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Lee Enterprises Manages To Swing To Profit On Cost Cuts — But Ads Decline Double Digits

Like most of its newspaper publisher peers, Lee Enterprises (NYSE: LEE), the owner of the St. Louis Post-Dispatch, was able to eke out a small profit in Q3, thanks mostly to continued cost-cutting and lower newsprint costs. In terms of its workforce, Lee had 14 percent less full-time staffers than it had last year. While the cost-cutting helped, Lee was unable to do much to halt the advertising slump its in.

The company posted $1.7 million in profits on a reported basis, versus last year’s $192 million loss. Total revenues fell 20 percent with combined print and online ad dollars falling 23.8 percent. By itself, online ads sank 24.7 percent, mostly due to continued weakness in classifieds.

Earnings release

3Q 2009 3Q 2008
EPS $0.04 -$4.34
Net Income $1.7M -$192M
Revenue $195.8M $244.8M

Lee’s ability to wring profits from cost cuts were similar to what its peers have been able to muster. But the ad side appeared to be worse than what others were experiencing.

For the most part, newspapers’ Q3 results have been largely mixed. Lee’s experience mirrored Journal Communications (NYSE: JRN), which reined in expenses to return to profitability and McClatchy (NYSE: MNI), which maintained profitability by holding the line on spending. EW Scripps’ Q3 story was pretty negative, as its loss expanded and revenues fell nearly 20 percent.

Although Gannett (NYSE: GCI) was still profitable in Q3, its earnings fell 47 percent. Media General (NYSE: MEG) swung to a loss, while the NYTCo (NYSE: NYT) narrowed its loss on cost reductions, as revenues continued to fall as well.

A number of analysts have questioned whether newspapers can maintain the profitability — or near profitability, in some cases — on cost cuts, since you can only shed so many employees and rid yourself of so many printing presses. In general, advertising looks pretty bleak for the next few months — though Lee’s chairman and CEO Mary Junck said that September was the Davenport, Iowa company’s best month for year-over-year ad revenue since December ’08, while October and November were trending similarly. Despite having hit bottom, even if online ads improve greatly, it won’t be enough to make up for the larger print weakness.