McClatchy took a pass on the June investors' meeting in New York. So yesterday's second quarter earnings conference call was a reminder of CEO Gary Pruitt's skill at finding some nuggets of hope in the industry's current dismal state.
Pruitt did not promise that July revenue declines would be less severe than those of the quarter just closed --
15.6 percent in McClatchy case and a 44 percent decline in net earnings. And he wouldn't bite on an analyst's suggestion that the company's Florida properties were showing improvement. "It's too early to tell -- we've seen some head fakes there before."
But after a very bumpy 2007, McClatchy online sales have picked back up, growing 12.5 % compared to a year ago. Further, Pruitt said, the company is seeing some success in growing online-only retail advertising rather than relying on so-called "upsells" of print classifieds. (The latter has proved a weak base with print classifieds in rapid decline).
The company has cut costs about 10 percent year-to-year and expects more savings as recent buyouts and layoffs cycle through the second half of the year. It also expects to cut newsprint use enough during the period to offset big price increases. And CFO Pat Talamantes commented that there have been "better discussions" lately with suppliers who may ease off planned price increases in the face of weak demand.
McClatchy is earning enough to have paid down $300 million in the second quarter of the debt it assumed acquiring Knight Ridder. Also, while the company, in hindsight, overpaid for Knight Ridder, it partly recouped by unloading the Star Tribune of Minneapolis to
unwary private capital buyers in December 2006.
The company expects to net $115 million after taxes on the sale of a big chunk of Miami land in the fourth quarter and that too will be applied to paying down debt.
Responding to an analyst's question, Pruitt said that he expects McClatchy to still be a "hybrid print/online company" in three to five years with a broader mix of products in each. By then, he added a majority of the revenues will be from print but a majority of earnings from online -- since the expenses of presses, paper and delivery are eliminated.
McClatchy has been aggressive in outsourcing, a path Pruitt said, that will lead to "a smaller, more efficient company."
All that said, the numbers are bad and McClatchy was trading yesterday at around $5 a share, compared to about $25 a year ago.
Even before listening in on Pruitt's spin, I had been musing about whether certain hammered down newspaper stocks have become a bargain for patient and venturesome investors. I'll explore that further in my next post.
