Gannett Q3 revenue falls 4 percent on drop in ad revenue

Reuters

By Jennifer Saba

Oct 21 (Reuters) - Gannett Co Inc, the largest U.S.newspaper chain and publisher of USA Today, reported a 4 percentdrop in third-quarter revenue on Monday as a persistent declinein advertising sales has dogged the industry.

Gannett is considered a bellwether of newspaper companies,which have been hurt by advertisers who have shifted theirdollars to digital. The New York Times Co, whoseflagship paper competes with USA Today, is expected to postmoderate declines in advertising revenue when it reportsthird-quarter results on Oct. 31.

Shares of Gannett, which also owns TV stations, were down 5percent in afternoon trade at $26.23.

Doug Arthur, an analyst at Evercore, said Gannett'spublishing division looked "weak" and that the slip incirculation revenue was "one cause for concern."

Publishing represents 63 percent of Gannett's revenue, whilebroadcast currently makes up 16 percent.

To counter print declines, Gannett has rolled out a digitalpay model at its papers and has made a big bet on localtelevision. Digital revenue jumped 12.4 percent to $376.1million.

"Our strategy ... was never meant to be a short-term plan," Gracia Martore, Gannett's chief executive, said during anearnings conference call, referring to efforts to reap morerevenue from digital and broadcast TV.

"It is a smarter, more strategic way of running our businessthat positions us to weather challenges as they come, like thesecular downturn in publishing or a tepid economy."

Gannett nearly doubled its broadcast holdings to 43 stationsfrom 23 with its agreement to buy Belo Corp for $1.5billion. Belo shareholders approved the transaction in the thirdquarter, and Gannett is waiting for government approval beforethe deal closes.

The move to increase its broadcasting assets has promptedquestions in recent months regarding Gannett's plans for itsnewspapers. Tribune Co, also a broadcast and newspaper operator,said it would split into two companies and many on Wall Streetwonder if Gannett will follow suit.

"For the foreseeable future, certainly into 2014, our numberone focus is on closing on and integrating Belo," Martore saidin response to a question about a possibility of separating thenewspapers into a standalone company.

"But as with everything ... we are always looking atdifferent alternatives," she said.

Publishing revenue fell 3.6 percent to $858.1 million on a 6percent slide in advertising revenue. Circulation revenue dipped0.6 percent. Gannett started charging for digital content a yearago at its domestic U.S. newspapers.

At Gannett's broadcast TV station divisions, total revenuefell 15 percent to $198.5 million because of the absence ofOlympic or political advertising recorded in the third quarterlast year.

Total revenue fell to $1.25 billion versus analysts'estimates of $1.27 billion. Year-ago revenue was $1.3 billion.

Net income for the quarter totaled $79.7 million, or 34cents per share, compared with $133.1 million, or 56 cents pershare, for the same quarter last year.

Adjusted for special items, earnings per share was 43 cents.Analysts, on average, expected of 41 cents per share, accordingto Thomson Reuters I/B/E/S.

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