WPP Shares Crumple on Lowered Guidance

A blank white advertisement board on a motorway

Shares in WPP PLC (NASDAQ:WPPGY) crumped on Wednesday morning, falling by more than 12% as the ad agency reported weaker-than-expected ad buying from consumer goods companies, especially those in North America. The outlook doesn’t look good either, as the company lowered its full-year guidance.

In the second quarter, WPP reported billings fell 4.7% on a constant currency basis to £26.9 billion (US$34.4 billion). Like-for-like revenue, which removes any gains from new acquisitions, was down 0.3% in the first half of the year. Meanwhile, revenue growth in July was down 4.1%.

WPP, which owns advertising agencies such as Ogilvy & Mather, Grey Global, and JWT, said North American like-for-like revenue fell three percent in the second quarter while like-for-like net sales slipped 3.3%.

Results in Western Continental Europe, the largest economic region in the world, were also disappointing. Like-for-like revenue fell 3.2%, compared with growth of 5.3% in the first quarter. Austria, Finland, France, Germany, Italy, the Netherlands, and Sweden all slowed in the second quarter when compared with the first quarter. Net sales, meanwhile, were down 4.2% like-for-like, as opposed to growth of 4.3% in the first quarter.


For the full year, WPP lowered its full-year outlook, forecasting revenue and sales growth of between zero and one percent.

More broadly, over the last two or three quarters, the company’s top 20 clients have reported top-line growth of between two and three percent, with most, if not all, of that growth a result of pricing increases in Asia-Pacific and Latin America.

The company is blaming the dour outlook on packaged-good companies that have, in light of the weak economic outlook, been cutting their ad spending. Again, the region that is being hit the hardest is North America, which really means the United States, the world’s biggest economy.

The advertising giant also blamed populist politics in the U.S. and U.K., “fake news” on social media platforms, and a short-term business outlook for the abysmal start to 2017.

In its second-quarter financial results, the company noted that, “In the last year or so, growth has become even more difficult to find, perhaps due to increasing social, political and economic volatility, for example with the rise of populism typified by surprise election results in the United Kingdom and the United States and bumpy growth in three of the bigger BRIC countries of Brazil, Russia and China…”

“Even the growth of the digital marketplace has been dogged by issues such as measurability, viewability, fraud, and fake news, let alone the duopoly of Google and Facebook and the growing dominance of Amazon in so many spheres, including, but not exclusively, ecommerce, retail, cloud computing and content,” it added.

“In a slower growth world, both more recently and post-Lehman, inflation has been negligible, perhaps also suppressed by digital deflation,” the company also said. “As a result, clients have markedly less pricing power and finance and procurement departments are very focused on cost. In this world, it is, perhaps, not surprising that clients have reduced spending.”

WPP is the world’s largest advertising agency, and because of its huge, diverse client base, the company’s quarterly results are considered a bellwether for the economic health of the broader economy.



WPP Interim Results 2017,” WPP PLC, August 23, 2017.


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