Tuesday, August 18, 2009

With 2nd quarter profits up, why are some newspapers still handing out pink slips?

Wonder why some newspapers are handing out pink slips despite positive 2nd quarter profits? Rick Edmonds says newspapers expect their 3rd quarter revenues will be down 20% to 25% and they are adjusting accordingly.

Newspapers were still losing ad revenue at a 25 to 30 percent pace year-to-year in the second quarter. They managed small profits with very tight expense control. Third quarter ad revenues will be down 20 to 25 percent compared to the 2008 period, which itself was off 18.1 percent compared to third quarter 2007.

So staying profitable will require continued vigilance on expenses. 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.

As for the stock market, remember that share prices reflect investor consensus on future earnings over a year or 18 months and that the low base indicated investor fear that the companies would fail, now eased considerably.

A friend suggests that the end of the recession reports may be hyping what is at best a slow start to a long recovery. Even if you side with the optimists who believe GDP will grow more than 2 percent this quarter, that only begins to dig out of the hole of sharp declines in the last half of 2008 and the first quarter of 2009.

If you are a gambler, the analogy is sitting at the blackjack table down $1,000. If you have a good run and win $200, you are still well under water.


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10 comments:

Anonymous said...

Not only will 3Q revenues be down quite a bit, but 4Q will be down even more and that's the one everybody needs to pay the bills. Profits are misleading when revenues are on a double-digit downward spiral. McClatchy will continue to cut costs - which means staff.

Anonymous said...

For every peon they cut management extends their useless jobs a few more days.

Anonymous said...

Re: 8:20

AMEN!!!!!!!!

Anonymous said...

It's curious why McClatchy hasn't cut more management positions. At Sac only a couple of managers were let go which made the rest of us very upset. Morale can't get any lower, so maybe they felt it didn't matter. They can't justify keeping managers when there's nobody to manage. It's no wonder this company is in decline.

Anonymous said...

Sooner or later all the down and out sizing MNI has pulled out will erode their infrastructure, and create a knowledge and resource gap that cannot manage expansion or transformation.

When the economy does recover new demands will be placed upon a crippled organization.

Anonymous said...

Don't expect much from the dino's in corporate, they still hoping to sell more newspapers rather than have a real internet strategy. The family has accepted that MNI is done and they will loot it as best as they can.

Anonymous said...

The Eugene Register Guard (Eugene, OR) announced a 6% staff cut yesterday. The paper is owned locally by the Baker Family of Eugene.

"The Register-Guard this morning reports on the layoffs Monday of 6 percent of the newspaper's workforce, a response to deteriorating advertising revenue.
By laying off a mix of full- and part-time staff, the newspaper eliminated the equivalent of 16 full-time positions.
In June, the paper eliminated the equivalent of 35 full-time positions, citing an "unprecedented drop in advertising that began in late 2007 and is still with us."
Newspaper advertising revenue continues to plummet, the paper reports. In June, July and the first half of August, revenue "was nearly 25 percent below budget."

If they were just part of McClatchy, where there is sunshine everywhere.

Anonymous said...

But we're profitable! The stock is going to the moon! Why, I was even able to pay for my WSJ subscription from my MNI profits! I am a genius and we are better off without you out of work slugs.

Anonymous said...

MNI is cutting staff to prop up profits. Of course they missed the implication of staff cuts on the product and on circulation. Like the dodo bird MNI is flying in tighter and tighter concentric circles till it flies up its own rear end and dissapears. Poof.

Anonymous said...

Of course everyone who still works at a
mcclatchy rag knows, the true waste is in the
sacred cows. I wonder how many furlough
days it takes to pay for the full color special
sections?