Valassis revenue down, CPG shrinkage cited

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Valassis' third-quarter revenue declined 7.7% to $572.4 million year on year, the company reported Oct. 26.

The marketing services company's neighborhood targeted business had Q3 revenue of $76.9 million, a decline of 32.5% compared with 2010. Segment profit for the quarter was $0.4 million, a decrease of 94.4%.

The neighborhood-targeted segment was negatively impacted by a $25 million decrease in run-of-press revenue and reductions in the CPG vertical, Valassis said.

Valassis CEO and president Alan Schultz said on an earnings call that an 18% year-over-year spike in coupon redemptions is “prematurely exhausting” CPG clients' promotion budgets. “As a result, clients began to cut back on the number of their coupon-related programs in the second half [of the year],” he said.  

Schultz noted a “direct correlation between declining consumer confidence and increased redemption rates,” and said he “expects this trend to worsen in the fourth quarter” as CPG client budgets continue to be exhausted early.

The marketing services provider reported free-standing insert revenue of $73.5 million in Q3, a year-over-year decline of 17.6%. Segment profit for the quarter was $0.8 million, down 116.3% compared with 2010.

Meanwhile, the company reported quarterly revenue from shared mail of $330.5 million, an increase of 1.3% compared with Q3 2010, as revenue from the company's international, digital media and services business grew 10.2% to $47.5 million in this year's third quarter.

Q3 net earnings rose 1.9% to $27.5 million, while operating income dropped 12.4% to $48.9 million.

Schultz, Valassis' CEO since 1998, announced in August that he will retire at the end of this year. Rob Mason, the company's EVP of sales and marketing, will succeed him.

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