Tags: wpp | advertising | marketing | earnings

Ad Giant WPP Suffers Worst Stock Drop in 20 Years on Grim Outlook

Ad Giant WPP Suffers Worst Stock Drop in 20 Years on Grim Outlook
WPP CEO Martin Sorrell speaks at the American Magazine Media Conference 2018 on February 6 in New York. (Photo: Ben Gabbe/Getty Images)

Thursday, 01 March 2018 09:26 AM

Advertisting giant WPP suffered the worst stock slump since 1999 after CEO Martin Sorrell slashed the profit outlook and predicted a year of no growth, giving already jittery investors another reminder that the ad industry is undergoing its most dramatic upheaval in decades.

Long-term earnings growth will be as little as 5 percent and twice that at best, compared with a prediction of as much as 15 percent previously. The year got off to a “slow start,” WPP said, continuing a trend from 2017 that saw flat margins and sales. Investors responded by pushing the shares down as much as 15 percent, briefly prompting a stock suspension.

“There’s a real sense of shock and awe at what’s happened to his business model,” said Alex DeGroote, media analyst at Cenkos Securities. “This is a stark reminder of the significant challenges WPP faces.”

The steep slump of the industry leader is the most dramatic sign yet of the deepening crisis facing Sorrell as digital competitors hollow out his core business. Major customers such as Unilever Plc are holding back ad spending to cut costs, while digital players like Google and Facebook Inc. are cutting out advertising agencies that act as middle men.

WPP’s advertising sales are a bellwether of strength in the global economy, as companies tend to expand or cut their marketing budgets depending on how well their businesses are performing.

Thursday’s stock slump deepens an already poor performance of WPP, which lost more than a quarter of its value over the course of last year. The stock dropped as much as 207 pence in London to 1,187 pence, the worst performer on the FTSE 100 Index. Having founded the company in the 1980s, Sorrell is the biggest individual shareholder at WPP, with a stake of about 1.4 percent, according to data compiled by Bloomberg.

The ad giant said it’s responding by trying to break down silos among its various creative, ad buying, strategy and public relations businesses to draw on top talent and seamlessly serve clients. After “not a pretty year” in 2017, WPP is “upping the pace” of its effort to combine its global team, Sorrell said.

“In this environment, the most successful agency groups will be those who offer simplicity and flexibility of structure to deliver efficient, effective solutions – and therefore growth – for their clients,” he said.

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Advertisting giant WPP suffered the worst stock slump since 1999 after CEO Martin Sorrell slashed the profit outlook and predicted a year of no growth, giving already jittery investors another reminder that the ad industry is undergoing its most dramatic upheaval in...
wpp, advertising, marketing, earnings
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2018-26-01
Thursday, 01 March 2018 09:26 AM
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