Sodexo, H&M, WPP Warnings Add to Pain as Europe Stocks Struggle

(Bloomberg) -- It’s been a bad quarter for European stocks all round. And a swathe of company profit warnings -- from Sodexo to WPP Plc -- hasn’t helped.

French catering services company Sodexo said Thursday that 2018 revenue and
profit will be below previous forecasts, sending its shares plunging. It’s the latest in a series of high-profile company warnings this quarter.

Blowups from small and midcap European companies have also been numerous: U.K. retailers Mothercare Plc and Carpetright Plc, Angry Birds game maker Rovio Entertainment Oyj and Irish food company Greencore Group Plc are a few examples.

While Societe Generale strategists noted last week that the Stoxx 600 has delivered its strongest earnings growth in seven years this quarter, investors are punishing companies that publish disappointing results. The market has little patience with struggling companies as central banks start to remove liquidity and raise interest rates.

Below is a curated list of some of the most dramatic warnings among Stoxx 600 companies in the first quarter.

Sodexo

Down 25 percent in the first quarter

The French caterer began to slip in January when it missed first-quarter sales growth estimates, but that paled in comparison to Thursday’s drop of as much as 17 percent after it slashed 2018 forecasts. The company cited weakness in its unit serving universities and health care clients in North America; peer Compass Group Plc also fell.

Micro Focus International Plc

Down 60 percent

The business software firm, currently in the process of integrating the software assets of Hewlett Packard Enterprise Co., was clobbered this month when it issued a sales warning and its chief executive officer left. Micro Focus had already forecast lower sales in January, raising concerns about the complexity involved in the HPE deal.

Aryzta AG

Down 46 percent

The Swiss firm that makes buns for McDonald’s Corp.’s Big Macs tumbled in January when it said 2018 earnings would drop by about a fifth and scrapped its profit guidance. The company compounded the misery in March when management team pointed to a long road to recovery.

Hennes & Mauritz AB

Down 26 percent

2018 is showing all the signs of being another annus horribilis for the Swedish clothing giant. It kicked off the year with a racism row in South Africa over an advertisement, dropped at the end of January after warning on its sales outlook and fell further in March after slashing prices to clear an inventory backlog. The share performance this quarter follows a 33 percent drop last year.

WPP Plc

Down 16 percent

The world’s biggest advertising group was hit hard in March when it issued a bleak forecast for 2018, adding to woes in 2017 as major clients cut advertising costs. Rivals Publicis Groupe SA and Interpublic Group of Cos Inc. had previously issued more upbeat statements, adding to the disappointment from WPP’s warning. Chief Executive Officer Martin Sorrell faces a huge pay cut amid investor criticism.

--With assistance from Blaise Robinson

To contact the reporters on this story: Beth Mellor in London at bmellor@bloomberg.net, Sam Unsted in London at sunsted@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Brian Lysaght, Paul Jarvis

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