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Economics & Research Blog

Profits Report Out, Disappointing

We knew this was going to happen,

By Dr. Joe Webb
Published: April 2, 2008

We knew this was going to happen, but we hope for the best anyway. The fourth quarter was the worst fourth quarter since our data series started in 1995. Shipments were disappointing in the fourth quarter, and we know that the Producer Price Index was flat, indicating that prices were not increasing, and we know inputs like paper, ink, energy, and other factors were increasing. The equation is unfortunately simple: sales down, costs up, equals profits down.
I just finished my profits report, and it includes updated charts and data. As I was reviewing the quarterly profits, I noticed that the fourth quarter always seemed to be bad in recent years. One would think that since the sales levels each quarter are relatively similar that profits would be. Indeed they used to be. So I have a chart that shows the profit share per quarter from 1995 to 2000 and then what it has been since 2003. They are quite different. It makes me wonder if long-term contracts which make up a lot of the fourth quarter's printing (holiday catalogs and the like), were negotiated at unsustainable prices considering the increased costs. It makes me also wonder if printers have been going into the fourth quarter knowing that they have historically been somewhat strong, and that they have kept staffing at those historical levels in the hopes that sales would come through.
The more I look at these data in the context of media and economic trends 2008 seems like a very pivotal year in our industry's restructuring. Proceed cautiously, and makes decisions based on creating a vastly different industry, not little changes that nibble around the edges but just maintain the status quo.
See full analysis with charts and graphs -
wttstore.com/prpr.html

Dr. Joe Webb is one of the graphic arts industry's best-known consultants, forecasters, and commentators. He is the director of WhatTheyThink.com's Economics and Research Center.

What do you think? Please send feedback to Dr. Joe by emailing him at drjoe@whattheythink.com.

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