• by Erik Sass  @eriksass1, April 25, 2007

The litany of bad news for newspapers continued Tuesday with the release of first-quarter results by McClatchy Co., which saw earnings tumble 67.5% to $9 million from $27.7 million a year ago.

Overall revenue more than doubled, due to McClatchy's acquisition of Knight Ridder properties in 2006. However, calculating revenues based on the acquired newspapers' previous results, total ad revenue still dropped 5.3% to $477 million, compared to the first quarter of 2006.

Chairman and CEO Gary Pruitt conceded: "In the first quarter of 2007, we faced the toughest advertising climate we have seen in a number of years. In particular, real estate and automotive advertising were hurt by the continuing declines in sales of both homes and domestic vehicles."

Adjusting for the acquisition of Knight Ridder properties, McClatchy saw total classified ad revenue drop 12%, with automotive down 10%, real estate down 18.6% and job recruitment down 12.7%. Adding insult to injury, national ad revenues dropped 12.4%. Retail was the only bright spot, with revenues up 4.2%.

On the Internet front, McClatchy's online revenues rose just 5.4%--a lackluster performance in an area where other newspapers are posting double-digit gains. McClatchy blamed the slow Web growth on its decision to cut its stake in CareerBuilder.com, an online job-recruitment network co-owned by Tribune Co., Gannett and McClatchy, following the latter's purchase of Knight Ridder. After the deal, McClatchy sold about half its stake to Tribune and Gannett for $284 million--giving them 42.5% each, while it retained 15%.

McClatchy also blamed its weak first-quarter results on losses incurred during the sale of the Minneapolis Star Tribune, which cost the company $5.5 million. Beyond the immediate financial repercussions, the sale of the Tribune was a humiliating retreat for McClatchy. The company purchased the newspaper for $1.2 billion in March 1998, but sold it in December 2006 for just $731 million.