By Anna Isaac
The fallout from the coronavirus epidemic is threatening to weigh on advertising agencies and media companies' operations as the disruption to the global economy from travel bans and quarantines spreads further afield.
U.K. broadcaster ITV PLC became one of the first to raise the alarm, when it warned Thursday that the impact of reduced advertising spending from the leisure and tourism industry would hurt its outlook. That sent its stock down 10% in London, and extended its rout this year to 32%.
Businesses are paring back ad spending amid a widespread cancellation in travel plans, as people back out of planned cruises and holidays as new epicenters emerge globally for the disease. Cuts to this kind of discretionary spending, a metric of companies' confidence that is often closely watched by investors, can sometimes signal that there may be deepening concerns about coming corporate earnings.
"Falls in ad spending are a sign companies are finding things tougher," said Emilie Stevens, an analyst at Hargreaves Lansdown PLC. "It's one of the first types of spending to go when companies need to cut back."
Ad agency WPP PLC's stock has shed 32% year to date, while rivals including France's Publicis Groupe SA have also taken a battering.
"In March and April, we have seen an impact from travel advertising deferments relating to the coronavirus," London-based ITV said in a statement, adding that early indications suggest a 10% drop in advertising revenue for April.
Restrictions on travel, which have so far been far more severe in China than in Europe and the U.S., have already had an impact on some advertising agencies. France's JCDecaux SA, which offers outdoor advertising such as displays inside transport hubs and on billboards, has been one of the worst hit. The stock is down 26% this year.
"It's been a sharp shock for advertising agencies," said Sarah Simon, senior analyst at Berenberg Bank. "If you look at JCDecaux, we saw a significant contraction in demand in China, because there's nobody in the airports or metros."
Online retailers might trim their advertising spending on television and other broadcast platforms if more travel restrictions come into force in Europe and the U.S., preventing delivery workers from dropping off packages, Ms. Simon said.
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