Goldman Sachs: Newspapers In January Off To A ‘Lousy’ Start

By: Jennifer Saba

The newspaper companies that reported January numbers didn’t catch observers off-guard with double digit declines in advertising revenue. In a note issued by Goldman Sachs, lead analyst Peter Appert wrote that the January results are “not surprisingly lousy.”

Overall for the companies Goldman covers, advertising revenue skidded an estimated 11.4% in January compared to the same period a year ago. It’s the worst performance the industry turned in since Q4 2001.

“So much for an ’08 rebound off of easy ’07 comps,” wrote Appert.

The breakdown is even more dispiriting, considering that classified revenue plunged almost 20%, suggesting the economy is in a recession.

Retail dropped 7.9% and national was down 2.7% in January.

By company, Appert noted that the cost control efforts of Gannett wouldn’t protect the country’s biggest newspaper chain from ad revenue declines.

McClatchy is particularly exposed as a pure-play newspaper company. “While we have high confidence in management’s execution capabilities, high debt levels and significant exposure to a weak newspaper advertising revenue environment places McClatchy in a very difficult positions in the context of the challenging newspaper industry backdrop,” according to the note.

Lots of debt could hurt GateHouse Media too, given declining ad revenue that points to the fact that smaller markets are not immune to economic trends.

Appert warns investors to ignore the rally in New York Times Co. shares caused by the activity by two shareholders. “We’d be sellers into the strength.”

At the moment, Goldman is hanging out on the sidelines before it revises its Q1 estimates but notes, “We see nothing on the near-term horizon to alter our long-held view that investors should remain underweight the sector.”

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