Shares of WPP slipped nearly 8 percent in London this morning after advertising’s largest holding company reported slowing sales in the critical North American market during the first half of this year.
In the second quarter, like-for-like sales in North America fell 0.3 percent. They slipped 0.7 percent in the first half of 2018.
Excluding certain impacts from acquisitions and currency, total revenue climbed 2.4 percent and 1.6 percent in the second quarter and first half of 2018, respectively.
Like-for-like sales in the U.K. were up 1 percent in the second quarter and 3.1 percent in the first half of the year; in Western continental Europe, like-for-like sales rose 4.6 percent in the quarter and 1.7 percent in the first half; and in Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe region, sales spiked 4.5 percent in the second quarter and 3.7 percent in the first half of 2018.
The slowdown in North America is not isolated to WPP; it is a reflection of the widespread pressures facing the industry in that region, according to Forrester principal analyst Jay Pattisall.
“Large multinational marketers (i.e. CPG) continue to shift dollars in-house and aggressively manage agency costs and fees,” Pattisall told Adweek. “Omnicom, Publicis, MDC and WPP all reported declines or lackluster results citing their North American operations as areas of decline.”
Still, newly-appointed WPP CEO Mark Read said in a statement today that a “review of strategy is underway, addressing our structure, our underperforming operations, particularly in the United States, and how we position the company for the future.”
Pattisall said “advertising and media are most likely responsible for WPP’s declines in North America,” noting that most of the new business wins in those areas came from other regions. For that reason, he predicted that the strategy review, which will be updated by the end of 2018, will “focus on streamlining creative and media operations in the U.S.”
“From a creative agency standpoint, WPP would be better served by consolidating the hundreds of agencies into the seven large networks—AKQA, Grey, JWT, Ogilvy, VML, Y&R and Wunderman,” Pattisall said. “This will make the selection and management of agency capabilities easier for marketers.”
Under his direction, Read said in today’s statement that WPP has already “accelerated initiatives that will simplify our organization, making it easier for us to manage and clients to access, with, for example, co-locations opened or announced in New York, Kuala Lumpur, Prague and Toronto.”
“The mix of performance by geography and function and a decision to invest in the growing areas of our business resulted in a slightly lower headline PBIT margin,” Read noted. “As chief executive, my focus will be on invigorating our company and returning the business to stronger, sustainable growth.”
Read added that WPP is committed to “providing more effectively integrated solutions to clients” and highlighted recent account wins such as Adidas, Hilton, Mars, Mondelez, Shell and T-Mobile.
Read, who WPP officially confirmed as Martin Sorrell’s successor on Monday, maintained an upbeat outlook for the company in an all-staff memo prior to the release of this morning’s financial report. He described WPP as a “global powerhouse of talent” and “a modern, vibrant organization.”
“Some commentators have questioned the prospects for our industry, but I believe they are bright,” Read wrote. “We’re going through a period of structural change, not structural decline, and if we embrace that change we’ll have an exciting and successful future ahead of us.”
Read also noted in the memo that, as part of its move toward simplification, WPP would “adopt much more of a common approach to things like technology, data and production” and invest in areas such as artificial intelligence and programmatic buying.
This tech-heavy focus makes Read “a different kind of leader for WPP,” Pattisall said.
“He’s more digitally conversant than the typical Madison Avenue ad guys,” Pattisall said. “That should make run for new thinking, new tools and new ways of working. The changes started under Martin Sorrell were certainly the right types of changes. Mark Read needs to take them further and faster.”
Shares of WPP were down 6.27 percent at the close of London’s trading on Tuesday.