Coronavirus-related advertising cancellations and delays wiped an estimated $136 million off People owner Meredith Corp.’s fourth-quarter revenues, but there are tentative signs that some companies are starting to spend on marketing again.
Revenues in the three months ended June 30 were $611 million, a decline of 22 percent from the prior year and below analysts’ expectations of $641.64 million. Loss per share was 14 cents, versus analysts’ forecasts of earnings per share of 29 cents.
While most of the slide in revenues was due to a pullback in advertising, the Des Moines, Iowa-based publisher added that previously announced magazine portfolio adjustments including the closure of Money and Family Circle reduced advertising and consumer related revenues by approximately $40 million. These moves are expected to to improve profitability in the long-term.
Meredith is not alone in suffering a fall in advertising revenues despite rising engagement across many of its titles. The whole industry has been impacted as companies across the board slashed marketing budgets, leading to widespread job cuts, furloughs and pay reductions. In the case of Meredith, which also publishes InStyle, it cut salaries for 60 percent of its 5,000 staffers through Sept. 4. Employees receiving pay reductions will have one day of unpaid leave a week during the same period and Meredith has also implemented a wage, salary and hiring freeze. It plans to restore full pay on Sept. 5.
There are early signs that the trends are becoming “less negative” though, according to Meredith president and chief executive officer Tom Harty.
“Since our last earnings update on May 14, advertising trends became less negative during the course of the fourth quarter. In July, we were seeing fewer client cancellations and/or campaign delays,” he told analysts during a call.
He added that “assuming no changes in trajectory due to COVID-19 or other macro factors,” he sees its national media group’s digital advertising revenues coming in flat to down in the low-single digits in the company’s first quarter, while comparable print advertising revenues are expected to be down in the mid to high 20 percent range.
Non-political advertising in its local media group is expected to be down in the mid-20 percent range as well, “due in part to expected crowding out by the coming political advertising cycle.” Political advertising revenues in fiscal 2021 should be at levels similar to fiscal 2019, he further explained.
As for People magazine, Meredith’s prized brand and the reason many believe it purchased Time Inc.’s assets, Harty admitted that it had been impacted by the pandemic, although he’s now seeing improvement.
“Early on, on the digital side of the business, when the pandemic first broke, traffic from a celebrity standpoint wasn’t as hot. We were also up against some comps from some issues that happened last year related to the royals and things like that,” he said. “But we’ve actually seen the traffic come back. And actually, during the month of July, there’s been a lot of, believe it or not, celebrity activity going on and very, very important to us.”
Out of the big three magazine publishers, Meredith is the only one that is publicly listed and therefore gives a quarterly glimpse into the real impact COVID-19 is having on the industry. Advertising generates approximately half of Meredith’s annual revenue.