WPP Reports Organic Sales Decline In Q3; Downgrades 2017 Outlook To 'Broadly Flat'

WPP reported another tough quarter in what is turning out to be its worst-performing year since the recession of 2008-09. The firm reported a 2% drop in organic revenue growth for the third quarter, including a 5.1% drop in North America.

Organic net sales growth was down 1.1% overall for the third quarter, including a 4.9% dip in the North American region.

The holding company downgraded its outlook for the year, indicating that it now expects to be “broadly flat” for both organic revenue and organic net sales. Earlier, the firm had been estimating 2% growth in both.

Investors didn’t seem to be taking the weak performance out on the company’s shares, which were up slightly in mid-morning trading on the London Exchange. And WPP is not alone in reporting disappointing results so far this year.  Other major holding companies have as well, including Publicis Groupe and Interpublic Group, both of which missed consensus analysts’ estimates for the third quarter, sending ad sector stocks down in market trading.



WPP’s Reported revenues were up 1.1% in the third quarter to 3.649 billion British pounds (about $4.8 billion at today’s exchange rate). Reported revenue for the first nine months was up nearly 9% to 11.053 British pounds ($14.6 billion). Reported growth was due largely to the impact of acquisitions and the strengthening of the British pound against currencies. The organic figures strip out both of those variables.

The 5.!% organic revenue drop in North America widened versus the second-quarter and first-half results (-3.0%) with further softness across most of the Group’s businesses, the company reported. The UK was the firm’s strongest-performing region in the third quarter, with organic revenue growth of 1.8%, although that figure was down from the 5.8% growth achieve in the second quarter.

Western Continental Europe improved in the third quarter, reaching positive territory versus the previous quarter.

Asia-Pacific, Latin America and Africa and the Middle East and Central and Eastern Europe showed some weakening in the quarter, the holding company reported.

One bright spot was net new business -- which reached $6.363 billion for the first nine months, versus $5.374 billion for the same period a year ago.

As it has done consistently this year, WPP blamed macroeconomic conditions impacting its clients -- which are cutting ad and marketing costs -- for much of its own slippage. “It does seem that in the new normal of low growth, low inflation, limited pricing power world, there is increasing focus on cost reduction,” exacerbated by pressures from activist investors and management consultants, the firm stated.

Marketers, WPP insisted, will have to spend more in the future on marketing in order to generate top-line growth, which in turn should improve its own results.

Next story loading loading..