Worse than than that, however, is what is happening to its operating efficiency. Lamar is starting to flirt with the territory in which it cannot make an operating profit on its day-to-day transactions.
Lamar gets about $1.14 in revenues for every $1 it spends on worker salaries, direct advertising costs and all the other stuff it has to buy just to keep its business running. But that revenue yield is trending down. In Q1 it was $1.02 -- barely profitable. In Q4 2008 it was $1.09. Those numbers are down from a comfortable $1.29 in Q3 2007. This chart shows the trend: The more the blue line flirts with the $1 level, the less able Lamar is to make a simple profit on the sale of its billboards, even before tax and amortization and all those other things are taken into account.
It's not the employee costs. Those are down 12 percent -- the company laid off 400 people already. Rather, it's the direct advertising costs, the money Lamar must spend just to keep its ads in place. They only went down 10 percent.
If the adspend turnaround doesn't come soon, Lamar's inventory network will have to get a whole lot smaller.
- Lamar Sells Billboards to Hookers But Not to Atheists
- Lamar Advertising Joins in N.C. Ruckus Over Digital Billboards
- Lamar Demands $1M Taxpayer Bailout for a Single Billboard
- Lamar, Canadian Supreme Court in Head-On Collision Over Atheist Billboards
- Lamar's Religious Management Would Rather Lose Money Than Sell Billboards to Atheists
- Lamar Refuses to Lower Billboard Prices, Making It Ever More Dependent on Legal Strategy
- Sotomayor Once Ruled in Lamar's Favor in Billboard Case
- Lamar Lobbies to Keep Taxpayer Subsidies for Billboards in S. Dakota
- Lamar Sues Detroit Over "Unconstitutional" Billboard Fees
- Lamar, CBS, Clear Channel Ban Obama Birth Certificate Billboards
- Lamar Takes Down Billboards That Criticized Israel
- Lamar Q1: 400 Laid Off; "We're Going to Bump Along the Bottom for a While"