Omnicom Group posts second quarter organic sales declines; U.S. saw 20 percent drop
Omnicom Group on Tuesday reported a 24.7 percent decrease to $2.8 billion in worldwide revenue for the second quarter, compared to $3.7 billion in the same period of last year.
The holding company said that second quarter organic revenue declined 20.7 percent in the U.S. and fell 29.6 percent in "other" North America; organic sales in the U.K. dropped 23.7 percent and fell 29.4 percent in the Euro markets and "other Europe"; second quarter organic sales slipped 18.6 percent in Asia; Latin America's organic revenue declined 24.1 percent; and organic sales decreased 39.4 percent in the Middle East and Africa.
By discipline, Omnicom reported its advertising services declined 26.6 percent in the second quarter; its CRM consumer experience division fell 25.6 percent; its CRM execution and support business decreased 27.6 percent; public relations declined 13.6 percent; and healthcare, seemingly the only bright spot, increased 3.2 percent.
On an earnings call, Omnicom Group Chairman-CEO John Wren said the company achieved cost savings of $500 million in the second quarter through several measures including laying off 6,100 employees, reducing real estate and implementing salary cuts and a hiring freeze. He also didn't rule out further cost savings in the second half of the year.
"The quarter posed extraordinary challenges," said Wren, adding that Omnicom's focus has remained on "our people, our clients and our business."
Wren said the majority of employees continue to work from home with the exception of offices opening up in certain areas of Asia Pacific, Europe, the Middle East and America. "While we are pleased with these reopenings, we recognize that some of our staff will continue to work from home for a continued period of time," he said.
Wren pointed to recent wins as evidence of the company's ability to work remotely. In the second quarter, Omnicom picked up the global media planning and buying account of Air France, Playstation's global production account and Clorox's entire U.S. media business.
Wren noted how the decline in third party service costs in Omnicom's events and media divisions particularly negatively impacted second quarter results. Third party service costs in media, Omnicom Chief Financial Officer Philip Angelastro explained on the call, are related to bundle solutions in programmatic media buys. He said, "If a client is focused on the achievement of a particular metric or ROI, and they want a fixed cost, we deliver that bundle media for a fixed price and the risk of delivering that price, better or worse, we bear."
Wren added, "when it comes to events, we don't anticipate any meaningful turnaround in the second half," noting how there's still "a lot of uncertainty even in respect to live sports." He said, though, that Omnicom agencies continue to work on the Tokyo Olympics despite its postponement to 2021.
"We remain confident we will weather this period and emerge a stronger organization," Wren said.
On Monday, Wren released the holding company's staff diversity makeup in an internal email and laid out the company's "Open 2.0" action plan "to achieve our ultimate goal: systemic equity throughout Omnicom." That move came after Nathan Young, co-founder of the nonprofit 600 & Rising, called out Omnicom Group on Ad Age Remotely for not releasing diversity data or responding to 12 action steps he laid out in an open letter last month to tackle racism in the ad world—as other holding companies had.
Young, who is group strategy director at Minneapolis-based agency Periscope, told Ad Age that Omnicom's release of diversity data and plans for improving diversity, equity and inclusion for its employees of color are not enough. He criticized the "Open 2.0" plan as having "incredibly broad goals that are designed to skirt accountability."
"Put it back in the oven. This plan is half-baked," Young said. "Given how much they delayed this release, I expected more. The excuses their executives gave me is that they were taking their time to ensure they get this right. If that was their goal, they failed."