Thursday, July 24, 2008

More Corporations, State Government Report Falling Revenue

Posted By on Thu, Jul 24, 2008 at 4:00 AM

A fresh batch of reports this week on the Tennessee economy and from corporations that do business in Memphis spells problems for state and local government and enterprises as varied as newspapers, reuse of The Pyramid, and shopping malls.

Corporations filing quarterly reports Wednesday and Thursday include E.W. Scripps, the parent of the The Commercial Appeal; Northwest Airlines; and Costco, which has a store on Germantown Parkway.

Also, the National Conference of State Legislatures issued its annual report Wednesday on the financial state of the states, and Tennessee is headed for a budget shortfall of 4.7 percent, or $468 million.

Tennessee has no broad-based personal income tax and relies heavily on the sales tax, which is running $167 million below estimates. Business taxes are $137 million below estimates, and tobacco and privilege taxes are lagging a combined $100.6 million, according to the report. State government hopes to trim 2,700 jobs by offering buyouts to employees.

City of Memphis and Shelby County governments, including the school systems, can expect minimal help from state government in the remainder of 2008 and in 2009. State officials have already been talking tough about making city taxpayers pay more for city schools or risk losing their state appropriation.

Meanwhile, corporate quarterly financial reports were equally gloomy in these areas:

Newspapers: Scripps reported that second-quarter revenue at its newspapers was down 13 percent year over year to $144 million. But the newspaper segment made a $16.3 million profit thanks to cutting employees and other costs.

"Lower local and classified advertising sales, including particularly weak real estate, employment, and automotive advertising, contributed to the decline," the company said. Local was down 13 percent, classified down 21 percent, national down 20 percent, and online down 8 percent.

Scripps is spinning off its newspapers and television stations as a separate company from its lifestyle television networks and interactive service businesses which are much more profitable.

Air Travel: Northwest, which plans to merge with Delta but keep its Memphis hub, announced a second-quarter loss of $377 million and said it spent 41 percent more on fuel than a year ago. The company plans to cut 2,500 jobs, but has not said where.

Retail: Costco, a discount chain that sells to bargain hunters, announced that higher merchandise costs will cut its profits this year. The surprise announcement drove the stock price down 12 percent Wednesday. Starbucks is closing nine stores in the Greater Memphis area among 600 closings nationwide announced this week.

The Pyramid: The price of gasoline makes buying a new bass boat with a big outboard motor a very expensive -- and expendable -- purchase. Bass Pro Shops is privately held, but competitors Cabela's and Gander Mountain are public companies. Gander Mountain, with stores in Tennessee, Arkansas, Mississippi and 20 other states, lost $1.59 a share in its most recent quarter -- and that was before the price of gasoline surged past $4 a gallon. Its stock has fallen from $11 to under $3 in the last year. Cabela's, which is a mail-order specialist, has fallen from $28 to under $13 but is still profitable.

Robert Lipscomb, the city's point man for talks with Bass Pro, said Thursday, "We're still talking and we’re talking every day." He said he sees "no economic benefit" in a renewed proposal from a local church to buy The Pyramid, and he questioned whether the church -- Cummings Street Missionary Baptist -- could even pay the utilities in the building.

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