2004 Starts on a Cool Note for Publishers

By: E&P Staff January proved to be a cool month for the newspaper industry, according to a report released today by Goldman Sachs.

Ad revenue for January inched up 2.9% versus December's surprise 4.2% gain. This is due in part to the weak national ad category -- up 1.7% in January versus 8.7% for December.

The report cites timing issues, including an earlier date for the Academy Awards, which may have pushed some ad spending into December. Technology companies held back their campaigns, which may mean a stronger month for February.

Retail ad revenues were up 2.8% for January as opposed to 1.9% for December, while classified revenue showed the strain of slow hiring, 3.3% for January versus 4.6% for December.

Newspaper stocks have lagged the market year to date as sickly January advertising revenues have raised investor anxiety that the pace of the ad recovery may not be significant enough to kick-start earnings growth in 2004. Year to date, the newspaper group is down 2.3%, versus a 2.6% gain in the S&P500. Near-term stock picks remain defensive with Gannett and Tribune as top choices, according to Goldman Sachs.

Despite the slow start, the investment firm is still optimistic about 2004, predicting a turn in the help-wanted category sometime in the first quarter.