WPP Cuts Growth Forecast As Clients Slash Spending
WPP, the world's largest ad holding firm by revenue, slashed its full-year sales growth target for the second time in two months as clients in North America and Europe cut spending.
The announcement led to stock dropping as much as 5.2%.
Revenue growth for the year, excluding the effect of currency fluctuations and acquisitions, will be 2.5% to 3%, down from an earlier forecast of about 3.5%, the company said in a statement today. That comes on the heels of WPP's announcement in late August that it was reducing its growth forecast from 4%.
CEO Martin Sorrell has been pushing the Dublin-based company into new areas, such as Malaysia and Brazil, to counter slowing growth in more established markets. According to Mr. Sorrell, businesses are starting to express concerns about the health of the U.S. economy, which contributed to a "tough month" in September.
"North America looks to be the main culprit for the downgrade," said Ian Whittaker, an analyst at Liberum Capital, who advises investors to buy the shares. The forecast cut "will be taken dissapointingly, but the share price has come off to a degree on expectations things were not great."
Third-quarter sales were $4 billion, the owner of the Ogilvy & Mather and Grey Group ad agencies said in the statement.
Mr. Sorrell has said that 2013 will be a more challenging year as the company comes off the spending highs of the Olympics and the U.S. Presidential election. In March, he said he planned to spend between $475 million and $630 million on acquisitions this year. WPP completed 56 deals in the first three quarters of 2012, the company said today. That includes one huge investment to purchase a majority stake in global digital agency AKQA, a deal it struck this summer after the shop had been on the block a long time.
WPP will continue to make acquisitions at the same rate next year, focusing on faster-growing markets outside of Western Europe and North America, as well as digital agencies, Mr. Sorrell said.
"The concern of U.S. corporations or U.S.-based multinationals has switched from Europe to the United States," Sorrell said in an interview. "It's not a great time, frankly, for that concern to crystallize because people are preparing budgets for next year."
French rival Publicis Groupe will report results tomorrow.