After The Bell Thursday: Selling On The News

Fitz: Gannett Co. executives presenting to analysts in New York Thursday could hardly have been cheerier about the company’s prospects, all things considered. Chief among those considerations, of course, is that ad revenue is expected to show a continuing  decline when Q1 results are posted.

CFO Gracia Martore emphasized that the momentum of Q4’s easing declines is also continuing in the not-so-new year. This quarter’s decline of newspaper revenue should drop to a single-digit percentage compared to the 18% plummet publishing revenue took in the final quarter of 2008. And Gannett said it was “comfortable” with The Street’s view that it will be profitable in the quarter, with the consensus at 40 cents a share.

All this (relatively) happy talk did nothing for Gannett (GCI) stock, though -- nor for the rest of the sector.

GCI ended the day at $16.40 a share, down 38 cents, or 2.3. On a day when the Dow recorded its eight straight up session, all but two NYSE newspaper stocks fell on the day, with The McClatchy Co.(MNI) pacing decliners by falling 4.4% on a 22-cent loss to $4.83.

The two gainers didn’t exactly win bragging rights at the Bull & Bear Bar, though: A.H. Belo (AHC) was up just 7 cents, or 0.9%, to $7.93 and Journal Communication’s (JRN) 2-cent gain to $4.01 amounted to just half a percent.

After The Bell: Another Day At The Beach For Newspaper Stocks

Fitz: Wall Street ended July on a “tame” or “tepid” note Friday, so the financial news headline writers said of the Dow's tiny 17-point gain. For the newspaper sector, though, the session  might better be described as “relaxing” or “comforting.” The newspaper stock rally lives on.

Friday’s Earnings Hero was The Washington Post Co. (NYSE: WPO). After soaring by more than 10%, nearly unheard-of for the pricey stock, WPO settled back to $451.50 on a $32.40, or 7.7%, gain. The last time WPO sold for so much was Oct. 8, 2008.

 Sure, the swing to profitability and the actual increase (!) in revenue that the Post Co. reported for Q2 had everything to do with its Kaplan education division and nothing to do with The Washington Post, where print ad revenue fell 20% and Internet classified was down 29%. The Street didn’t care, and it didn’t much distinguish between the Post Co.’s special business mix and the more pure-play publishing companies.

The biggest percentage gainer was community publisher Lee Enterprises (NYSE: LEE), which shot up 11% from yesterday’s profit-taking, closing at $1.41, a 14-cent gain.

Another pure-play, The McClatchy Co. (NYSE: MNI),  jumped 10.6%, on a 22-cent gain to $2.29. If MNI can hold the gains it’s made in just two weeks, it can put its delisting worries behind.

Gannett Co. (NYSE: GCI) joined The New York Times Co. (NYSE: NYT) in $7-a-share territory as it added 35 cents, or 5.3%, to close at 7 even. Volume for GCI was double the three-month average. NYT added 25 cents, or 3.3%, to $7.87.

B2B Maven Warns Saturday Mail Delivery May Be Doomed

Fitz: The political will to stop the U.S. Postal Service’s plan to eliminate Saturday mail delivery is waning, American Business Media (ABM) President CEO Gordon T. Hughes II warns in a video message Friday.

Postmaster General John Potter says the USPS will run up a record deficit this year and that the revenue stream from the declining volume of mail no longer supports six-day mail delivery.

“Now, for years Congress has enacted legislation requiring six-day delivery, and opposing the elimination of Saturday delivery. Well, it appears that this is waning, and that its inevitability is reluctantly being perceived,”  says Hughes, whose  association represents trade magazines and other business-to-business publications.

For newspapers, this cuts two ways. On the one hand it will hurt the mostly smaller-circulation papers that still delivery by mail in big numbers. On the other hand, if the USPS abandons delivery for the entire weekend, it could open up even more alternative delivery opportunities for newspapers.

Hughes’ message is that ABM and other organizations are in Washington intensely looking to protect the interest of print publications.

Unfortunately there was no embed code on the video, but you can link it here.

Street Cheers Revenue Jump At Kaplan, Er, I Mean Washington Post Co.

Fitz: With the latest quarterly earnings report from the Washington Post Co., it’s clear that the proud flagship newspaper isn’t just being outshined by the Kaplan education business -- it’s become a drag on the company itself.

That’s okay with Wall Street, which in early afternoon trading Friday had bid the Post Co. pricey stock (NYSE: WPO) up 10.1% -- an unusually high jump for a single session for the stock. At 1:30 p.m. Eastern, WPO was trading at $461.50, up 42.40 from the open. 

The Post Co. swung to a profit of $11.4 million, or $1.30 a share, in the quarter from a net loss a year ago of $2.7 million, or 31 cents a share. And while other newspaper publishers reported steep revenue drops for the quarter, most on the order of 20% or so, Post Co. revenue ticked up 2% to $1.13 billion, beating analysts expectations.

But the newspaper division recorded an operating loss of $89.3 million in Q2, and the only faint hope for optimism was that that was less than Q2 2008’s loss of $96.7 million. Still, the division is down $143.1 million for the first six months of this year, and that’s worse than 2008’s first-half operating loss of $95 million.

Revenue also drop in the newspaper division, by 14% to $197.3 million, and print ad revenue at The  Washington Post fell 20%, driven by what the Post Co. said were “large decreases” in classified, zoned and general advertising.

Newspaper failed to perform online as well, with its Internet revenue down 9% on classified ad revenue that slid 29% at washingtonpost.com.

If you sort SEC-reporting companies by category, Washington Post Co. no longer comes up with rest of its, um, peers in the newspaper business. The Washington Post -- which has shed Pulitzer Prize winners by the dozens in recent years and where even Bob Woodward is now an independent contractor -- could be regarded as just another publication Kaplan puts out. Like an LSAT test prep book, just not as profitable.

Friday Morning Links

Rick Edmonds on the hunt for online ads that work. People generally encounter "banner blindness" while online audience measurements must get more precise. (The Biz Blog)

The NYT continues to flirt with the prospect of selling its New England properties. Word comes today that two parties have reportedly submitted bids for The Boston Globe. One bidder includes Stephen Taylor, whose family sold the Globe to the NYT for more than $1 billion back in the early 1990s. Wouldn't that be something if he ends up picking it up for song? (The Boston Globe via Romenesko)

Felix Salmon doesn't exactly approve of Walter Hussman's strategy to put online content behind a pay wall, but he gets that it protects circulation revenue. (Reuters)

Newspapers skated by in Q2 by making deep cost cuts that aren't really deep enough to keep up with the ad downturn. Executives can't keep playing that card however, writes Alan Mutter. (Reflections of a Newsosaur)

San Antonio gets all creative with front page ads shapes. (Visual Editors)

After The Bell Thursday: Wall Street Punishes LEE, But Still Loves Newspapers

Fitz: There wasn’t enough good news in Lee Enterprises (NYSE: LEE) fiscal Q3 earnings report before the opening bell  Thursday to please investors, who hammered the stock down 33.9% in value by the time the session was through.

The Davenport, Iowa community publisher reported the same steep expense cuts and ad sales decline as its peers have for the past two weeks, but another goodwill impairment, though of course non-cash, erased earnings, its Internet revenue was down more than others, and circulation revenue actually went down as the chain is still getting around to paring low-profit deliveries.

But all that doesn’t mean The Street still doesn’t love newspapers. With the exception of LEE and The McClatchy Co. (NYSE: MNI), which fell 8.8% on a 20-cent decline to $2.07, the sector ended in positive territory.

A.H. Belo Corp. (NYSE: AHC), which earlier this week also reported a loss but a dramatically improved balance sheet, jumped 22.6%, increasing 45 cents to $2.44 on volume that was six times an average day’s.

Gannett Co. Inc. (NYSE: GCI) gained 39 cents, or 6.2%, to close at $6.65. The New York Times Co. (NYSE: NYT) ticked up a dime, or 1.3%, to $7.62.

One quiet beneficiary of the newspaper rally has been E.W. Scripps (NYSE: SSP), which had been rising even more Gannett touched off the run-up with its pleasantly surprising Q2 report. SSP closed up 28 cents, or 7.6%, to $3.98, and at one point in the session was actually more than half-way to its 52-week high of $7.99 -- something none of its peers have been able to say for a long while.

For the record: LEE down 65 cents, or 33.9%, to $1.27 on volume that was seven times normal.

In Toronto, Free Papers Will Soon Take The Train Home, Too.

Fitz: The glow came off free papers months ago, as the advertising crash reached beyond mainstream papers to suck all sorts of newspapers -- black, gay, Spanish-language -- into its vortex.

Yet, in Toronto, a Web-oriented business is determined to take on the challenge of publishing not just a free commuter daily in a city that already has two -- but an evening paper where the last p.m. daily folded 28 years ago.

FreshDaily, which hosts city Web sites in Toronto, Montreal and Vancouver, said it is launching a five-day evening daily to be called t.o.night on Sept. 8. The paper, distributed between 3:30 p.m. and 6:30 p.m. on workdays at downtown mass transit points, will have a distribution of 100,000 copies, FreshDaily said on the Toronto site, blogTO.

T.o.night will join the morning commuter papers 24 Hrs. and Metro in Toronto's crowded free paper space. But it will have evenings all to itself: The city hasn't had a p.m.-only daily for decades. When the Toronto Telegram folded in 1971 it was replaced by The Toronto Star, which soon began all-day publication. It switched to a morning cycle in 1981.

In late 2006 CanWest launched a free afternoon commuter daily in Ottawa called RushHour, followed by editions in Calgary and Edmonton in early 2007. As Piet Bakker's noted earlier this week in his Newspaper Innovation blog -- the best source for information about free papers --  the RushHours closed without much notice in the spring of 2008.

The Earl On Newsroom Cuts

Jen: Fitz, I don't know about you, but the addition of The Earl Blog penned by Earl Wilkinson, the executive director of INMA, is adding an interesting flavor to the soup of media discourse.  In his latest post -- really this is something to be checked out -- he muses about  Q2 results at the New York Times, Gannett, and McClatchy, and the profits obtained mostly by deep cost cutting.

As an editorial aside, it's shocking that the companies found 20% to cut. We at E&P have been posing the question for several years -- how much can a newspaper cut before it hits bone?

Wilkinson thinks the industry is morbidly obese particularly the belly of the newsrooms. He's been saying for years, that newspapers need to whack levels there and reinvest in business functions like marketing, advertising, and new technology.

The Earl writes:

The popular spin is that news corporations should reflect on the cutbacks needed to achieve these profits in bad times. That they should admit the errors of their ways. That the bloodbath in newsrooms has caused immeasurable harm. And – wait for it – now that we've re-established profitability, maybe we should consider restoring some of those editorial department jobs.

Numbers are a funny game. In the talking sport of newspapering, it's been suggested by prominent academics that an investment in “quality” – i.e., newsroom employment – equals better circulation.

Wilkinson sets out to prove his provocative claim by using circulation and employment data going back several decades. He figures that in 2007 the industry employed 21% more newsroom employees, while circulation fell 18% using 1980 as a benchmark year. Quality, Wilkinson says, does not necessary equate a big newsroom.

A Difference Three Months Can Make. Or Not.

Jen: Newspaper brokerage firm Cribb, Greene & Associates does a fantastic job keeping its finger on the pulse of the many small and mid-sized newspapers out there. If you don't already, may we suggest that you get on the receiving end of Cribb's monthly report. Fitz and I are big fans. (That's John Cribb featured at left.)

The August report revisits 16 owners and executives at small and mid-sized newspaper companies and gives them an opportunity -- anonymously -- to reveal aspects of their financial performance. This is an update from what they had to say in May, regarding the last gasp of 2008 and the first months of 2009. As one can imagine it was bleak. In July, however, Cribb found some high notes: "Some newspapers are worse off now, and some are the same. But a number indicate they may have reached the bottom and can see some improvement coming."

On that end, let's focus on the happier responses. The report culls from each respondent, providing answers from both the May survey and the July one.

Here's what one newspaper owner said:

• May '09: "At the conclusion of '08, I wanted to slit my wrists, figuratively speaking of course."

• July '09: "I am pleased to say that we have seen a significant turnaround in business in 2009 as compared to 2008. We actually have seen a slight increase in revenue and experienced a modest profit in the second quarter."

Will this person please come forward:

• May '09: "March was an ugly month, but not as ugly as February."

• July '09: "It appears the worm has turned. Our classified section has exploded for this Sunday and we should easily beat our July 2008 numbers."

Thursday Morning Links

Microsoft and Yahoo inched a little closer to one another with a search deal announced on Wednesday. Henry Blodget thinks it's a disaster. Newspapers were left out in the cold but if approved maybe Yahoo can concentrate on advertising, writes Ken Doctor. (All Things D, The Business Insider, Content Bridges)

Newspapers up in Canada are feeling chilly too. Torstar swings to a loss. (WSJ)

Another closed door meeting for newspaper executives about paid content. Walter Hussman makes the case for charging. (Arkansas Democrat-Gazette)

LibreDigital (a.k.a. Newsstand), a company that develops electronic publishing platforms for newspapers and books,  picks up a round of funding. (Austin Business Journal)

Gannett's 10-Q, ready and available. (Yahoo)

FYI: Cars.com reports that tons of peeps are searching for new cars, thanks to its "cash for clunkers" program. (Yahoo)

A 30% plunge looks good to the Minnesota Spokesman-Recorder, which reported ad revenue spiraled at least 50%. (MinnPost)

After The Bell Wednesday: Two Weeks On, Rally Still Has Legs

Fitz: The newspaper sector rally, now exactly two weeks ago, showed the slightest signs of slowing Wednesday, with another modest decline for both The New York Times Co. (NYSE: NYT) and Gannett Co. (NYSE: GCI), who started the sector run-up with its Q2 report.

But The McClatchy Co. (NYSE: MNI) continued its surge with a 43.7% single-session jump to $2.27, its highest price since December. As we report elsewhere on Fitz & Jen, short sellers have helped pump up the price as they scramble to cover their positions. Short interest in MNI plunged to 8.06% of the float as of the close of markets Tuesday, from 27.23% when last we checked in on May 15.

MNI, so SmallCapInvestor.com tells us, was the fourth-largest percentage gainer among small cap stocks Wednesday.

Lee Enterprises Inc. (NYSE: LEE) reports its fiscal year third-quarter results on Thursday, and investors apparently believe they’ll have some good news -- peppered, of course, with sliding ad revenue and other declines that apparently no longer put people off newspapers stocks. Lee has stopped holding conference calls with analysts so Jen and I will have to provide our own “color”’ and “granularity,” and guess about “run rates.” 

LEE was up big Wednesday, increasing 29 cents, or 17.8%, to $1.92.

NYT, BTW, declined 4 cents or 0.5%, to $7.52, while GCI was off 22 cents, or 3.9%, to $6.26.