Publicis Groupe is hoping investors forgive short-term struggles in anticipation of long-term payoffs based on its weak third quarter financial results. Over-the-counter shares were down nearly 6% in early afternoon trading today.
The Groupe posted an organic revenue decline of 2.7% in Q3, below internal expectations.
The U.S. posted a 4.9% organic drop, while North America declined 3.6%.
The decline in Europe was 3.3% and Latin America fell 7.2%. On the upside, Asia Pacific's organic growth was 2.5% and The Middle East and Africa region was up 9%.
“Our third quarter shows the two faces of our transformation, which have never been so extreme," stated Arthur Sadoun, Chairman/CEO, Publicis Groupe. "This is leading us to take a very cautious approach and reset our guidance for revenue this year, now expected around -2.5%."
Net revenue was $2.83 billion (euro 2.58 billion), a 17.3% increase from $2.42 billion (euro 2.20 billion) in 2018 thanks to positive exchange rates.
Publicis Groupe’s net revenue in the first nine months of the year was $7.64 billion (euro 6.93 billion), up 7% from the year-ago period. The organic decline was 1.4% through the first nine months.
A contributing factor to the disappointing results: The Groupe continued to suffer from cuts from a handful of clients on traditional advertising mainly in the U.S.
Also, the performance of media operations was softer than expected, especially in light of a stronger year-ago contribution.
And Publicis Sapient continues to drag down the company as it pivots from digital marketing services to introduce services more similar to consultancies, or what the Groupe calls "full business transformation through industry verticals."
"We have taken the tough but necessary decisions needed to tackle the industry challenges we are facing head on," stated Sadoun. "We are without a doubt at the hardest part yet of our journey and as is the case with any major structural change, things always get worse before they get better."
And the company cautioned that the numbers may not be much better for another full year or more.