WPP’s Ad Agency Struggles Continue

(Bloomberg) -- Advertising giant WPP Plc reported a fall in first-quarter sales after its agencies in North America lost work with top clients, in another reminder of the challenge facing Chief Executive Officer Mark Read.

  • Revenue less pass-through costs, WPP’s measure of organic sales growth, fell 2.8 percent, the London-based company said in a statement Friday, in line with the average estimate in a company-compiled survey of 14 analysts.

Key Insights

  • Revenue tumbled 8.5 percent in North America, where big consumer goods makers have cut spending on TV commercials and billboard ads to focus more on digital marketing. The loss in October of the lead creative brief for Ford Motor Co., one of its oldest and biggest clients, was a major blow.
  • Read, who succeeded company founder Martin Sorrell permanently in September, is battling to revive WPP’s fortunes amid competition from consulting groups like Accenture and Deloitte and the growing influence of Facebook Inc., Alphabet Inc.’s Google and Amazon.com Inc. in marketing.
  • Read said WPP agencies that he has merged to simplify WPP’s structure “are showing initial signs of success in new business pitches” and he stuck with a pledge to improve WPP’s performance in coming quarters. The company on Friday maintained guidance for a 1.5 to 2.0 percent fall in revenue over the full year.

Market Reaction

  • WPP’s shares have lost a fifth of their value over the last 12 months, while the U.K.’s FTSE 100 index is flat and the U.S. S&P 500 has gained 10 percent.

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  • Read: “We continue to make good progress in implementing our three-year strategy to return WPP to sustainable growth.”
  • WPP is looking to sell a majority stake in its data and market research unit Kantar as part of an effort to reduce debt. First-round bids for Kantar were due last week and WPP said the sale was progressing in line with expectations.
  • NOTE: Ad Giant WPP Struggles With Founder’s Legacy as Rivals Circle

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