But Gannett Expects Paper to Post Loss for Year : USA Today Turns Its First Profit

USA Today, the Technicolor national newspaper launched by Gannett Co. five years ago, turned a profit in May for the first time, although it will fall back into the red during the summer and lose money for the year, the company announced Tuesday.

The paper earned roughly $1 million in operating profit in May, following a loss in April of $900,000, Gannett said. From its inception in September, 1982, to January, 1987, USA Today lost $361 million before taxes, according to estimates by the brokerage firm of Lynch, Jones & Ryan.

Following the announcement, several Wall Street brokerage analysts, who were predicting USA Today would lose $30 million to $40 million this year, lowered the predicted losses to $10 million to $20 million.

Quick-Read Stories

“McPaper has made it,” Gannett President John Curley proclaimed, using the derisive name USA Today’s many early critics gave the paper because its “quick-read” stories, bright-color graphics and up-beat news seemed like fast-food journalism.

The analysts, while impressed by the announcement, fell short of heralding it as the final word.

“It is not entirely out of the woods yet where we can say it is a profitable property and will remain profitable,” said Bruce Thorp, an analyst with Lynch, Jones & Ryan.

But, “there are reasonable odds USA Today will make money next year,” said John Reidy of Drexel Burnham Lambert.

Gannett made much of the fact that the maiden profitable month came four to six months ahead of its prediction five years ago that USA Today would turn a profit at some point during the final three months of 1987.

Yet investment analysts said a company as large as Gannett has the ability to “engineer” its income statement between months sufficiently, by deferring costs or assigning them to other operations, so that it could design a profit for USA Today early.

For instance, Gannett sends editorial employees to USA Today from its other newspapers, but the employees remain on the payrolls of their home papers. Gannett Chairman Allen H. Neuharth said that the paper currently has 30 such “loaners” on a news staff of 250.

“If they want to take a million or two swing, they can easily do that,” said Victoria Butcher, an analyst with F. Eberstadt & Co.

Butcher said Gannett may have timed the announcement of early profits to gain momentum with advertisers in the summer months, the traditional slow season for newspaper advertising.

“This press conference may have been directed at advertisers particularly,” she said. “We investment analysts weren’t even invited.”

Lower-than-projected losses at USA Today may not move analysts to revise projections for Gannett’s overall profits for the year, Butcher said, because its broadcast and billboard advertising divisions are performing below expectations.

Despite widespread skepticism, USA Today has carved out an audience and won advertisers.

Rising Circulation

Circulation reached 1 million within months, with heavy promotion and much free distribution, and then held steady at about 1.2 million. In the last year, however, circulation rose to 1,311,792, according to the Audit Bureau of Circulations. By including bulk circulation--those papers sold to hotels, airlines and such, and given free to customers--Gannett counts circulation at 1,544,547.

Advertising, which Lynch Jones & Ryan estimated averaged 7.8 pages a day in April through September of 1983, has gained steadily. From January to May of this year, Gannett said advertising averaged 16.1 pages a day.

The company said that later this year it would release a breakdown of what USA Today has cost Gannett to develop and launch.