Last week, The Washington Post (WPO) reported disappointing first quarter earnings that showed a continuing decline in its print business and larger education segment. For its first quarter, The Post earned $0.64 per share, or $4.7 million, a steep 85% plunge from the $4.07 per share, or $31 million, it earned in the prior year quarter. Revenue growth was nearly flat at $959 million.
The Washington Post’s largest segment is the Kaplan education division, which most Americans know for its textbooks, tests and testing centers. The division, which had previously held up The Post’s lackluster revenue growth, posted a 3% decline in revenue to $527.8 million, citing restructuring costs which are expected to continue for several months. These costs included $25 million in expenses attributed to early retirement, severance costs and other restructuring initiatives.
The company’s second largest reporting segment is its cable television division, which reported a 5% increase in revenue to $200.1 million. This is in line with recent gains from major cable companies such as Walt Disney (DIS), Time Warner (TWX) and Comcast (CMCSA). Meanwhile, its smaller television segment, which consists of six local affiliates of ABC, CBS and NBC, reported a 5% gain to $85 million, mainly attributed to advertising growth.
The company said the results were influenced by $25 million in costs attributable to early retirement, severance and restructuring. The company also suffered from a $4.6 million foreign currency loss.
That leaves its struggling flagship newspaper business, which reported a 4% decline to $127.3 million. The print versions of the newspaper posted heavy declines from the previous year, as the company implemented price increases to offset declines in retail and general advertising. Daily print circulation dropped 7.2% while Sunday circulation declined 7.7%. Print advertising revenue dropped 8% to $48.6 million.
Despite these nasty declines, The Post’s digital business showed some more promise. Digital revenue, driven by The Post’s digital version and Slate, rose 8% to $25.8 million. Online display advertising revenue rose 16%, but was slightly offset by a 6% decline in online classified advertising. The company is planning to erect a tiered-pricing paywall this year to capitalize on digital growth, but the strategy is controversial and unproven, despite being advocated by Warren Buffett.
To keep its head above water, The Post is reportedly planning to move out of its downtown Washington headquarters to save money. The move echoes recent strategies by its similarly troubled industry peer, The New York Times (NYT), which sold off local newspapers, radio stations and real estate to stay afloat.
Although The Post is often cited as Warren Buffett’s favorite holdings, I believe that the stock is in serious trouble. Investors should avoid both The Post and The Times, which could both be headed for dark times ahead.
Other News About WPO
The Washington Post Co. Earnings Decline; Revenue Sees Slight Increase
Can The Post stay alive in these trying times?
WashingtonPost Suffers 85% Earnings Drop
Washington Post teeters on the edge of unprofitability.
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