Valassis Battered by Weak September Sales

Company Affected by Marketer Cutbacks to Coupon Programs

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CHICAGO (AdAge.com) -- The economy is apparently so bad that marketers can't even afford to print coupons.

Shares of the coupon giant Valassis Communications fell by more than half today after management announced that sales dropped dramatically in September and are unlikely to recover through the first half of 2009.

Valassis today crashed 55% to a closing price of $1.87. Valassis has plunged 89% from the 52-week high reached last May, $16.80.

The firm, which had predicted a single-digit sales increase for the second half of this year, now expects revenue to decline 6% to 7% during that period.

"In the middle of September we closed our books for the month of August -- at that time revenue for the two-month period July and August was up 4.5% vs. the previous year," said Alan F. Schultz, Valassis' CEO. "By the time we closed the books for the third quarter a lot had changed. Obviously September results fell off dramatically."

That's putting it mildly: The company posted a net loss of $5.2 million in the third quarter, compared with a $16.4 million profit during the same period a year earlier.

Robert W. Baird analyst Dan Leber, who downgraded Valassis shares last month, said the results reflected that "coupon advertisers cut back quickly and dramatically in September," when the credit crunch kicked in. While that seems contrarian given at a time when consumers are craving bargains, he said, it's "one of these cases where, when [package-goods companies] get scared, marketing is the first thing cut."

He did predict that marketers would likely return to coupons now that they are beginning to benefit from reduced costs of goods due to lower oil and commodity pricing.

It can't come soon enough for Valassis, whose shares are down more than 80% this year.
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