Currency fluctuations and asset sales and sluggish performance in the North America region contributed to a decline in revenue at Omnicom Group in the second quarter, which fell 2.4% to $3.790 billion.
Organic revenue growth for the period was 3.5%, in line with the company’s full-year guidance of 3% to 3.5%. Net income was up less than 1% to a little more than $328 million.
North America, hampered by problems in the PR, branding and shopper marketing practices, was the slowest-growing region for the company during Q2. with organic growth of just 0.2%.
CEO John Wren told analysts and investors on a conference call Thursday morning that management issues in the branding sphere were being addressed. He is hopeful the discipline will be back on track by the end of the year.
Wren said the shopper marketing business lost a key client — a competitor to AT&T — that was uncomfortable with potential conflict of interests. Anticipated projects in the PR space failed to materialize. The company is also addressing PR leadership issues, Wren said, where more “hunters” may be needed, as opposed to “farmers.”
Wren added that a lack of policy clarity — in areas like health care and taxes from Washington — wasn’t helping either. There are concerns about the future performance of the U.S. economy, despite an initial so-called “Trump Bump,” which seems to be fading.
In that environment, clients aren’t eager to invest in areas where they don’t see an “immediate return,” said Wren.
Foreign exchange issues will continue through the year (albeit ebbing somewhat), said CFO Phil Angelastro, as the dollar has strengthened against many currencies most notably the British Pound, the Euro and the currencies of China, Japan, Turkey and Canada.
Asset sales included the disposition of print specialty unit Novus. Wren said that sale was more about bleak future prospects for its current offering than performance issues. No more significant asset sales are expected for the balance of 2017.
Retail companies are under pressure globally, Wren said. “When clients suffer, you suffer along with them.”
Asked what impact Amazon is having on the company’s shopper-marketing businesses, Wren replied it is driving a more strategic offering, with perhaps less emphasis on activation services. Clients need strategic input more than ever, given the tech giant’s growing presence and impact, he said.
More generally, Wren said the company is adapting to marketplace changes on many fronts including the creation of more “integrated and nimble” service offerings for clients such as McDonald’s, for which Omnicom created a dedicated agency We Are Unlimited.
He also cited AT&T, which last year selected Omnicom Group for ad and media duties on its massive $3 billion ad account. The scope of work also includes digital, data and analytics, areas Wren said the firm was constantly honing and updating.
For the first half of the year, company revenue was down just a tick (0.1%) to $7.377 billion with organic growth of 3.9%. Net income was up 4.8% to $570.4 million.