McClatchy Reports Weak Q1, Cites Toughest Ad Climate in Years

By: E&P Staff McClatchy reported this morning that Q1 earnings per share fell to 18 cents compared to 46 cents per share for the same period a year ago. The company said earnings were impacted by 7 cents because of the sale of the Star Tribune. Total net income was $9 million or 11 cents per share compared with 59 cents per share last year. McClatchy was negatively impacted by the Knight Ridder acquisition when it issued 35 million Class A shares.

On a pro forma basis, including the Knight Ridder properties, revenue dropped 5% to $596.3 million. Advertising revenue slipped 5.3% to $477 million. Circulation revenue decreased 3.6% to $71.9 million.

Expenses were down 6.3% due to savings from overlaps in the KR acquisition, staff reductions, and lower newsprint costs.

"In Q1 we faced the toughest advertising climate we have seen in a number of years," Gary Pruitt, chairman and CEO of the company, said in a statement. "In particular, real estate and automotive advertising were hurt by the continuing declines in sales of both homes and domestic vehicles."

Retail advertising revenue rose 0.8% to $206 million. National advertising declined 10.4% to $45 million. Classified advertising revenue dropped 10.9% to $188.5 million. Within the classified category, automotive plummeted 16.1% to $42.1 million. Real estate skidded 14.1% to $55.1 million. Help wanted was down 8% to $69.6 million.

The company reported that its Florida region experienced the biggest declines in advertising revenue, down 12% to $82.1 million. Advertising revenue at its California properties dropped 9.7% to $92.4 million.

Pruitt forecasted that there will be little relief in Q2 and that results should be in line with Q1. Executives expect real estate advertising revenue to continue to drop especially in Florida and California.

"The cyclical downturn in all three major classified categories is exacerbating the impact of structural shifts affecting newspapers." Pruitt said. "However, we believe our strategic moves in acquiring Knight Ridder and selling the Star Tribune have both helped us in this difficult time and made us an even stronger competitor."