McClatchy's 2Q expected to show more ad erosion

AP News
Posted: Jul 27, 2011 2:47 PM
McClatchy's 2Q expected to show more ad erosion

McClatchy Co.'s second-quarter earnings will show how much further the newspaper publisher's revenue has fallen in a slump that has triggered massive staff cutbacks.

WHAT TO WATCH FOR: As with all major newspaper publishers, the severity of the decline in McClatchy's print advertising will be the focal point when the numbers come out Thursday before the stock market opens. Newspapers have been struggling for so long that it will likely be seen as an encouraging sign if McClatchy's advertising in the second quarter fell less than it did during the first three months of the year. The company's first-quarter revenue fell 11 percent from the same time last year, worse than the 7 percent decline in last year's final quarter.

McClatchy's ad revenue probably decreased by less than 10 percent, based on the second-quarter results already reported by two other major newspaper publishers, Gannett Co., which owns USA Today, and The New York Times Co. Ad revenue at Gannett's more than 80 newspapers declined by about 6 percent in April-June period. The Times Co.'s ad revenue dropped 4 percent.

In recent years, the quarterly declines at McClatchy have tended to be slightly worse than at its peers. That's primarily because two of the company's largest newspapers, The Sacramento Bee and The Miami Herald, are in markets particularly hard hit by the downturn in home sales. Real estate ads traditionally have been among newspapers' major moneymakers.

McClatchy will likely report an increase in Internet advertising, but the online gains in recent years haven't been nearly enough to offset the erosion in print advertising. Print ads sell for about 10 times more than online ads, one of the reasons companies are shifting more of their marketing budgets to the Internet.

With less money coming in, McClatchy has cut its work force in half the past three years. The latest cutbacks eliminated 540 jobs in the first quarter, leaving McClatchy 7,240 full-time positions at the end of March. McClatchy CEO Gary Pruitt said in April that the company would evaluate the need for additional cuts based on how its 30 daily newspapers fared in the second quarter.

WHY IT MATTERS: Stemming the decline in print ad revenue would make it less likely that McClatchy will have to further trim its staff and news coverage.

WHAT'S EXPECTED: The average estimate of three analysts polled by FactSet is earnings of 5 cents per share.

LAST YEAR'S QUARTER: McClatchy earned $7.3 million, or 9 cents per share, on revenue of $342 million.