April 21 (Bloomberg) -- Gannett Co., the largest U.S. newspaper publisher, said first-quarter profit fell 8.9 percent as the drop in classified advertising sales deepened and television revenue declined.

Net income fell to $191.8 million, or 84 cents a share, from $210.6 million, or 90 cents, a year earlier, McLean, Virginia-based Gannett said today in a statement. Sales dropped 8.4 percent to $1.68 billion.

Classified ad sales tumbled 18 percent in March, a steeper decline than in January and February. Chief Executive Officer Craig Dubow said on a conference call today that the economy deteriorated more in the second half of last month, and that newspapers in California, Florida, Nevada and Arizona faced a challenging real-estate market.

``The economic weakness has really taken its toll on Gannett,'' said Michael Kupinski, research director at Noble Financial Group in Boca Raton, Florida. ``Revenues were a little lighter than what we expected and classified was certainly a major part of that.''

He recommends investors buy the shares and said results should improve when the economy recovers. Gannett's broadcast stations will also benefit from the summer Olympics and ad spending ahead of the U.S. presidential election, he said.

Gannett, the owner of USA Today, rose 32 cents to $28.30 at 4 p.m. in New York Stock Exchange composite trading. The stock has dropped 27 percent this year.

Industry Decline

The shares fell to a 12-year low on March 14, when the company predicted first-quarter profit of 76 cents to 78 cents, below analysts' estimates of 80 cents. Excluding a gain from a land sale, profit matched the 77-cent reduced average of nine analysts' estimates compiled by Bloomberg.

Gannett's results mirror the steeper drop in advertising across the industry. New York Times Co. reported a loss last week as classified ad sales fell 23 percent. Lee Enterprises Inc., the publisher of 50 daily newspapers, today reported a 14 percent decline in classified ads among its print publications. Combined print and online classifieds fell 12 percent.

Lee's net income for the second quarter ended March 30 dropped 74 percent to $3.03 million, the Davenport, Iowa-based company said today.

Also today, A.H. Belo Corp. said first-quarter results fell short of its forecasts. The company plans to lower expenses to cope with the toughest newspaper advertising market in the past 60 years, CEO Robert Decherd said in a letter to shareholders.

Print, Broadcast

Gannett faced a ``struggling economy'' in the first quarter, Dubow said. The slowdown in real estate and employment classified advertising ``has added a degree of difficulty to our transformation,'' Dubow added, citing efforts to increase sales from the Internet.

Gannett's classified sales fell 16 percent in the quarter after dropping less than 12 percent in the previous four periods. Overall publishing revenue dropped 8.6 percent to $1.5 billion, and broadcast sales fell 7 percent to $170.2 million.

The company is investing in the online operations of its 85 newspapers and 23 broadcast TV stations to counter the loss of advertising to the Web and other media. During the quarter, Gannett joined Tribune Co., New York Times and Hearst Corp. to form a new Internet advertising network and named a chief digital officer.

Total U.S. advertising sales fell 11 percent and dropped 7.2 percent at Gannett's U.K. publications. USA Today posted a 2.1 percent increase in ad revenue, which benefited from stronger national sales, the company said.

The first-quarter results included a gain of 7 cents a share from the sale of land adjacent to the company's Virginia headquarters.

USA Today made an undisclosed investment in Fantasy Sports Ventures, operator of more than 100 Web sites, to share content and marketing, the company announced.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net.

Last Updated: April 21, 2008 16:19 EDT