KR Web Strong, But Circ Still a Challenge

By: Jennifer Saba The 10% surge in first quarter profits reported by Knight Ridder on Thursday wasn't the only good news for the company, CEO Tony Ridder noted during a quarterly earnings call.

Knight Ridder Digital's revenue for the quarter rose 42.6% to $24.5 million, and operating profits increased $6.7 million versus $2 million for the same period last year.

But not everything is rosy. Despite increases in unique visitors -- to 15.7 million for the month of March -- Hilary Schneider, president and CEO of KR Digital, said that the company was working to match that in revenues after an analyst brought up concerns that Monster was well ahead of CareerBuilder in that regard. "With gains in audience and listing share, we feel comfortable that we can close that gap," she said. Knight Ridder is a co-owner of Chicago-based CareerBuilder, along with Tribune Co. and Gannett Co. Inc.

For Knight Ridder overall, advertising revenue is up 2.1% with growth in national (up 5.9%) and classified (up 2.8%). But the retail category remains frail. Tony Ridder noted that retail advertising is essentially flat (up 0.3%) partly because of Kmart's setbacks. The company's recent closings and critical vendor lawsuit impacted the bottom line by about 1% of the total retail category or $800,000 for the quarter. Ad revenues from department stores also remain weak. Executives do not expect the retail category to reap much in the way of gains for the remainder of the year as many "contracts have already been signed for reduced levels."

Ridder also said that "circulation growth is challenging" but expects it to be up for the year. Circulation revenue for Q1 was down 1.9% but remains a top priority. Knight Ridder has not introduced any price cuts since 2002 and instead plans to focus on promotional efforts like direct mailings, new subscription discounts and an emphasis on "easy pay" to boost sales.

Steve Rossi, president of the newspaper division, acknowledged that the do-not-call legislation affected about 14% of all orders or roughly a 35,000-40,000 decline in orders company-wide. To offset this, the company is increasing its presence in malls and stores, the amount of money spent on crews and easy pay incentives.

Knight Ridder's total costs rose 2.1% for the quarter. Labor and employee benefits are up 5%. Although salaries only increased 1%, pension expenses were up 43.5%.