Times Mirror Profit Falls 4.8%; Decline in Ads Cited

Media conglomerate Times Mirror Co. on Tuesday reported a 4.8% decline in second-quarter profit, which it blamed on higher costs and weak demand for advertising.

Hardest hit was the company’s newspaper division--which includes the Los Angeles Times, Newsday, the Baltimore Sun and the Hartford Courant--and its group of television stations.

The decline in profit to $79 million for the Los Angeles-based company came despite an increase in revenue during the three-month period ending June 26. Second-quarter revenue rose 4.3% to $818.1 million, compared to the 1987 period.

In a statement, Times Mirror Chairman Robert F. Erburu said: “The continuing softness in advertising volume at our newspapers and other media properties, and the impact of higher newsprint, other paper and postal costs, are resulting in weaker operating performances than anticipated.”

Erburu added that “the weaknesses in our advertising revenues are being moderated by strong performances in other areas, notably professional publishing and cable television, and by aggressive cost controls.”

Tough Time for Newspapers

In a memo to employees earlier this week, Times Publisher Tom Johnson said the newspaper--Times Mirror’s largest property--has frozen hiring with few exceptions, has asked departments to reduce travel and entertainment expenses by 20% and has raised the ratio of space devoted to advertising.

The company’s latest results were “not quite up to expectations,” said Edward J. Atorino, a media industry analyst at Smith Barney, Harris Upham & Co., of Times Mirror’s financial results. “The big problem is still newspapers.”

Pretax operating profit for newspapers fell 19.3% to $88.6 million in the second quarter, and operating profit for television stations was down 21.2% to $14.3 million.

Analysts said media companies nationwide have seen their financial performance hurt by sluggish demand for television and newspaper advertising. Meanwhile, the cost of newsprint has increased 14% since last year, they said.

Analysts have attributed the soft advertising market to slow consumer spending and the mergers and acquisitions of department stores and other retail chains, which sometimes lead to cutbacks in advertising.

That is bad news for newspapers, which generally depend on retail advertising for half their total advertising revenue, said media industry analyst John S. Reidy at the investment firm Drexel Burnham Lambert. “When retail advertising is soft, it’s a problem.”

Expansion Programs

At Times Mirror, costs were also affected by expansion programs at The Times and Newsday and by start-up expenses for the trade magazine Sports inc.

The lackluster demand for advertising hurt Times Mirror’s television stations, and its two stations in Texas were also hit by the depressed regional economy.

The bright spots in Times Mirror’s second quarter included a 47.3% increase in cable television operating profit on higher revenue. The company’s book and magazine division reported a 29.2% gain in operating profit.

For the first six months of the year, Times Mirror reported that its profits rose 9.1% to $154.1 million from the comparable period last year. However, that figure would have been lower except for one-time gains on the sale of Times Mirror Press and timberlands. The company also benefited from a lower tax rate this year.

Although the company’s first-half revenue climbed to $1.6 billion from $1.5 billion in the 1987 period, operating profits for the six months declined 6.6% to $258.4 million.

On a day when stocks were generally lower, with the Dow industrials falling 20.63, Times Mirror shares slipped $1.375 Tuesday on the New York Stock Exchange to close at $31.125.