WPP shares slump as ad giants cut forecast on weak spending

Bloomberg

WPP Plc shares had their biggest drop in 17 years after the world’s largest advertising company cut its full-year revenue forecast amid lower spending by customers, in particular consumer-goods manufacturers. The stock fell as much as 13 percent after WPP said like-for-like revenue growth is expected to be between zero and 1 percent in 2017. That’s down from an earlier 2 percent forecast.
Advertising companies worldwide are being hit as big clients like Unilever and Procter & Gamble Co. focus on cost-cutting to cope with sluggish global economic growth and technological disruption. London-based WPP singled out ad spending on consumer goods—items such as laundry detergent and toothpaste that make up about one-third of its revenue — as coming under particular pressure.
Consumer-goods giant Unilever, one of WPP’s biggest customers, said earlier this year that it would cut ad output by 30 percent and halve the number of creative agencies it works with to 1,500 from 3,000. That followed a failed takeover bid by Kraft-Heinz, which was the “seminal” moment in the first quarter, according to WPP Chief Executive Officer Martin Sorrell.
“That sent a shock-wave through the industry,” Sorrell said. “It obviously had an effect in terms of people spending, particularly in the packaged goods sector.”
WPP, which also works for brands such as Ford and Marks & Spencer, had already seen its shares fall 12 percent this year amid a difficult economic climate and pressure on its businesses in North America. It’s now down more than 20 percent year-to-date. Its biggest rivals, including Interpublic Group of Cos., Publicis Groupe SA and Omnicom Group Inc., are each down more than 8 percent this year.
In March, WPP had its biggest drop since the financial crisis.