A Mixed Bag From the New York Times: Q2 Costs Got Better, Ads Got Worse, and Web Dollars Disappeared

We saw a mini-rally in newspaper shares yesterday, based on the hopeful notion that the worst may be over for the industry. Now investors are going nuts for the New York Times (NYT), at least in early trading, based on its Q2 results. But I think the results are a mixed bag.

The publisher was able to take a big chunk out of operating costs, knocking them down 20 percent. But revenue fell faster. The paper did say, though, that things got less bad as the quarter progressed, and that they’ll get slightly less bad next quarter, too.

The numbers: After factoring out one-time charges and benefits, the Times posted earnings of eight cents per share, well above the four-cent loss the Street was expecting. But revenue dropped 21 percent, to $585 million; the consensus was $603 million.

The Times posted an operating profit of $23.3 million; without one-time charges that number would have been $66.1 million. That’s worse than the $100 million the paper made a year ago, but much better than the $74.5 million it lost (net) in Q1.

But! Ad revenue declined 30.2 percent, an acceleration from last quarter’s 28 percent drop. In addition to the regular culprits, the Times noted a “lower volume of online advertising.” More details on that: Internet revenue dropped a shocking 14.3 percent, and Internet ad revenue was down 15.5 percent; last quarter they were down 5.6 percent and 6.1 percent.

The assessment from Times CEO Janet Robinson:

Based on what we have seen so far in July, we expect the advertising environment to continue to be challenging. We believe the rate of decline will moderate slightly in the third quarter from what we experienced in the second quarter.

As we look ahead, an enduring constant is the outstanding journalism of The New York Times Company and the esteem in which it is held by our readers. For the balance of the year, we are focused on developing innovative new products and platforms based on our high-quality journalism, particularly in the digital area, and continuing to aggressively lower our cost base to better align it with our revenues. When the economy and ad markets improve, we believe we will be very well positioned to benefit from the restructuring of our business.