Omnicom's Organic Growth in North America Slows to 0.2%

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A strong performance in the rest of the world helped Omnicom Group post organic growth of 3.5% for the second quarter, but the North American market slowed to just 0.2% growth, down from 1.1% in the first quarter of 2017.

John Wren.
John Wren. Credit: Balint Porneczi/Bloomberg

And even that 3.5% organic growth rate for the second quarter, compared to the same period last year, was a slowdown from 4.4% in the first quarter. (Organic growth excludes acquisitions and foreign exchange fluctuations).

On a call presided over by President-CEO John Wren, Omnicom reported that worldwide revenue was down by 2.4% in the second quarter to $3.79 billion, from $3.88 billion in the second quarter of 2016. The company attributed that to the impact of foreign exchange movements, and to fewer acquisitions.

In response to questions from analysts, Wren gave three reasons for the disappointing U.S. performance. He said the largely project-based branding business had "operational and management issues," including the departure of a key executive in January, followed by some of his colleagues, who "were really the people who were selling the product." Then a client who was uncomfortable being in the same holding company as AT&T quit using Omnicom's shopper marketing services, he said. The third area he cited was PR, principally from projects not being executed, and Omnicom is "adjusting some of the leadership."

"Those three operations drag down strong performances in some of our other areas to get us to the net 0.25%," he said. "We are unhappy with it. We've forensically identified it and we're taking actions to do something about it."

The downturn wasn't due to oft-cited competition from consulting firms, he said. "We are not really seeing them in the pitches that we are engaged with."

Outside the U.S., Omnicom reported organic growth for the second quarter of 9.3% in the U.K., 7.8% in the rest of Europe and 7.1% in Asia Pacific.

At Publicis Groupe, which reported earlier Thursday, organic revenue growth was 0.8% for the second quarter, and worldwide revenue was up by 2.2%. The next holding company to report 2017 results will be Interpublic Group on July 25, followed by WPP on Aug. 23.

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