, the publisher of national newspaper USA Today, is a media and marketing services company seeking to write a better storyline for itself. Gannett is wrestling with the vagaries of media business models in the Internet age, trying to earn more profits despite downward pressure on revenue.
The McLean, Va. company publishes more than 80 newspapers, including USA Today, the nation's largest-selling daily, and operates 23 television stations in 19 U.S. markets as well as a growing digital business segment.
Among other digital initiatives, the company in late July announced the national launch of its DealChicken venture, an online source of daily discounts on retailers' products and services. Gannett plans to make the service available in more than 50 local markets in the United States by the end of 2011.
In recent years, revenue declines in the company's larger publishing and broadcasting businesses have offset top-line growth in the digital business segment. Gannett's net income in the first half of the year dropped to $263 million, down almost a fifth from the same period last year. Revenue in the six months ended June 30 settled at $2.58 billion, a 2.9 percent drop from the first half of 2010.
Wall Street has a mixed reading on Gannett. Opinions of its stock among analysts following the company were almost evenly split in mid-August between buy and hold recommendations.
Gannett's annual revenue has been in decline for years, falling to $5.43 billion from $7.69 billion in 2006. The company earned net income of $622 million in 2010, up 62 percent from the previous year, after incurring a whopping 2008 net loss of $6.6 billion on non-recurring charges from facility consolidation and asset impairment.
Junk bond rating
Credit rating agency Standard & Poor's has had a junk-bond rating for Gannett since 2009 and reaffirmed the BB rating in early 2011, citing trouble on the top line of the income statement.
"Revenue could decline at a mid-single-digit percentage rate in 2011 because of print ad revenue and TV broadcasting declines," S&P analysts Hal F. Diamond and Deborah Kinzer forecast March 31.
The S&P analysts also reported that Gannett's 2011 earnings before interest, taxes, depreciation and amortization "could decline at a high-teen percentage pace because of higher newsprint costs, absent additional cost cuts." The company next reports in early November.
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