UPDATE: McClatchy Reports Soft Q1 Results; Pruitt Still Expects KR Deal by July 1

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By: E&P Staff

Facing a tough Q1, McClatchy reported today earnings of $27.7 million or $.59 per share compared with $32.3 million or $.69 per share in the same quarter a year ago. Excluding the impact of stock related compensation, earnings were $.62 per share in Q1.

Total revenue was up slightly 0.4% to $282 million. Advertising revenue grew 1.4% to $237.1 million. Circulation revenue declined 4.5% to $39.5 million.

“We faced our toughest comparison in quarter-to-quarter advertising revenue growth,” said CEO Gary Pruitt in a statement. “Real estate, employment, and direct marketing advertising grew strongly in the quarter, but automotive and national advertising fell.”

Pruitt attributed the lower earnings results to the stock related compensation expense, increases in pension and medical costs and higher newsprint prices.

During a conference call with analysts and shareholders, Pruitt said he expects the Knight Ridder deal to close on July 1 if all goes well with the Justice Department. “We don’t expect significant issues to arise.”

Pruitt would only say that McClatchy is moving quickly to sell the 12 Knight Ridder papers, declining to give further details.

Additionally, he said that McClatchy is doing background work on its stake in CareerBuilder, the online employment site jointly owned by Tribune, Gannett, and Knight Ridder. Tribune and Gannett get first right of refusal over Knight Ridder’s stake. “There’s no real update we can discuss on this call,” Pruitt said, adding that McClatchy has a good relationship with both Tribune and Gannett. He said an update is likely during next quarter’s conference call.

Meanwhile, McClatchy expects the real estate, employment, and direct marketing categories to remain strong in Q2, while automotive and national trends will likely stay the same.

“Some may see the current slow advertising environment as confirmation of predications that newspapers and print media are dying. We think that’s wrong,” Pruitt said. “While there is certainly more competition for advertising in all media, McClatchy continues to gain share over other traditional media in our local markets, and online advertising is growing strongly — up 30.1% in Q1.”

For the quarter and including online, retail advertising revenue was down 1%. National declined 5.2%. Classified was up 3.8%. Within the classified category, auto slipped 17.8%, real estate advanced 27.1%, and employment rose 5%. Direct marketing was up 12.4%.

By region, only California and the Carolinas reported increases in ad revenue for the quarter, up 5.9% and 0.3% respectively. Minneapolis was down 2.3% and the Northwest declined 2.1%.

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