• by Michael Shields , July 15, 2004

The New York Times Co. Wednesday reported earnings growth for the second quarter, but lowered its ad sales outlook for the remainder of the year, expressing skepticism about the U.S. ad recovery and uncertainty over the economy in general.

Total revenues for the Times rose 2.7 percent to $823.9 million compared with $801.9 million in the second quarter of 2003. Advertising revenues grew 3.9 percent, approximately the same level of growth seen in the second quarter last year.

Because of a slower than expected quarter, the Times Co. lowered its advertising outlook for the second half of the year. "Our second-quarter financial performance reflects improved advertising revenues at each of our business segments," stated Russell T. Lewis, president-CEO of the Times Co., adding that the pace of growth has slowed to a point where the Times Co. needed to manage expectations for shareholders. "Based on the rate of ad revenue growth we experienced during the first half, we are adjusting our full-year ad revenue growth guidance down from the mid-single digits to the low- to mid-single digits," he noted.

During a conference call with investors, COO Janet Robinson added, "The ad recovery has not been as strong or as spectacular as we'd like to see in a recovery economy."

The Times Co. identified three categories that had hurt advertising revenue, including technology, which was down 29 percent. In addition, real estate and movie studio advertising also stalled, though the Times believes that a recently revamped real estate section and soon to be re-launched culture section will yield increases along with a strong end of year movie lineup.

"We are confident that these categories will come back in the second half," said President and General Manager Scott Heekin-Canedy.

Yet several times during Wednesday's call, officials expressed worry that the economic recovery was fragile.

CFO Leonard Forman referred to a "cloudy future," while Heekin-Canedy spoke of "month to month fluctuations in advertising" spending as contributing to the slowdown.

The Times Co.'s performance may be hurt by the size of the New York and Boston markets it dominates. "Larger metropolitan areas are not bouncing back as quickly nationwide," warned Heekin-Canedy.

As for circulation, The Times Co. also saw an increase in the second quarter, though it did not drive revenue growth, as much of the growth was driven by discounted subscription programs with schools and hotels.

On the bright side, the company listed color advertising a being a "terrific story," delivering 29 percent of total ad revenues and leading the paper to announce that it will be increasing its capacity in coming months.

In addition, while the company's overall growth was modest, the New York Times Digital Group appears to be enjoying the red-hot Internet advertising recovery. Revenues for New York Times Digital grew 26.7 percent in the second quarter to $27.4 million.

The company's burgeoning Broadcast Group, which includes the Discovery Times Channel, also exhibited solid growth, as revenues rose 10.7 percent in the second quarter to $42.0 million, boosted by strong political advertising activity.

The Times Co.'s earnings announcement came a day after Gannett Co., the nation's largest newspaper publishing group, posted an impressive 9.3 percent increase in second-quarter net income, driven by acquisitions and stronger advertising demand. Gannett's newspaper division reported a 9.8 percent increase in revenue to $1.66 billion.