Madison & Wall founder Brian Wieser, the well-known and respected financial analyst focused on media and technology companies, has taken his magnifying glass and combed through the latest U.S. retail sales data, released Thursday by the U.S. Census Bureau.
There’s 2.8% year-over-year growth on an unadjusted basis in May 2023. That’s slower than the inflation rate increase seen in May. What does this mean for broadcast media?
Wieser notes that CPI (inflation) growth of 4.0% was seen in May 2023.
However, retail sales excluding gasoline sales was up 5.4%, a figure that was above any annual rate of expansion between 2012 and 2020. This, he points out, suggests that underlying trends “aren’t overly weak,” and is consistent with Wieser’s general take on the economy and the advertising industry.
Looking at some of the individual categories, motor vehicle sales were up 7.3% while food and beverage stores were up 3.7%.
Food services and drinking places were up 7.7%, illustrating continuing levels of heightened growth for restaurants and bars (which typically grew at a mid-single digit percentage in years prior to the pandemic).
Nonstore retailers – capturing e-commerce, but also mail-order retailers – accelerated their growth to 8.7% during May while general merchandise stores continued with a more modest rate of expansion at 1.7%.
Building materials stores were also relatively sluggish with only 1.9% growth as there is clearly an impact on the broader housing market at this point in time. Gasoline stations revenues were down by 20%.
RETAILERS: THEIR DISPROPORTIONATE IMPORTANCE
As a category of advertising spending, Wieser considers retailers to be “a disproportionately important group.”
Indeed, data from the IRS during 2019 show that retailers (including food services) account to 15% of all receipts generated from all companies but 20% of all advertising spending in the United States. Advertising spending equates to 1.4% of revenue generated for retailers vs. 1.1% for all companies.
There are, of course, sub-categories within retail which are more important than others. The most important group are non-store retailers, who allocated 4.1% of receipts into advertising and four years ago accounted for 26% of all retailer advertising in 2019. “Presumably that figure would be higher today as nonstore retailing has risen from 13% of all retail in 2019 to 16% of retailing in 2022,” Wieser says. “New and used car dealers are the next most important category of retail advertising accounting for 10.5% of the total, with 0.9% of revenues allocated to advertising. Interestingly, food and beverage stores – which might seem like a typical category of retail – only account for 4.9% of retail-related advertising spending, as they allocated a mere 0.5% of reported revenue to this activity in 2019.”
In closing, Wieser expects that “so long as nonstore retailing continues to outpace overall retailing, their higher allocations to advertising likely mean that retailer-driven advertising spending is probably growing faster than revenues are, with more than 3% year-over-year growth at the present time.”
