McClatchy Chief Responds to Concerns over Cost Cuts, Future

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By: Jennifer Saba

As the McClatchy Co. posted double-digit revenue losses for Q1 this morning, investors and analysts raised concerns that McClatchy may have run out of room to maneuver the downturn in the economy and the secular changes facing the industry.

During a Q1 earnings call this afternoon, McClatchy Chairman and CEO Gary Pruitt fielded questions ranging from the future of the company to cost cutting initiatives.

“You’ve done a good job managing costs but it feels like you are running out of strength. … What is next? You can’t keep cutting headcount I assume?” lobbed one analyst.

“We do feel we are doing a good job on [costs].” Pruitt said. “We feel we have no choice. Given revenue trends we have to reduce costs.”

With the rise in newsprint prices expected to hit later this year, Pruitt said the company has to look for “further efficiencies.” McClatchy is one track, he noted to sustain double digit run rates on expense declines.

Where those cuts will occur, is another matter. When asked to elaborate on future reductions, Pruitt said it was important that the company maintain its ability to generate revenue. “We want to make sure the revenue engine is fully revved and fully staffed,” he said. “We constantly ask the question, ‘if we started a news company today what would it look like, how would it be structured?'”

The company wants to take advantage of technology “which allows us to be more flexible in staffing and not burdened by legacy cost structures,” Pruitt continued. “It’s a difficult but essential process.”

When asked if that future company includes classifieds, Pruitt said.
“We know directionally where classified is headed… We are operating the company assuming print classified will decline as it moves increasingly to the Internet.

“We see those ads together print and online only we offer that solution locally. Print classifieds are not going to zero — particularly in auto and real estate. Employment is the category that will migrate most and already has migrated most to the Internet. We expect we will be the local leader in each of those categories,” Pruitt said, adding the company plan is to keep and make future investments in online classified companies.

One caller asked about the morale of employees given the cost cuts and general malaise of the industry. Pruitt said, “We want to look ahead and structure the company in a way that makes sense … not in a way that straitjackets us from selling advertising or producing quality journalism. It’s always difficult to operate in an economic downturn and maintain employee morale — it’s a constant challenge. But McClatchy is a high quality company.”

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