US newspaper publishers expected advertising to rebound this year after a slump of more than two years. They're still waiting.
Several big newspaper chains have issued profit warnings for the current quarter because of weak advertising, blaming factors such as less spending by the consolidating telecommunications business and the recent hurricanes in the south-eastern United States.
While newspaper ad growth industrywide still is expected to be up from 2003 and some publishers like Gannett Co Inc. have posted sustained ad gains year to date, the recovery overall has not been as robust as anticipated.
"Advertising trends are uneven," said Fulcrum Global Partners analyst Edward Atorino. "Some companies like McClatchy and Gannett are seeing some pretty decent gains, and then you have other companies like Scripps, Tribune, New York Times and Knight Ridder that have talked about a slow start to September. It's hard to figure out the trends."
Besides sluggish advertising, newspapers are grappling with a rise in newsprint prices and employee pension and health-care expenses that are raising operating costs. The industry also is under scrutiny because of recent scandals over inflated circulation figures at papers including Tribune Co's Newsday, Spanish-language paper Hoy and Belo Corp's Dallas Morning News.
The woes have hit stock prices. Tribune stock is down 20.5 percent year to date through Thursday, while New York Times stock is off 18 percent, Dow Jones & Co Inc is down 17.3 percent and Knight Ridder Inc. has lost 13.8 percent. In comparison, the broad Standard & Poor's 500 index is virtually flat during the same period.
Analysts say chains with newspapers in middle and smaller-size markets, like Gannett and McClatchy Co, are generally faring better than publishers like Tribune that focus on larger urban areas.