WPP cuts sales and profit margin forecasts amid ‘low growth’ advertising market
WPP – the world’s largest advertising group – has cut its sales and profit margin forecasts for the second time in two months.
The advertising giant cited the loss of two major accounts in North America – VW and AT&T – as the main reason for its financial decline, along with cutbacks from clients such as Unilever and Procter & Gamble.
Of all the regions it operates in, WPP stated the UK performed the best.
Since WPP’s previous announcement regarding cuts to its full-year net sales forecast in August, rivals Interpublic and Publicis have also suffered subpar results.
Current economy experiencing 'a new normal of low growth'
This decline raises concerns around the effectiveness of digital campaigns and the fierce competition for online advertising, as the biggest ad players continue to trim their marketing budgets.
Sir Martin Sorrell, CEO of WPP, told the BBC the world was in a “new normal of low growth, low inflation and limited pricing power,” which inevitably is leading to clients keeping a tighter check on their budgets.
He continued: "Consultants are going to clients and suggesting they're spending too much money across the board."
WPP announced like-for-like net sales (its main trading measurement) fell by 1.1% in Q3, an improvement on the 1.7% decline reported in in Q2.
The ad group's share price experienced its biggest fall in almost two decades following the announcement in August, but this week's release prompted a more muted response, with shares only dropping by 1%. However, WPP's shares are down by 30% overall for this year.
This news comes despite WPP’s recent announcement of a global partnership with experience management software company Sitecore.