By: Jennifer Saba
Tribune reported last week that advertising revenue for Q1 for its publishing division was flat at $787.6 million compared to the same period a year ago. Excluding Newsday, ad revenue grew 1%.
Retail advertising declined 2% due to decreases in the food and drug stores, department stores, and electronic categories. Preprint revenue dropped 2%. Excluding Newsday, preprint revenue was up 3%.
During a conference call with analysts and investors, Dennis FitzSimons, chairman, president, and CEO of Tribune, attributed Newsday?s drop in preprint revenue — it plummeted 28% — to a terminated relationship with one of the paper?s main outside sales agent in March 2005. ?Some preprint customers elected to move business to that individual?s competing products,? he said during the call. ?Bringing that business back is one of our highest priorities.?
National advertising slipped 8% primarily due to declines in movie advertising at the Los Angeles Times. The paper experienced an 18% decrease or about $10 million in the category. Traditionally, Q1 is the best quarter for movie advertising. Don Grenesko, senior vice president of finance and administration, said during the call that big studios backed fewer movies nominated for awards this season, hence the drop-off in movie ads. Additionally, he cited a ?glut of movies and not very great ones? with short theater runs.
Company-wide, automotive and technology also weighed down national results. Telecom and wireless were up.
Classified advertising at the company was up 8%. Within that category, help wanted advanced 7%; real estate jumped 35%; and auto declined 10%.
Interactive revenue was up 30% to $51 million.
Circulation revenue was down 4%.
During the call investors expressed concern that Tribune was not being aggressive with its use of free cash flow, especially with its share-repurchasing program. A report issued by Merrill Lynch notes that Tribune spent $138 million on share buybacks in Q1 with the expectation of spending $350 to $400 million for the year. Executives said during the call they want to set aside cash for possible acquisitions, most likely Internet related.
?While positive directionally, [the share buybacks] were shy of our expectations and with commentary that Tribune wants to pursue acquisitions, we are a bit concerned,? wrote Merrill Lynch analyst Lauren Rich Fine. ?Given Internet valuations and nothing obvious to us that fits Tribune?s expertise, we fear this could destroy rather than enhance value.?
Meanwhile, Knight Ridder reported today that advertising revenue for Q1 grew 4.4% to $582.7 million in Q1 compared to the same period a year ago. On a pro forma basis excluding the Idaho and two Washington papers Knight Ridder acquired in August 2005, total ad revenue was up 1%.
Retail was down 0.8%. National declined 9%. Classified was up 7.3%. Within the classified category, employment was up 14.6%, real estate was up 21.8%, and auto declined 11.4%.
?National advertising was poor throughout the quarter,? said Steve Rossi, Knight Ridder senior vice president and CFO, in a statement. Entertainment, which represents roughly 8% of the category, was down 16.9%.
The 20 papers that McClatchy intends to acquire, ad revenue was up 2.3% in Q1. For the 12 papers that McClatchy plans to sell, ad revenue declined 0.4%.