Soft Ad Sales Fuel 25% Decline in Gannett's 1Q Net

USA Today parent Gannett (NYSE:GCI) revealed a 25% slide in first-quarter profits on Monday amid tepid ad sales, driving the newspaper operator’s stock more than 7% into the red.

Gannett, which is also the parent of CareerBuilder and many daily newspapers, said it earned $68.2 million, or 28 cents a share, last quarter, compared with a profit of $90.5 million, or 37 cents a share. Excluding one-time items, it earned 34 cents a share, topping the Street’s view of 31 cents.

However, the McLean, Va.-based company said its revenue slid by a steeper-than-expected 2.6% to $1.22 billion. Analysts had called for revenue of $1.24 billion. Further, operating margins shrank to 11.1% from 14.3%.

“Our first quarter results were impacted by spending on strategic investments and advertising softness, particularly during January's industry-wide slowdown,” CEO Gracia Matore said in a statement. “Improving advertising activity in February and March, while encouraging, did not overcome the slow start to the year.”

While digital revenue jumped 12.5% year-over-year thanks to strength at CareerBuilder, Gannett was hit by an 8.3% decline in U.S. ad sales and a 6% drop in U.K. ad revenue. Retail advertising fell 7.6%.

Wall Street responded negatively to Gannett’s results, sending the company’s shares 6.52% lower to $14.06. For the year Gannett had been up 12.5% as of Friday’s close.