By: Jennifer Saba With two weeks remaining before the year comes to a close, Goldman Sachs estimated ad-revenue growth to come in at 4.4%. That's a slowdown for the industry, after year-over-year increases of 5.4% in Q3 and 5.6% in Q2.
The sore spots: weak performance in classified (which Goldman calls "troubling") and national revenue coupled with higher newsprint costs and employee benefits dragged down the quarter. The investment firm predicts classifieds to increase 6% for Q4, versus 6.6% in Q3 and 8.2% in Q2. The classifieds category has been the one bright spot during quarterly and monthly earnings calls, but that appears to be losing its luster.
Though Christmas retail sales appear to be soft, this could mean good news for newspapers. It's likely stores will beef up their advertising during this week to move inventory. However, there are pitfalls. "This short-term positive likely translates into more cautious inventory ordering by retailers going into 2005 and possibly reduced ad spending in the New Year," the report said.
For 2005, Goldman Sachs forecasts an increase of 4.6% growth for newspaper ad revenues. Watch for more newsprint hikes. Both Abitibi and Bowater announced a $35/ton increase by March 1 -- an unlikely scenario. Still, Goldman Sachs estimates a 7.4% increase in the cost of newsprint for next year.
Year to date, the newspaper stocks are down 7.8%, while the S&P 500 is up 8.4%.
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