U.S. newspapers have posted worse- than-projected results this year, with publishers including Gannett Co. (GCI:US) and Tribune Co. hurt by falling real estate advertising, Fitch Ratings said.
Declines in real estate have been ``significant,'' tracking slower new-home construction in California and Florida, the Chicago-based agency said today in a statement. The advertisers may not return when real estate recovers, Fitch said.
Real estate classified ads account for about 10 percent of newspaper revenue, Fitch said today. Gannett, the largest U.S. newspaper company, said July classified sales were hurt by an 11 percent drop in property ad sales. Tribune's classified ads fell 18 percent, driven by a 24 percent decline in real estate.
``These well-chronicled housing troubles and real estate classified declines have driven some newspaper industry participants and observers to assert that problems are largely cyclical,'' Fitch said. ``Secular factors could make these declines permanent.''
Gannett, based in McLean, Virginia, fell 23 cents to $47.50 at 4:21 p.m. in New York Stock Exchange composite trading (GCI:US) and has lost 21 percent this year. Chicago-based Tribune, which is being acquired by investors led by billionaire Sam Zell, dropped 25 cents to $27.13.
Separately, Standard & Poor's said it may further downgrade the credit ratings of newspaper companies as advertising sales continue to decline.
``Despite 11 rating cuts in 2006 and five so far in 2007, the potential for further downgrades this year remains significant,'' S&P said. ``However, there is some hope for industry credit stabilization next year, as year-over-year revenue comparisons will likely ease.''
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