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Business – Retail Growth Boosts Ad Market Outlook

– Georg Szalai

Better-than-expected retail sales growth in September is further boosting UBS’ growing optimism in the U.S. advertising market outlook.

Analyst Michael Morris said in a report this week that the “modestly better retail environment may embolden ad buyers.”

On Thursday, big retailers posted same-store sales figures for September, which rose 1.1% according to an index of key firms compiled by research firm Retail Metrics. Morris highlighted that this is the first gain in 13 months.

“Healthier retail sales will encourage retailers to increase advertising to compete for share of still shaky demand,” he said. And he highlighted that, according to TNS Media Intelligence, retail advertising represented 14% of all U.S. ad spending in 2008.

His overall conclusion: “Consensus advertising expectations remain too low.” Importantly, Morris said research shows that consumer and ad spending have been “consistent in magnitude” over time, even though the relationship broke down during the 2007-2009 time frame when revenue at the top 100 U.S. advertisers fell 6%, but ad spending plunged 13%.

“We expect the advertising/consumer discretionary spend relationship to return to normalized levels over the next two years and believe that consensus estimates mistakenly estimate future advertising using conservative growth rates off depressed 2009 bases,” Morris said.

Nielsen Business Media

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October 14, 2009 - Posted by | Uncategorized |

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