WPP Cuts Sales Growth Forecast as Clients Slash Spending

WPP CEO Martin Sorrell
Martin Sorrell, chief executive officer of WPP Plc. Photographer: Simon Dawson/Bloomberg

WPP Plc, the largest advertising company, slashed its full-year sales growth target for the second time in two months as clients in North America and Europe cut spending. The stock dropped as much as 5.2 percent.

Revenue growth for the year, excluding the effect of currency fluctuations and acquisitions, will be 2.5 percent to 3 percent, down from an earlier forecast of about 3.5 percent, the company said in a statement today.

Chief Executive Officer 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. Businesses are starting to express concerns about the health of the U.S. economy, which contributed to a “tough month” in September, Sorrell said today. In August, WPP cut its full-year sales growth forecast to about 3.5 percent from 4 percent.

“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.”

WPP dropped as much as 42 pence to 766 pence in London, the biggest intraday decline since October last year, and was down 3.7 percent as of 8:11 a.m. Through yesterday, the stock had risen 20 percent this year, while the U.K. FTSE 100 benchmark index had gained 4.2 percent.

Acquisition Spree

Third-quarter sales were 2.5 billion pounds ($4 billion), the owner of the Ogilvy & Mather and Grey Group ad agencies said in the statement. Analysts in a Bloomberg survey had estimated 2.56 billion pounds in revenue.

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. He pledged in March to spend 300 million pounds to 400 million pounds on acquisitions this year. WPP completed 56 deals in the first three quarters of the year, the company said today.

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, 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 SA will report results tomorrow.

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