunge in the company's second-quarter earnings compared with a year ago, when a one-time gain from the sale of a unit boosted the bottom line.
The outlook for the current quarter is no better.
Advertising revenue at the company's flagship paper fell 18 percent in June -- and CEO Janet Robinson said Wednesday there has been no improvement so far in July, compared to spending in the same months last year. She said advertisers "are really saving dollars" as they try to offset higher energy costs and lower consumer spending by cutting ad spending.
"The bad news is June, that the economy has gotten worse," said Edward Atorino, an industry analyst with Benchmark Co. "And the second half is going to be more of a struggle than I thought for all newspaper publishers."
Net income at Times Co. fell to $21.1 million, or 15 cents per share, from $118.4 million, or 82 cents per share, a year ago. Total revenue in the quarter fell 6 percent to $741.9 million and missed the Wall Street projection of $754 million. The 11 percent decline in ad revenue came mostly in classifieds.
In the second quarter of 2007, the company got a 66-cents-per-share boost from selling its broadcast media group but also took a 14-cent hit from other one-time items. In the second quart of 2008, it took a one-time charge of $15.7 million, or 11 cents per share, to cover staff buyouts.
Earnings from continuing operations slid 6 percent to $20.9 million, or 15 cents per share. Excluding one-time items like the buyout expenses, earnings were 26 cents per share, the company said.
That topped the forecast of analysts polled by Thomson Financial, who on average expected profit of 22 cents per share. Most of their forecasts excluded buyout charges, making them comparable to the Times' 26-cent figure.
The better-than-expected result pushed up Times shares by 34 cents, or 2.6 percent, to close at $13.20 Wednesday. In the past year, the stock has ranged from $12.08 to $23.85.
"We saw the continued effect on our businesses of the U.S. economic slowdown and secular forces playing out across the media industry," Robinson said in a statement about the results.
Airlines, hotel operators and automakers have all curbed advertising spending this month as higher energy costs crimp their businesses, she said, adding, "We expect that will continue for some time."
Gannett Co., publisher of nation's largest paper, and Media General Inc., which publishes the Richmond Times-Dispatch, also reported worsening ad revenue trends in June.
McClatchy Co., Lee Enterprises and E.W. Scripps Co. report second-quarter results Thursday.
"One hopes June is an aberration, that advertisers are saving money for fall," Atorino said.
That hope -- that the rapid deterioration of ad revenue is only temporary -- has persisted despite several years of data that are beginning to make clear the industry's revenue model is broken and may be irreparable.
Publishers have beefed up their Web presence to try to recapture some of the lost ad dollars, but advertisers pay significantly less per online ad than they did for print space.
Revenue from the Times Co.'s Internet properties -- which include its newspaper Web sites and the About.com consumer information site -- jumped 13 percent to $91.3 million and accounted for about 12 percent of total revenue. That is 2 percentage points more than in the same period a year ago.
The Times fares better than most of its peers in getting revenue from its online operations -- Gannett Co., publisher of USA Today and other papers across the country, gets just over 5 percent of total revenue on the Web, for example. But online revenue growth is not quick enough to offset the decline in print ad revenue.
The Times plans to devote much of its capital expenditures for the year to improve technology and boost sales staff for its digital properties. The company did not provide details for any plans.
"The issue with newspapers is they've gotten into tiny things that don't have much of an impact," Atorino said. He praised the Times for being the "biggest and the best" online, but said, "They're just nudging the needle with the Internet."
Meanwhile, the Times was able to reduce second-quarter operating costs by 2 percent by reducing staff, paying fewer bonuses and reducing newsprint consumption. A company spokeswoman said the company has no plans for further newsroom staff reductions.
The cut this year of 100 people is expected to produce up to $40 million in related costs during fiscal 2008. The Times said it is on pace to shave $130 million off expenses this year and $230 million next year, compared with 2007.
Higher newsstand and subscription prices for the Times boosted circulation revenue 2.5 percent. The company said it will increase the Monday-Saturday newsstand cost of its flagship paper by 25 cents to $1.50 beginning Aug. 18. The Sunday Times will still cost $4. That is expected to boost revenue by less than $10 million.
Besides the Times and The Boston Globe, Times Co. owns the International Herald Tribune, regional newspapers, the online consumer information site About.com and the classical music radio station WQXR-FM in New York. 