Newspapers Stung by a Sagging Ad Market

NEW YORK – The worst advertising market in recent memory took its toll on major newspaper publishers Thursday, as Tribune Co. and Dow Jones & Co. reported steep declines in fourth-quarter earnings, with no signs of an immediate recovery.

Dow Jones, publisher of The Wall Street Journal, posted earnings of $29.2 million, or 34 cents per share, down more than 60 percent from a year ago, excluding charges from the relocation of its headquarters in the World Financial Center following the Sept. 11 attacks and other items.

Tribune, publisher of the Chicago Tribune and Los Angeles Times, said operating earnings, excluding gains from the sale of equities, restructuring charges and other items, fall 45 percent to $69 million, or 21 cents per share, from $124.4 million, or 36 cents per share, a year earlier.

Media firm E.W. Scripps Co., publisher of the Denver Rocky Mountain News, on Wednesday posted a 24 percent decline in earnings before one-time items to $41.4 million, or 52 cents a share, compared with $54.7 million, or 69 cents a share, a year ago.

Knight Ridder Inc., publisher of the Philadelphia Inquirer and the Miami Herald, and the Washington Post Co., which in addition to its flagship paper owns Newsweek magazine, report fourth-quarter results on Friday.

LOOKING FORWARD

For Dow, at least, the first quarter doesn't look much brighter.

``We are dealing with a pretty severe recessionary environment, at least from an advertising standpoint,'' Chairman and Chief Executive Peter Kahn said in a conference call with analysts. ``And nothing in the marketplace has improved for us or our direct competitors.''

Dow said it expects ad linage at the Journal to fall an additional 20 percent to 30 percent, but for full-year 2002 ad linage should grow in the mid-single digits.

Analysts said there was some cause for anticipating a strong second half for the advertising market.

``If you look at the economic data, it's been a bit more positive,'' said Robertson Stephens analyst Brian Shipman. ``Consumer sentiment -- a good leading indicator for advertising -- is looking up.''

Dow expects full-year earnings before special items ''around'' analyst estimates of $1.57 per share. But, barring a strong turnaround in the ad market, it may be difficult to achieve.

``There's a lot of hope out there,'' said Edward Atorino, and analyst with Dresdner Kleinwort Wasserstein. ``Management is obviously counting on a very strong recovery in the second half, where year-ago comparisons will be better and technology and financial (advertising) will come back.''

Dow's guidance is ``ambitious,'' according to J.P. Morgan analyst Barton Crockett, but the Journal's new color printing facilities may lend a hand by increasing demand for ads.

``In the last few days they've had some large spreads from companies like (German software firm) SAP they would not have been able to produce before,'' Crockett said. ``We'll have to have more of that.''

MAJOR MARKET MALAISE

Tribune, which also owns television stations and the Chicago Cubs, has been especially hard-hit by the ad slowdown because of its concentration in major media markets, such as Chicago and Los Angeles, analysts said.

``It sounds like help-wanted ads are still horrible in the big markets, and the employment sector is going to remain under pressure for the considerable future,'' said Shipman. ``Tribune has been hurt more so than anyone, and likely won't recover as quickly as some of their peers, because of their large market exposure.''

Tribune declined to give first-quarter guidance, and said it expected 2002 earnings within the range of Wall Street estimates. The Wall Street consensus estimate was 71 cents per share, with a range of 67 cents to 75 cents a share, according to Thomson Financial/First Call.

Executive Vice President Dennis FitzSimons told analysts that he expected retail and national advertising in the first quarter to improve from the fourth quarter, although both sectors were expected to be down from a year ago.

Classified advertising was expected to decline 20 percent in the first quarter, about equal to the fourth quarter decline, he said, while automotive and real estate advertising are expected to improve in the first quarter from a year ago.

``The Tribune people are not counting on as much of a recovery as Dow,'' said Dresdner Kleinwort Wasserstein's Atorino.