By: Jennifer Saba
Gannett was one of the first companies to report 3Q results this morning an appropriate slot given that many consider the company a bellwether.
“[Gannett’s] weak September results likely confirm the cautious outlook by several management teams on August revenue performance releases,” wrote Alexia Quadrani, an analyst with Bear Stearns, in a note released this morning. “We expect the trend of lower than [expected] top line results, offset by more aggressive cost cutting to be a dominant theme in 3Q for the publishers.”
During this morning’s conference call, analysts focused on a few themes: Detroit and Gannett’s use of cash.
For 3Q, operating expenses at the Detroit Free Press and Detroit News, which Gannett owns a majority of the paper operated by MediaNews Group, grew 4.9%.
Given those numbers and Detroit’s size, it prompted Merrill Lynch analyst Lauren Rich Fine to ask: “How bad are things with Detroit?”
Gannett Executive Vice President and CFO Gracia Martore said that “the folks” in Detroit are doing a “terrific job dealing with the expense side,” but that the revenue environment has been “tough.”
CEO Craig Dubow followed up and commented on how Gannett was “comfortable” with Detroit — a market hammered by the flailing automotive industry.
With all the movement in the industry and Tribune’s announcement that it could be in play encouraged several analysts to inquire after Gannett’s use of cash.
Dubow restated that Gannett will continue its strategy of share buybacks, declaring dividends, and looking at “strong acquisitions” that fit Gannett’s portfolio.
He did shed a little light on what catches the interest of executives on the deal front: “We feel absolutely enthusiastic about larger market duopolies,” Dubow said adding the company is “looking hard” at acquiring potential digital properties as well. “There are no restrictions to how we pursue an investment.”
Incidentally, Gannett said it does not have first right of refusal over Tribune’s share of CareerBuilder should Tribune sell. That was not the case when Knight Ridder was sold to McClatchy. Gannett and Tribune had first dibs over Knight Ridder’s portion.