New York Times plunges as advertising slump leads to surprise loss

The New York Times Co. on Thursday tumbled the most in at least three decades after reporting a surprise loss on falling advertising sales, adding to the challenges for incoming Chief Executive Officer Mark Thompson.

Times Co. plunged 22 percent to $8.31 in New York, the biggest one-day drop since at least 1980. The stock, up 38 percent this year through yesterday, led decliners in the Russell 2000 Index Thursday.

The publisher's struggles reflect mounting challenges for the newspaper industry as it tries to compensate for shrinking print-ad sales with Internet revenue. Advertisers are growing squeamish on fears that the economy will worsen, which will probably cause the print business's slump to continue into the fourth quarter, Times Co. said.

"We are hearing from business leaders that they are extremely concerned," Chief Advertising Officer Denise Warren told analysts Thursday on a conference call.

The loss from continuing operations was 1 cent a share, excluding severance and other costs, the New York-based company said today in a statement. Analysts had estimated a profit of 8 cents on average, according to data compiled by Bloomberg.

The company's print-ad sales for the period dropped 11 percent, and overall ad revenue declined 8.9 percent. Print sales trends will probably be similar in the fourth quarter, the company said.

"A very disappointing third quarter," said Douglas Arthur, an analyst with Evercore Partners Inc. who has rated the stock the equivalent of buy since August 2010. "Very weak advertising and higher costs than expected."

Advertising has fallen across all categories for the newspaper industry, dropping 6.6 percent in the first six months of this year, according to the most recently available data from to the Newspaper Association of America.

Bearish options wagers against the Times Co. had climbed to the highest level ever. The ratio of outstanding puts to sell the stock versus calls increased almost 30-fold in two days to 4.1-to-1 on Oct. 22, an all-time high, according to data compiled by Bloomberg. A block of 8,500 January $10 puts changed hands that day after 10,000 traded at the end of last week. Those options tripled in value today, the data show.

Gannett Co., publisher of USA Today, fell 5.2 percent to $16.84 at the close in New York, the most since June 1.

Times Co. has operated without a permanent CEO since December. Thompson, who is scheduled to take over Nov. 12, faces questions over how his former employer, the British Broadcasting Corp., handled a sex scandal, marring his move to the New York Times.

Last December, reporters for the BBC show "Newsnight" prepared a broadcast featuring interviews with women saying they had been sexually abused as children by Jimmy Savile, a popular BBC presenter. Savile died in October 2011.

Top editors at the BBC knew of the pending report, including BBC News Director Helen Boaden, according to people familiar with the matter. Boaden reported to Thompson, who has said he knew nothing of the Savile report and had no involvement in its cancellation.

"Mark has provided a detailed account of that matter and I am satisfied that he played no role in the cancellation of the segment," Chairman Arthur Sulzberger Jr. said on a conference call with analysts Thursday after the earnings were released.

Thompson "possesses high ethical standards and is the ideal person to lead our company as we focus on growing our businesses through digital and global expansion," he said.

Times Co.'s net income dropped 85 percent to $2.3 million, or 2 cents a share, compared with $15.7 million, or 10 cents, a year earlier, the company said. Revenue was little changed at $449 million. Analysts had projected $479.4 million. The company had severance costs of $3 million before tax in the quarter, which it attributed to normal departure-related expenses.

Digital ad revenue fell 2.2 percent to $44.6 million, while subscribers to online editions of the New York Times and International Herald Tribune increased 11 percent to 566,000 since the end of June.

— With assistance from Niamh Ring and Nikolaj Gammeltoft in New York.