Posts Tagged ‘profits’

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McClatchy CEO: ‘progress’ through ‘expense cuts’

Friday, October 16th, 2009

Seeking Alpha has the transcript of McClatchy’s earnings call, which includes a Q&A between McClatchy executives and nine analysts.

CEO Gary Pruitt: “Despite our revenue challenges, we are showing financial progress in this recession. We reduced cash expenses in the third quarter by 29.4 percent excluding severance and other restructuring charges. The restructuring of our business has been necessary to align expenses with revenues and it is contributing to our ability to manage the company through this downturn by enabling us to grow cash flow. Yes, you heard that right. Operating cash flow was $94.4 million in the third quarter and that was up 1.3 percent. Still believe me; we know print revenue declines remain a challenge. …

“As far as expense cuts go, we have had numerous rounds of expense cuts. They have been extremely painful. We had hoped to avoid them. We couldn’t.”

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‘Profits’ via layoffs not impressive

Friday, October 16th, 2009

McClatchy Co. topped the list of Biggest Percentage Price Decliners among common stocks on the New York Stock Exchange at the close on Thursday, says the Wall Street Journal.

Morningstar equity analyst Tom Corbett talks about McClatchy in a podcast on Editor & Publisher’s Fitz & Jen blog. “Granted they’ve made some moves that buy them some time regarding their substantial debt burden, … and of course it looks like with the cost-cutting it’s profitability and cash flow. … It creates the appearance of stability, but without that recovery in the top line (revenue), the question becomes, ‘how sustainable are these cuts.’ And it’s our view that cost cutting in the face of declining revenues, that’s not a buy signal, that’s a survival tactic.”

Corbett also points out that cutting costs via layoffs creates the “value-destroying feedback loop,” in which loss of advertising leads to cutting costs/people, which inescapably has an adverse effect on content, which readers quickly recognize. Alienated readers cancel subscriptions (resulting in lost revenue), and as circulation falls,  advertisers see less value and continue to fall away. “It’s very, very difficult for a newspaper to recover from that once it starts down that slippery slope.”

McClatchy has cut about a third of its workforce in the past year.

McClatchy’s increase in online revenue – up to 17 percent of revenue in Thursday’s 3Q report, “way better than their newspaper peers,” says Mark “Fitz” Fitzgerald – is “encouraging” Corbett adds, but it’s still a very small piece of the shrinking revenue pie.

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All eyes on McClatchy Thursday

Tuesday, October 13th, 2009

The McClatchy Company, publisher of The News & Observer in Raleigh, The Charlotte Observer and 28 other dailies, reports 3Q earnings Thursday, the first of the major newspaper publishers to do so this time around. “McClatchy will provide a gauge on the state of an industry that has been reeling for most of the past three years,” says the Associated Press.

The worst is over, apparently, but the publisher still faces all of the problems the industry has been struggling with for the past few years – fewer readers leading to fewer advertisers and less revenue.

But the slide in ad sales is expected to be less dramatic than in the first half of the year, and the fact that the slide began in late summer of 2008 eases the year-to-year comparison. McClatchy has also reduced its payroll – employees, that is – by one-third since mid-2008 and refinanced its Knight Ridder debt.

“Any signs of progress will likely raise hopes that advertisers are regaining more confidence in the economy than they had been during the longest recession since World War II,” the AP says.

Meanwhile, according to The Street at mid-day Tuesday, “McClatchy (MNI Quote) jumped by 27 cents, or 8 percent, to $3.63 on volume topping 3.2 million shares after. The three-month average daily volume for McClatchy is 2 million, according to Yahoo! Finance. Internet message boards cited rumors of a partnership with Google [which we couldn't find] for the surge in price and volume.”

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Newspaper execs spin as Rome burns

Thursday, September 10th, 2009

Douglas Page, “an experienced media executive” writing for Newspapers & Technology, calls “BS” on newspaper publishers’ spin about revenues and profits.

“For a trade that prides itself on uncovering graft and crime and finding truth and justice, the pronouncements made by leading executives at publicly held newspaper companies — as well as some of the reporting covering those projections — are disturbing. They spin reality in a way that might make even the most ardent Party member blush,” Page writes.

Page uses as one example the Associated Press reports about McClatchy’s 2nd quarter profits, quoting CEO Gary Pruitt, who said: “We continue to restructure and permanently reduce expenses to better align our costs with our revenues.”

“In other words,” says Page, “some McClatchy employees took one for the team so it could make a profit — and someone’s next!

“The doozy, however, was the way McClatchy reported its online revenues:

‘Our digital advertising is down 2.9 percent in the second quarter of 2009, hurt particularly by declining employment advertising,’ Pruitt said. ‘Excluding employment advertising … our online advertising grew 24.7 percent in the second quarter of this year.’

“Can you really exclude an integral part of your revenue stream just so you look good?”

Newspaper executives are now preparing their 2010 budgets and glossing over how this year’s cutbacks will adversely affect the hoped-for recovery next year, Page says.

“(T)he true story is that the remaining employees’ workload, especially those on the sales side, will grow exponentially. They’ll be expected to hit their departed colleagues’ revenue targets.

“Tragically, they’re being positioned to fail. And with that will come — can you guess it? — more cuts.”

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McClatchy stock listing survives

Tuesday, September 8th, 2009

The McClatchy Co., owner of The News & Observer, The Charlotte Observer and 28 other daily newspapers, has escaped a de-listing threat from the New York Stock Exchange, the firm reports.

The NYSE said in February that the publisher’s stock must maintain an average value of at least $1 for 30 days before January 7  or it would be taken off of the board. McClatchy said in a news release Friday that it has met compliance standards.

McClatchy stock, which had reached a high of $74.50 in April 2005 before missing an earnings call and beginning to tumble, fell to a low of 44 cents in July. Through layoffs and other expense cuts, the firm posted a profit for the second quarter of 2009 and the stock jumped as high as $2.29 a share in July. So far this month, it has bounced between $1.99 and $1.71 per share.

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More layoffs expected, despite profits

Tuesday, August 18th, 2009

Poynter Media Business Analyst Rick Edmonds counts six newspapers that have announced layoffs this month alone – “once-proud, top-ranked regionals, three of them owned by McClatchy” – despite a return to profitability in the second quarter.

But profits have come from cutting expenses, not increasing revenue. Ad revenue continues to drop by 25 to 30 percent over last year, according to Edmonds.

“(S)taying profitable will require continued vigilance on expenses,” he says. “A little of that takes care of itself – reduced paper use since so much less advertising and news is being printed. But companies targeting above-average profit levels – like Gannett – or forced to keep profits up to handle a high level of debt – like McClatchy – will continue to work the outsourcing and down-sizing option.

…

“Still, I fret that many newspapers are flirting with the tipping point of seeming expendable to discerning readers who can see the gaps and flaws caused by cutting too much too fast.”

(Note: the author of this site was among 10 people laid off from The News & Observer in Raleigh, a McClatchy newspaper, this month.)

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McClatchy extends wage freeze

Tuesday, August 11th, 2009

McClatchy newspapers will extend a wage freeze instituted last year which, on top of pay cuts and furloughs instituted this year, ensures that its employees’ earning power continues to erode.

“We plan to extend the current wage freeze for all employees (including corporate) at least through December of this year, with the hope of restoring merit increases sometime in 2010, as business conditions warrant,” Publisher Orage Quarles III of  The News & Observer tells his employees in an e-mail sent today. “As we finalize budget plans this fall, each McClatchy newspaper will determine when the freeze will end.”

“We remain committed to lifting the salary freeze as soon as financial conditions allow,” he adds, after opening the note by saying that despite more than doubling its profits in the second quarter, the company “continue(s) to experience a challenging revenue environment and must remain disciplined in our cost control efforts.”

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