What could go wrong for The New York Times Co. (NYSE:NYT)? Apparently plenty.
Shares of the venerable newspaper publisher yesterday slumped more than 4% after CEO Janet Robinson said advertising sales would be worse than expected. In fact, third-quarter advertising revenue will drop 8% — double a previous forecast — as spending dries up. Print advertising is expected to fall by a whopping 10%. Even digital ad revenue, which had been rising, will fall 2% to 3%, Robinson told analysts at a Goldman Sachs conference.
��Economic conditions have been getting more difficult since the second quarter,�� The Wall Street Journal quotes Robinson as saying in perhaps the understatement of the year.
Consumer confidence remains as fragile as ever. More worrisome for The New York Times is the fact that wealthy consumers, which its advertisers want to target, are not feeling that confident either. One study found that confidence among the well-to-do had plunged 18% in July to a level not seen since the middle of the recession in 2008.
Advertisers interested in reaching wealthy readers like those that read the Times and News Corp.��s (NASDAQ:NWS) The Wall Street Journal might be shifting their marketing spending overseas because that��s where their companies are growing the fastest. For example, Tiffany & Co. (NYSE:TIF) saw second-quarter sales in the Asia-Pacific region rise 55%, more than double the 25% increase seen in the U.S. European sales also surpassed America��s, gaining 32%. For the fiscal year ended Jan. 31, 2012, Tiffany expects Asia Pacific sales to gain 30% and European sales to jump by at least 20% while rising ��a high-teens percentage increase in the Americas.��
Wall Street also might do less advertising as well, as big financial services firms including Bank of America (NYSE:BAC) lay off workers to ! reduce e xpenses. New York real estate, another prime source of Times advertising, continues to be soft. The real estate web site Trulia estimates the median sales price for homes in New York, N.Y., for June 2011 to August 2011 at $1,075,000, up just 1.4% from a year earlier. However, prices in several trendy neighborhoods — including the Upper East Side, the Upper West Side and Chelsea — showed week-over-week declines.
Circulation revenue is a bright spot, with an expected increase of around 4%. Robinson said digital subscriptions are outpacing internal expectations, which is noteworthy considering the company recently instituted a paywall. The company had 224,000 digital subscribers as of the second quarter.
One problem there, of course, is discounting. The company��s flagship paper is selling digital subscriptions that range between $15 and $35 per month for 99 cents for the first four weeks. It will be interesting to see if New York Times readers remain loyal to the paper once these teaser rates expire.
Robinson��s speech threw cold water on what little enthusiasm Wall Street mustered for the stock following the investment by Mexican billionaire Carlos Slim. After he added 450,000 shares to his position in August, his spokesman was quoted in the Times — of course — as saying that the price was so low that it was a ��good point to buy.��
Slim has stayed on the sidelines at The New York Times for now, but his patience with the Sulzberger family, who has controlled the company since 1896, will not last forever.
Jonathan Berr does not own shares of any of the companies listed.
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