Tribune Co., the owner of the Los Angeles Times and Chicago Tribune, said sales declined 5.9 percent in July, led by a drop in classified advertising.
Sales fell to $466.7 million from $496.1 million a year earlier, Tribune said in a statement today. Classified ad revenue dropped 18 percent after a plunge in real-estate ads in Florida, Los Angeles and Chicago. Help-wanted ads also declined.
The lower revenue at Tribune, the second-biggest U.S. newspaper publisher, reflects an industrywide slump in real- estate ads as the housing market slows and advertisers move to the Internet. Gannett Co., (GCI:US) the largest U.S. newspaper company, reported a 4.3 percent drop in July sales this month. Revenue at McClatchy Co., publisher of the Miami Herald, fell 8.6 percent.
``Real estate continues to get pounded in markets that were overheated,'' Mike Simonton, a bond analyst at Fitch Ratings in Chicago, said in an interview. ``Help-wanted down 19 percent in a pretty tight labor market is a concern.''
Tribune shares (TRB:US) fell 23 cents to $28.75 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has fallen 6.6 percent this year.
On Aug. 21 Tribune shareholders approved an $8.2 billion buyout led by real-estate billionaire Sam Zell. The company now must keep in compliance with loan covenants to secure $4 billion in bank financing needed to complete the deal.
Simonton said declines in operating profit may make it difficult for Tribune to pay interest on the debt. He rates Tribune's debt B+ and said that if the deal goes through as proposed the rating will be lowered to B-. Both are below investment grade.
Besides its 11 metropolitan newspapers, Tribune owns 23 television stations and the Chicago Cubs baseball team. Broadcast and entertainment revenue was little changed in July, while TV sales dropped 3.7 percent. Simonton attributed the decline to fewer political ads than a year ago and weak ratings for the CW Network.
Zell's takeover must also be approved by the U.S. Federal Communications Commission because Tribune owns newspapers and TV stations in the same markets.
Newspaper real-estate advertising was down 24 percent and automotive dropped 14 percent. National advertising fell 3.7 percent on declines in the auto, financial and resort categories.
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