WPP Attributes Surprisingly Weak 2017 to Client Budget Cuts and the Rise of Ecommerce

WPP Attributes Surprisingly Weak 2017 to Client Budget Cuts and the Rise of Ecommerce 1024 765 C-Suite Network

Sorrell predicts more consolidation to come in 2018.

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WPP suffered its worst stock drop (14 percent) in nearly two decades, it announced today during an earnings call in which CEO Martin Sorrell bluntly admitted that 2017 was “not a pretty year” for the world’s largest holding group.

The global business failed to meet even analysts’ most conservative predictions for growth, and WPP’s presentation called 2018 “slow to start” with like-for-like revenue flat. The market’s response was so dramatic that it affected the stock prices of competitors Omnicom, Publicis and IPG.

Sales for WPP were particularly weak in China and North America last year, with total revenue down 4.4. percent and 2.5 percent for the year, respectively. The U.K. served as the report’s lone bright spot, with revenue rising 4.9 percent in the group’s second-largest market.

The reasons for the drop are deceptively simple. Big spenders like P&G and Unilever have very publicly announced budget cuts to eliminate waste, while advertising continues its ongoing pivot to digital as more and more consumers make their purchases online. GroupM futures director Adam Smith noted that ecommerce sales are rising faster than internet usage rates, a trend he attributed to “flexitarians” and “picky millennials” avoiding both big brands and traditional brick-and-mortar retailers.

WPP also lost several major accounts, most prominently AB InBev, Lionsgate and Coty cosmetics.

“Our financial model has changed in light of what’s happened in the past year,” Sorrell said on the call, adding that WPP is “heavily involved in digital strategy and disruption with clients.”

A major element of that…