“We believe that Lee Enterprises has been burning its furniture to stay alive by aggressively cutting costs in order to service its crushing debt load,” writes a contributor to Seeking Alpha, a financial news/commentary site.
He points out:
* Lee has laid off 26 percent of its workforce since 2010.
* In that same time, the chain’s newsprint consumption has declined by 30 percent.
* The newsprint produced per subscriber has decline by 14 percent since 2010. (“Each of Lee’s subscribers is reading a smaller newspaper.”)
The Seeking Alpha writer’s conclusion:
Lee Enterprises has embarked on an unsustainable business model of destroying its product while raising prices in an effort to sustain its financial performance. …
Lee’s short-minded strategy of gutting its workforce (and therefore its product) while simultaneously increasing prices is doomed to fail. We believe the stock is worth at most $2.85 per share and is likely ultimately worthless based on industry average multiples and the high likelihood that LEE’s financial performance will begin to deteriorate once consumers catch on to the much weaker product and the company runs out of cost cutting measures. We are short the stock and suggest shorting the stock.
While Lee may be burning the newsroom furniture, its top executives are probably buying high-end leather sofas for themselves with their six-figure bonuses.
Lee owns the St. Louis Post-Dispatch and dozens of other smaller newspapers.