Gannett's expansion strategy runs into bad news on the advertising front
Gannett today reported $21.7 million in second-quarter revenue growth driven by the addition of the 15 papers acquired when it bought Journal Media Group.
Its earnings release alluded to continued weak advertising but provided no numbers. Questions from analysts in a subsequent conference call drew out these particulars from Chairman and CEO Bob Dickey:
- Advertising revenue was down roughly 10 percent year-to-year on a same-property basis.
- Circulation revenue was also off, about 4 percent.
- Print circulation volume was off roughly 9 percent daily and "a little less" on Sundays. (Digital-only paid subs are up)
- Pre-printed insert revenue — a trouble spot for the industry lately — was off "in the mid-teens," that is around 15 percent.
Dickey said that "improvements have been less than expected," in the business climate for print papers and their digital properties and that Gannett expects similar results for the second half of the year.
Gannett brings operating efficiencies, scale for national advertisers and the USA Today news network to the properties it acquires — but revenue trends continue to outweigh those factors.
Still, Dickey volunteered, "We are bullish that local market expansion makes sense."
After completing the purchase of the North Jersey Media Group, including the Bergen Record, earlier this month, Gannett now has 109 local properties plus USA Today.
Dickey said in this phase of growth he hopes to add 15 to 30 more newspapers and their websites over the next several years.
In the earnings release Dickey said, Gannett will continue to pursue "cost-improvement initiatives" throughout the company's portfolio of newspapers. He highlighted consolidation of printing and distribution, not mentioning potential layoffs in newsrooms or other areas.
Gannett's $864 million, $15-a-share bid for Tronc Inc., so far rejected by that company's board, remains on the table, though Gannett has said it will reevaluate when Tronc's results are reported next Wednesday. The Tronc takeover bid was not mentioned in the earnings report or conference call.
Despite Gannett's positive spin, Wall Street spotted the negative news and shares were down 9.5 percent for the day.
The company's net income for the quarter was $12.3 million on revenues of $748.8 million, a margin of 1.6 percent.
In the same period a year ago, net income was more than four times higher at $53.3 million. Special expenses from integrating the Journal Media properties and rebuilding its digital marketing and classifieds businesses account for some of the difference.
Gannett became an independent company, separated from its parent's television and digital holdings (now TEGNA) just over a year ago.
In the spinoff, Gannett was debt-free and had $60 million in cash, so it has been able to pay for acquisitions through a combination of cash generated and borrowing.