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Small-Town Papers, Big-Time Profits


When Mary E. Junck was running The Baltimore Sun, Newsday, and other newspapers owned by Times Mirror Co., after-hours life meant black-tie affairs at the Baltimore Symphony Orchestra or tony fund-raisers for Johns Hopkins University. Now, as chief executive of Lee Enterprises Inc. in Davenport, Iowa, Junck stages garage sales for her daughter's Girl Scouts troop or teaches Sunday school. True, small-town life is lower-key, admits Junck, a 54-year-old Iowa native. But "we're not totally removed from civilization."

Big Media city slickers could learn plenty from Junck and the $540 million-a-year, 45-newspaper chain she has run for 18 months. For one thing, readership--in such towns as Baraboo, Wis.; Albany, Ore.; and Rapid City, S.D.--is growing. For another, Lee is a moneymaking machine, and this year it's on track to post a 31% rise in operating income, to $114 million. What's more, while the stock in bigger companies has sagged from the ad slump and expansion efforts, Lee's stock rose after its biggest purchase ever--Howard Publications for $694 million, in April--and now trades at about $36 a share. That's close to its all-time high in May of just under $40 and up about 11% in the last year.

Establishment lifestyle isn't the only thing Junck has tossed. She has also taken a strategic tack that's heretical in some Big Media circles. Instead of buying TV, radio, and print properties in hopes of profiting through "convergence," Junck has narrowed Lee's focus to just newspapers. The company dumped 16 TV stations in the past two years and used the proceeds to buy more small and midsize newspapers, targeting 30,000 to 125,000 circulation dailies. Lee's papers, now in 18 states, comprise the U.S.'s 12th-largest chain, with daily circulation of more than 1.1 million. And it's managing just fine without TV or radio stations to cross-promote or share advertising revenues with. Says Junck: "It's much harder to converge than it seems."

It helps, of course, that Junck's papers are potent little cash machines. Such papers as Iowa's Muscatine Journal--which Mark Twain once wrote for--and the Chippewa (Wis.) Herald own their markets in ways big-city papers can only envy. Where the Chicago Tribune might reach 20% of households in its markets, Lee papers go to more than 60% of their households. Often the only game in town for local car dealers and grocers, Lee isn't suffering much from the slump in national ads.

Still, even as she gazes out at the broad Mississippi River lazing by her office window, Junck can't escape the pressures that beset most papers these days. Like many others, Lee's daily circulation slipped for much of the 1990s and only recently turned around, rising 1.8% in the six-month period ended Mar. 31. By contrast, Los Angeles Times daily circulation plunged 5.3%, to 985,798.

Hard times have nicked Lee's profits, but the pinch should be short-lived. Operating income slipped 16% in the year ended Sept. 30, 2001, to $86 million, as revenue inched up just 2.2%, to $441.15 million. Through May this year, ad sales are down some 3.3%, though Lee execs say declines are slowing. Thanks to the Howard deal, moreover, Merrill Lynch & Co. analyst Lauren Rich Fine expects Lee's revenues to jump 22%, to $539.8 million. For $5.3 billion Tribune Co., such results are little more than rounding errors. But Lee's margins put the convergence-obsessed Tribune's margins to shame. "I don't think size is everything," says Junck.

The folksy CEO owes much to the giants, though. She got her start at Knight Ridder Inc., rising to top jobs in Miami and St. Paul. A go-getter, she never waited for trouble. Says Knight Ridder CEO P. Anthony Ridder: "She would call and say, `I've got a problem, and this is what I plan to do."' Junck jumped to Times Mirror in 1993. She rose to publisher of The Baltimore Sun--a job she loved, despite occasional friction with reporters over stories critical of local businesses. Then, as president of Times Mirror Eastern Newspapers, she found she loathed "corporate life" there. She joined Lee as chief operating officer in May, 1999, just before Times Mirror sold out to Tribune Co.

Junck misses some things about big-city newspapers. Having once aspired to be a reporter, she still admires the "important journalism going on at big metros." But she says her papers, too, serve the "higher calling" and touch readers closely with their tight focus on local issues, from how schools protect kids from sexual predators to festering racial tensions. "What we do is important to [our] democracy," she says. Still an idealistic Iowa farm girl? Junck wouldn't bristle at the idea. By Joseph Weber in Davenport, Iowa


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