Hurt by weaker print advertising and circulation revenues, The New York Times (NYT) reported on Thursday a worse-than-expected 26% decline in fourth-quarter profit, however its digital sales continued to grow as part of its overhaul strategy.

The newspaper company posted net income of $67.1 million, or 46 cents a share, compared with $90.9 million, or 63 cents a share, in the same quarter last year.

Earnings for the three-month period topped average analyst estimates polled by Thomson Reuters of 25 cents.

Revenue for the New York-based company, which operates NYTimes.com, About.com and Boston.com, was $661.7 million, down about 3% from $681.2 million a year ago, narrowly missing the Street’s view of $666.05 million.

Sales were hurt by a 3.1% and 3.6% decline in advertising and circulation revenues, respectively, as well as a 7.2% drop in print advertising revenue, partially offset by an 11% increase in digital advertising revenues.

“In 2010 we demonstrated further progress toward our long-term strategy of re-engineering our company,” said NY Times CEO Janet Robinson. “During the fourth-quarter, we maintained our relentless focus on managing costs to mitigate the effects that the ongoing transformation of our industry and an uneven economic recovery had on our operating performance.”

Earnings took a hit from an $18.3 million charge for a loss on leases and a fee for the early termination for a third-party printing contract, as well as a $4.2 million charge in write-downs and $4.7 million in severance costs, offset by a $56.7 million pension curtailment gain resulting from freezing certain benefits.

Partially impacted by the weather, fewer copies were sold during the quarter, pushing circulation revenues lower. The company said it anticipates those sales to continue to decline through the first half of 2011.

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