McClatchy CEO expects continued weak advertising environment

Will Atkinson | Apr 23, 2008 5:00pm EDT | Comment

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The McClatchy Co. (NYSE:MNI) CEO Gary Pruitt said the newspaper company expects the advertising environment to continue to be weak. The Sacramento, Calif.-based firm projects second-quarter revenue to be somewhat better than first-quarter advertising revenue. The newspaper company’s first-quarter ad revenue slumped 17% to $128.4 million compared with $154.4 million a year ago. Pruitt made the comments during an afternoon conference call.

In 2008, Pruitt said the company will focus its efforts in four main areas. First, improving revenue performance with particular attention to Internet advertising is a goal. The second objective is to provide high-quality public service journalism in both print and online. The third aim is to grow McClathy’s audience. Fourth, McClatchy plans to reduce and restructure its costs.

“We are working hard to position the company to benefit from a stronger economy once it turns,” Pruitt said. “Given the revenue trends, we’re simply going to have to reduce costs and we do believe we can sustain a good record on cost throughout this year. We face increasing newsprint prices later in the year, but on the other hand we are looking at further efficiencies throughout the company.”

The CEO said the firm faces challenges from both the economic downturn and the Internet, which is taking advertising market share from newspapers.

“It’s always difficult to operate in an economic downturn and maintain employee morale,” Pruitt said. “It’s a constant management challenge that every manager in the world faces during a recession and we’re no different.”

Before Wednesday’s opening, McClatchy announced first-quarter revenue of $488.3 million, down 14% from $566.6 million a year earlier. The results missed Wall Street analysts’ expectation of $495.4 million in revenue.

“These results reflect the continuing tough revenue environment,” Pruitt said. “We’ve responded with strong cost controls to help offset the revenue decline.”

Operating expenses during the first quarter declined 10% to $431.5 million from $479.2 million a year earlier.

McClatchy swung to a quarterly loss of $0.8 million, or $0.01 per share, versus a profit of $9 million, or $0.11 per share, during the same period of 2007. Wall Street anticipated earnings of $0.04 per share.

During the quarter, McClatchy incurred a $0.02 per share charge related to an amendment to a bank agreement that provides the firm with greater flexibility under its debt covenant. McClatchy also incurred a $0.01 per share charge for tax expenses related to changes in prior period estimates.

Advertising revenue in California and Florida has been hurt by the downturn of the real estate market in both states. Advertising in both states was down 23.4%, which represented 56% of McClatchy’s total advertising decline during the quarter.

In afternoon trading, MNI shares are down 7.1%, or $0.63, at $8.24. Shares have ranged between $7.93 and $34.32 over the last 52 weeks.