Sussex-based Quad/Graphics Inc. saw some print product line volumes decline by 30% in the second half of March and similar trends continued in April.
Marketing from brick and mortar retailers was hit particularly hard and even grocery inserts have been hit as stores don’t want to advertise products they cannot guarantee they will have in stock.
Joel Quadracci, chairman, president and chief executive officer of Quad, said Wednesday his conversations with clients do not suggest those volumes will come rushing back.
“Until you get to the new normal, we’re in this new abnormal where the economy is trying to open up, things are going to happen in fits and starts,” he said on the company’s earnings call.
Quad reported a 14.4% drop in net sales to $822.5 million for the first quarter, but did narrow its net loss from $22.5 million to $12.4 million, compared to a year ago. The company has also taken cost saving actions, including furloughs and wage cuts, that will save $250 million on an annualized basis. In an early April interview, Quadracci said it was important to act quickly even if it wasn’t clear how bad things might get.
Looking forward, Quadracci pointed to news that Kohl’s and Dick’s Sporting Goods are opening some stores as a good sign, but noted that even if a company were opening all of its stores there’s no guarantee marketing spending would immediately return to pre-coronavirus levels.
“That may be true with one but not the other,” he said, speaking generally.
Quadracci said part of what the company is hearing from clients is concern that the number of coronavirus cases could spike as the economy opens. Clients do not want to be accused of having contributed to a spike if they market themselves too aggressively, he said.
“As people get comfortable with how all the new safety procedures are being followed throughout the country, then you’ll start to feel like ‘OK, now we can get more visibility,’ but until then, it’s really tough to get visibility,” Quadracci said.
There have been some positives for Quad’s business during the coronavirus outbreak. The company generated around $5 million in additional revenue producing signage on shopper safety for retailers that are open and mailed 42 million postcards for the White House and CDC on social distancing guidelines.
Quad also innovated internally with its ink manufacturing division developing hand sanitizer and direct marketing group designing disposable, non-medical face masks. Those masks are now on their third design iteration and are being mass-produced on the company’s printing press equipment.
Quadracci said there is also an opportunity for the company to accelerate its transformation to a marketing services provider in addition to a printer.
“I think that now that people have sent so many people home to work from home, every business is reevaluating. When the economy opens up, it’s not about when we bring things back, it’s what do we bring back and almost more importantly, what do we decide not to bring back,” Quadracci said. “We see opportunity in terms of being that partner to take over execution and media planning for many different customers.”
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