McClatchy Co. reports lower third quarter earnings as advertising revenue drops

The McClatchy Co. reported another decline in quarterly earnings Thursday amid an ongoing slide in advertising revenue, but The Bee’s parent company said it was encouraged by better-than-expected results from its Internet initiatives.

The Sacramento-based newspaper chain said third-quarter earnings fell to $6.9 million, down from $8.8 million a year earlier, not counting one-time adjustments. Including those adjustments, bottom-line net income rose to $7.3 million, or 8 cents a share, from $5.1 million, or 6 cents a share.

The results showed that the newspaper industry’s historic decline in print advertising hasn’t abated: Print ads were off 10.8 percent from a year earlier.

Total ad sales fell 8.1 percent. That was a slightly worse year-over-year decline than McClatchy reported in the second quarter.

Revenue from all sources dropped 4.2 percent from a year ago, to $293.6 million. McClatchy said the quarterly results were depressed in part by a slower-than-expected Labor Day weekend.

On the other hand, McClatchy said digital operations are growing strongly. Notably, the company’s Plus Program, which charges subscription fees for unlimited access to McClatchy newspaper websites, generated $8 million in new revenue during the quarter and is on track to produce $27 million to $30 million this year. That exceeds earlier forecasts of $25 million.

“Despite the challenging print advertising environment, we were able to execute on our revenue-diversification strategy,” President and Chief Executive Officer Pat Talamantes said in a conference call with investment analysts.

“Digital-only” revenue rose 13.1 percent. That includes money generated by readers who don’t buy the print paper and advertisers who buy only online space. The company now has 31,000 digital-only subscribers, and web traffic grew 5.4 percent in spite of online paywalls.

The 7-year slump in advertising – caused mainly by online competition – has prompted newspaper companies like McClatchy to comb for new revenue sources, including digital subscriptions.

On the ad side, digital is now responsible for one-fourth of McClatchy’s advertising revenue, and direct-marketing programs generate another 16 percent. That means less than 60 percent of McClatchy’s ad revenue comes from print.

Talamantes declined to offer projections on the crucial fourth quarter. “We just don’t have much visibility on the holiday season yet,” he said.

McClatchy stock closed at $3.12, down 24 cents, on the New York Stock Exchange.