Gannett Co., the Rosslyn-based media company, announced yesterday that its unbroken string of quarterly earnings increases, which began when the company went public 22 years ago, had come to an end.
Gannett, publisher of USA Today and 82 other daily newspapers, reported profits of $105.2 million for the second quarter of 1990, down 6 percent from $112.1 million in the same period a year ago.
Like other newspaper publishing companies, Gannett attributed the decline primarily to a drop in retail advertising triggered by a falloff in consumer spending and a wave of bankruptcies and corporate restructurings that has swept through the retail industry.
"It's like your Garfinckel's here in Washington," said Douglas H. McCorkindale, vice chairman and chief financial officer of Gannett, referring to the recent bankruptcy of the local department store chain.
"There have been a number of major retailers in bankruptcy or in financial difficulty because of leveraged buyouts and that has reflected adversely in the advertising."
One bright spot was USA Today. Despite a decline in ad pages for USA Today, advertising revenue was up 3 percent for the first half of the year due to rate increases and higher readership, the company said.
Overall, revenue for the second quarter was down 1 percent to $893.8 million from $904.2 million in the same period last year. The slide in revenue began in the first quarter of this year.
More significantly, operating income, regarded as a more accurate indicator of a company's health, plunged 10 percent to $193 million in the second quarter from $215.6 million in 1989.
For the first half of the year, profit and revenue were off 4 percent and 1 percent respectively, the company reported.
Gannett earned $180.3 million ($1.13 a share) in the first half compared with $187 million ($1.16) for the same period a year ago. Revenue fell to $1.7 billion from $1.72 billion.
The decline in Gannett's earnings, which was expected by some financial analysts, is particularly unusual because the company operates many of its daily newspapers in monopoly markets dispersed throughout the country, an advantage that in the past has helped it grow even during national economic downturns.
The news depressed the price of Gannett's stock, which closed yesterday at $36.50, down 50 cents.
"Most people were expecting earnings to be a little flat," said David Presson, a media analyst with Edward D. Jones & Co. in St. Louis. "It's below expectations. The ad market continues to be soft and with newspapers getting 75 percent of their revenues from advertising ... things will be rough."
Allen H. Neuharth, former Gannett chairman and head of the Gannett Foundation, the company's largest shareholder, expressed disappointment at the dip in earnings. For much of the time that Gannett was in an expansion mode, Neuharth was at the helm of the company, the fifth largest company in the Washington area.
"The Gannett Co. had quarterly earnings gains for over 22 years ... Those 22 years included good economic times and bad economic times. See how many recessions we had in those 22 years. Gannett continued its unbroken string of earnings gains," Neuharth said in a recent interview.
Gannett's performance is of particular interest to Neuharth because his foundation currently has its 10 percent stake in Gannett for sale.