Gannett remains at the top of the industry in terms of circulation. Particularly, USA Today is the largest newspaper in the country in terms of circulation with over 2.3 million newspapers in daily circulation. This wide and diverse audience makes it appealing to advertisers and thus will insulate the company somewhat from declining advertising in the print industry. Because of its size and diversification, GCI earned the AP's title as the print industry's most "fiscally healthy publisher"; but it has been downgraded to 'junk' by Moodys and in Feburary 2009 it cancelled 90% of its dividend, and will probably have to cancel the remaining 16 cents a year dividend in order to stay afloat. When that happens, its shares market price will most likely crash again down to a mere $1.50/share in Spring 2009.
Gannett has made efforts to protect itself against rising newsprint cost by cutting down on the size of its paper, and also through its partial ownership in a Washington printing facility. Since newsprint prices increased by about 25% in 2008, these strategies will put GCI at a competitive advantage in minimizing its costs in the increasingly competitive print industry, but it still won't keep its profits rapidly declining and its stock price slumping badly. Gannett's shares were down to $1.85/share in February 2009.
Gannett has increased its investment in a number of successful advertising Web sites including CareerBuilder and PointRoll. As the media industry shifts its focus to the Internet, a company's ability to draw advertising revenue online becomes increasingly important. In Q4 2008, the company's print advertising revenues decreased by 22.7% so the company's emerging online presence is becoming increasingly more vital to its future success. However, the increase in online revenues has now tapered off in this recession-depression, so online gains will not come close to off-setting the drastic decline in print ad revenues in 2008 and 2009, with its disastrous affect on earnings and stock price, down to around $2/share at end of 1st quarter 2009.
Gannett has strong cash flow that it is currently using to reduce their debt. Despite all the the gloom, USA Today has kept readers and circulation stable. Their strong cash flow just can not be ignored.
