Schools Open, But Ad Spending Plays Hooky

By: Lucia Moses August was a good month for a lot of retailers, with several reporting better-than-expected sales of back-to-school and household items. But newspapers aren't all sharing the bounty. Publicly traded newspaper companies won't begin reporting their August ad linage for another week or so, but industry watchers say last month appeared to be weaker than hoped. "July and August were the two worst retail months so far this year," said Linda Greiwe, vice president of advertising for The Arizona Republic in Phoenix. "What happened was, May and June were so soft, [retailers] had already decided what kind of cuts they would make."

"Just because it was a good month for retailers doesn't mean it was a good month for newspapers," said Dick Mitchell, senior vice president/retail manager for Landon Media Group Inc. "Retailers are carefully analyzing the ZIP codes they're buying and sometimes cutting them back in a quest to not have any wasted circulation. It seems to be more pronounced than it was in the past."

Knight Ridder lowered its third-quarter earnings estimate, citing in part a 3.4% decline in July retail spending and lack of revenue pickup. Edward J. Atorino, publishing analyst with Blaylock & Partners, said other newspaper companies seem to be priming investors for a less-than-stellar third quarter. With August looking barely better than July, Atorino said, "It's all a bet on September."

Overlaying the short-term ad spending softness is the ongoing struggle facing the department store category. May Department Stores said in the second quarter it would close 32 underperforming Lord & Taylor outlets. Dillard's Inc. has been pulling back its newspaper spending. And papers are feeling the absence of advertising from hundreds of Kmart stores that have closed in the past year.

Labor Day weekend, however, is widely considered a key indicator for consumer spending for the rest of the year, and the apparent strong showing this year could translate into a robust Christmas shopping season. Recent surveys showed surprisingly strong consumer demand for non-essentials such as furniture.

Retailers are likely to stick to the conservative ad-spending plans they've set months in advance, although ROP advertisers have more flexibility to increase schedules than do preprint users. "Back-to-school sales were better than they anticipated, and if that continues, I think you'll see them start to free up some dollars," Greiwe said. And hope abounds that the current pickup in consumer spending could boost retailers' spending levels for next year.