IN DEPTH: Daktronics downbeat on digital outdoor
U.S. digital-billboard maker Daktronics, hit hard by a decline in customer orders, has warned that it doesn’t see investment in digital outdoor recovering until 2011.
In the quarter ending on 31 October, Daktronics’ net sales dropped 32 percent compared with the same quarter a year earlier, to $115.4m. Six-monthly net sales fell by a similar percentage.
But that decline – bad enough as it may sound – masks a far more serious disappearance of business for Daktronics’ digital-billboard operation. Net sales to outdoor-advertising customers were down 82.3 percent quarter-on-quarter, and a similar percentage half-on-half.
Digital billboards account for about a sixth of Daktronics’ total sales; other businesses, such as providing LED scoreboards for sports venues, fared much better.
Earlier this year, said the company, “we were notified that our largest customer in our outdoor-advertising niche was decreasing its spending on digital billboards from approximately $100m annually to approximately $15m annually, effective for calendar year 2009. We were one of two primary vendors of digital billboards for this customer.”
The customer is believed to have been Lamar Outdoor Advertising, which along with Clear Channel Outdoor is one of the two big purchasers of Daktronics’ digital billboards.
“This corresponded to a decline in our orders overall from outdoor-advertising customers,” said Daktronics, “which started to become evident late in the second quarter of fiscal 2009 [autumn of calendar 2008].”
The supplier had warned in November 2008 that demand for digital billboards was dropping sharply.
But while that may come as little surprise in the midst of an economic downturn, what may dismay optimists is that unlike many firms working in or supplying the digital out-of-home sector, Daktronics doesn’t see conditions getting any better in 2010.
“It is our belief that the current economic conditions and limited credit availability caused this overall decline. Although we believe that this niche still represents a long-term growth opportunity, we do not expect to see it rebound until sometime in calendar year 2011,” the company said.
And it warned that even when the U.S. economy improves, there will still be hurdles for the advocates of digital outdoor to overcome: “It is also important to note that the outdoor-advertising business has a number of constraints in addition to the current economic conditions.”
Daktronics identified these as “the challenges of achieving adequate returns on investments on digital displays, which limit locations suitable for digital displays, and regulatory constraints, which we expect to be a long-term factor that limits deployment of digital displays”.
www.clearchanneloutdoor.com
www.daktronics.com
www.lamaroutdoor.com
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