One likely victim in Federated Department Stores Inc.'s acquisition of May Department Stores Co. is newspaper advertising.
Robinsons-May, a unit of May, has been among the bigger retail advertisers in the Los Angeles Times and other local dailies. Its demise as part of the consolidation is expected to result in lost revenue at a time when newspapers are struggling to maintain sales growth.
A Merrill Lynch research report on the pending deal identifies Tribune Co., which owns the Times, as among the newspaper companies with the most exposure because California has a heavy overlap of Federated and May stores. Deutsche Bank estimates that Federated might cut as much as $180 million from its newspaper advertising.
"May and Federated are both large advertisers of ours," said Todd Brownrout, senior vice president of advertising for the Times. "However, as a percentage of our total advertising base, they're fairly small."
Brownrout said each chain spends a comparable amount on advertising, which he would characterize only as in the "low single digits" as a percentage of overall sales.
Full-run advertising in the Times declined 6 percent in 2004 compared with a year earlier. Those weak results were partly to blame for Tribune's decision to reduce its workforce through buyouts and layoffs.
Doug Hanes, senior vice president of advertising and marketing for MediaNews Group Inc.'s Los Angeles Newspaper Group, which includes the Daily News of Los Angeles and the Long Beach Press-Telegram, noted that publishers face the loss of other large advertisers with the mergers of Sears Roebuck and Co. and Kmart Corp. and Cingular Wireless and AT & T; Wireless.
"There's obviously great concern with any kind of merger or consolidation," Hanes said. "I've never met a merger or consolidation that's beneficial to newspapers."
The Los Angeles Newspaper Group does not release advertising revenues or volumes. But Hanes said the group has seen "significant growth" from department stores, led by increased spending in the group's Inland Empire newspapers.
Both May and Federated increased spending in LANG's Inland Empire newspapers due to the opening of the Victoria Gardens mall in Rancho Cucamonga, which has both a Macy's and a Robinsons-May, he said.
National newspapers such as The New York Times and USA Today could potentially benefit from the merger because it sets the stage for Federated's Macy's unit to become the dominant department chain in the United States a single brand identity that could lead to national rather than regional advertising.
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