Only last week, the broker expressed confidence that revenue growth for 2003 would be 2.9% (see
US Newspaper Spend To Grow 3% In 2003, Says Merrill Lynch) but disappointing May results have forced its hand and 2.5% is now considered more realistic. Revenues increased by just 1.5-2% in the first five months of the year and a second half upswing is unlikely to compensate.
A fall off in classified advertising, particularly recruitment, is cited as being responsible for the downgrade. Merrill had expected classified to grow 2% in 2003 whereas a 0.5% decline is now forecast.
Retail ROP advertising had been encouraging in the early part of the year but department stores starting making cutbacks in May and these are likely to continue for the foreseeable future. Nonetheless, it is anticipated that retail advertising will grow 3.3% in 2003, up from a forecast of 2.7%.
Analysts expect to see more pronounced growth in 2004 but Merrill has trimmed its full year forecast from 4.9% to 4.5% in light of current conditions. The classified market will grow by 6%, less than the 6.5% previously envisaged while retail advertising revenues will increase by 2.8%, as opposed to 3.3%, because of tougher comparisons and lower department store spending.
