People and InStyle owner Meredith Corp. is beginning to see tentative signs of recovery in its ad business, with growth in digital advertising and political spot revenues partially offsetting adverse COVID-19-related impacts.
“We are encouraged by the rebound in advertising demand from our shorter lead time platforms, namely digital,” said chief executive officer Tom Harty, stating that year-over-year digital advertising revenues grew 15 percent to a record first-quarter high. “Some categories remain soft due to COVID-19, including auto, travel and entertainment. That said, the reopening of the U.S. economy in recent months is driving improving trends in certain categories, including pharma, beauty, home and online retail. We see some filmmakers ramping production, and expect improving spend ahead in the entertainment category.” Political advertising also helped, with competitive races led by those affecting its Arizona, Georgia and Missouri media markets driving growth of 43 percent compared with two years ago.
Earnings from continuing operations more than tripled to $42 million in its fiscal first quarter compared to a year ago, while total revenues were $694 million, down 4 percent. At the national media group, which includes People and InStyle, revenues were down 8 percent as it “continues to experience COVID-19-related cancellations and delays in advertising, consumer-related and other activities, primarily in the print platform,” the company said.
Its local media group, comprising many broadcast channels, saw revenues rise 17 percent to $226 million. Political advertising revenues of $52 million and retransmission revenues of $91 million offset declines in nonpolitical spot advertising revenues, driven by COVID-19-related cancellations, delays and crowd-out by its record political demand.
Meredith estimated that the pandemic wiped between $45 million and $65 million off total first-quarter revenues across both the national and local media groups.
“While the COVID-19 pandemic continues to impact total company revenues, sequentially our year-over-year performance has continued to recover,” added Harty. “Our efforts to enhance financial flexibility and control costs have produced tangible results as demonstrated by our growth in operating profit and free cash flow. We anticipate these improvements will continue benefiting shareholders as macroeconomic conditions continue to improve and enable us to more meaningfully shift our focus to deleveraging and other long-term initiatives.”
These cost control measures included Meredith laying off 180 staffers — 50 at its national media group and 130 at its local media group — as it sought to cut costs amid the pandemic. It had previously cut pay for 60 percent of staff, but that has since been reinstated.
With the release of its first-quarter results, Meredith executives are now preparing for the group’s annual meeting on Nov. 11, where it will seek shareholder approval of an amendment to its charter that would increase options for a separation of the national and local media groups, although the company stressed in a statement that it has no immediate plans to split into two.
If such a move does happen, analysts believe the hope is that it will improve shareholder value. Meredith’s share price is down 55 percent since the beginning of the year.
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