Gannett Earnings Fall

Updated from 10:52 a.m. EDT.

Gannett (GCI Quote), the nation's largest newspaper publisher and a bellwether for the industry, reported an 11% drop in first-quarter earnings Thursday as advertising revenue slumped.

The publisher of USA Today said its net income declined to $210.6 million, or 90 cents a share, for the quarter, from the $235.3 million, or 99 cents a share, it reported for the same quarter last year.

The results beat Wall Street's expectations by a penny, according to consensus estimates reported by Thomson First Call, but investors were not impressed. The company's shares closed down 71 cents, or 1.2%, to $57.60.

Gannett, which owns 90 daily newspapers along with some TV and radio stations, is grappling with a downturn in the ad market amid slumps in the housing market and the U.S. auto industry. It's also suffering from the rise of the Internet, as consumers are increasingly turning to the Web for information.

Newspaper publishers have warned that the first half of 2007 will be particularly difficult, but they're hopeful that the ad market will strengthen in the second half. Gannett said its March revenue declined by 1%, while its newspaper ad revenue was down 2%.

On Gannett's conference call following its earnings release, the company's chief financial officer, Gracia Martore, attributed much of its problem to the cyclical downturn in the U.S. real estate market.

"This housing cycle will pass," said Martore. "We cannot predict when, but it will, and when it does, we will be well-positioned."

On its top line, Gannett said its revenue was down 1% to $1.87 billion, meeting analysts expectations. Newspaper ad revenue was down 2%. USA Today, its largest newspaper, posted an 8% decline in revenue.

It also faced tough comparisons in its first quarter, due to last year's ad blitz from the Olympics and the midterm elections.

"Executing on our strategic plan and delivering profitable, top-line revenue growth continues to be our focus," said Gannett in a press release.