Heeding a call for higher earnings,
the Miami Herald reinvents itself.
How does a company increase sales while downsizing? That's the challenge of new Miami Herald publisher Alberto Ibarg?en. With a '98 pre-tax profit margin of more than 18%, the Herald's bottom line appears healthy. But in an industry that averages over 20%, parent company Knight Ridder is demanding 22% by next year.
Ibarg?en hopes to reach that goal with staff cuts, new products and a greater emphasis on local reporting to attract new readers. He'll reduce newsroom positions over the next two years, mostly through attrition. Some editorial departments have been merged; others, such as the Sunday magazine, Tropic (which was losing $2 million a year), and the international edition, have been eliminated. Despite the smaller staff, the Herald has expanded sports and business pages and added new sections.
Increased automation should also help reduce costs, and Ibarg?en plans cuts in non-newsroom staff, too. By the end of the year, much of the paper will be paginated electronically, eliminating some positions. This year's $110 million press upgrade will let the Herald produce a greater variety and quantity of products.
Some analysts are reserving judgment on Ibarg?en's plan, which follows a company-wide Knight Ridder blueprint of increased profits through lower costs and higher revenues. "If you degrade the editorial product, people may not want to buy your paper, and appealing to readers is what it's really all about," says analyst Michael Beebe of Goldman Sachs in New York City, who follows Knight Ridder.
Ibarg?en acknowledges the risks, but insists he has few choices. The paper's daily circulation (about 350,000 a year ago) has been in a gradual slide, sinking recently to No. 2 in the state behind the St. Petersburg Times. Ibarg?en says 1998 daily circulation may be down as much as 9,000, mostly due to the decision to spin off the Herald's Spanish-language version -- El Nuevo Herald -- which had been an insert. El Nuevo circulation is now reported separately. Herald ad revenues remain flat, in the $270 million-a-year range. Year-end 1998 figures are expected to reveal a drop in classified advertising, a slight increase in retail ads and no change in national ads.
Meanwhile the Herald is feeling intense pressure to the north in the Broward market from the Tribune Company's Sun-Sentinel in Fort Lauderdale. Later this year, as part of an ambitious effort to win readers in that fast-growing county, the Herald will dedicate a new $88 million Broward headquarters. Ibarg?en admits the Tribune Company's profitability inspires Knight Ridder officials to demand more. The Chicago-based company, which also owns the Chicago Tribune and Orlando Sentinel, routinely posts company-wide profit margins of 25% or better, compared to Knight Ridder's 17% last year. But in the past two years, Beebe explains, Knight Ridder has recommitted itself to the industry, acquiring new dailies while dumping non-core businesses. Along with that renewed commitment is a pledge to be the best. "Knight Ridder wants to be known as the industry leader," says Beebe. "But the question always remains: Do you measure success by profits, by good journalism or by some combination of both?"
...in the news
Boca Raton -- Levitz Furniture Corp. announced it is laying off 1,000 employees, 25% of its workforce, and closing 27 of its 90 stores around the U.S., including all six in Florida -- Fort Lauderdale, Boca Raton, West Palm Beach, Miami, Plantation and Cutler Ridge. The publicly held company intends to focus more on the Northeast U.S. and West Coast states
Broward County -- Broward remains a hot spot for corporate relocations. The latest newcomer is Concord Camera of Avenel, N.J., the world's fourth largest producer of single-use cameras. The company, which has a manufacturing plant in China, will consolidate all corporate operations in a new facility in Hollywood and build a 15,000-sq.-ft. distribution facility near Port Everglades. Meanwhile, Pennsylvania-based Hyperion Communications will open a regional office and switching station in Tamarac; it expects to add 40 new positions.
Coral Springs -- First Data Merchant Services (FDMS), a division of Atlanta-based First Data Corp. that provides merchant transaction and Internet processing services, will nearly double its local workforce to 950. Completion of a 106,000-sq.-ft. expansion is slated for June.
Dania -- Billed as the world's largest fishing museum, the International Game Fish Association World Fishing Center opened a $32-million, 60,000-sq.-ft. facility with interactive displays, an information library, exhibition hall and a children's discovery room. The center expects 500,000 visitors in its first year.
Fort Lauderdale -- In a restructuring move designed to reduce costs, BankAtlantic (Nasdaq-BANC) will close three of its 67 branches and shut down one of its mortgage-servicing units, laying off at least 185 of the bank's 1,200 employees. BankAtlantic, which posted a $9.4 million third quarter loss last year, has struggled to remain profitable since embarking on a statewide expansion program.
Hollywood -- Builders Square, which at one time operated 10 stores in south Florida, is closing three of its last four locations and converting its Hollywood store to a discount clearance outlet.
Juno Beach -- Electric utility holding company FPL Group (NYSE-FPL) is saying "yes" to California and "no" to Maine. The company has agreed to pay $213 million to Pacific Gas & Electric for geothermal power plants in northern California. Meanwhile, a bid to acquire non-nuclear plants from Central Maine Power for $846 million has hit a snag. FPL, insisting that new rules by the Federal Energy Regulatory Commission will diminish the Maine plants' profitability, is asking out of the deal.
Miami-Dade County -- Major League baseball reversed its decision to play the 2000 Major League All Star Game at Miami-Dade County's Pro Player Stadium. In naming Atlanta's Turner Field as the game's venue, league officials said the high-profile event should be awarded to newer, baseball-specific facilities. Miami-Dade economic development officials are protesting the move.
A Norwegian company that hopes to sell luxury condominium units on board a cruise ship will set up its U.S. headquarters in Miami. ResidenSea Ltd. will launch its 86,000-ton The World of ResidenSea in April 2001.
Burger King Corp. is exploring relocation options in other Florida cities after deciding not to buy its 80-acre waterfront headquarters building. Miami-Dade County officials, caught off-guard by the decision, are scrambling to persuade the company to stay. Burger King was founded in Miami in 1954, but now is owned by Diageo PLC, a publicly traded company based in London.
Southern Gear & Machine will double its Miami facility to 60,000 square feet and add 40 new employees. The company, which made the gears used in the Hubbell Space Telescope, expects an increase in orders from other federal aerospace projects.
Good and bad news for the county from United Airlines: The Chicago-based carrier will spend $30 million on a new cargo-handling facility at Miami International Airport (MIA), where United's cargo operations have grown tenfold in the last six years. At the same time, however, United canceled a planned $75 million aviation training facility in Homestead, which would have added 120 new jobs in the region. United cited uncertainties in the Latin airline industry.
Meanwhile, LanChile announced plans for its new cargo facility, to be the largest at MIA when completed in late 2000. The $52 million, 340,000-sq.-ft. building will allow the airline to keep pace with expected cargo-volume growth of 12% to 15% over the next few years.