WPP shares in steepest fall since financial crisis

Advertising giant cuts its growth forecasts for the second time this year

Sir Martin Sorrell
(Image credit: Eric Piermont/AFP/Getty Images)

Shares in the advertising behemoth WPP slumped by more than 11 per cent today in the steepest decline since the market crash following the 2008 banking crisis.

The dive follows a second quarter trading update that saw the company downgrade growth expectations for the second time this year.

Chief executive Sir Martin Sorrell "started the year forecasting that WPP would see growth of three per cent but cut this in March to two per cent to reflect 'tepid' economic growth and weak new business trends", says The Guardian.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Today the company cut that forecast further to "between zero and one per cent".

Its update reveals that comparable annual sales declined by 1.7 per cent in the three months to the end of June compared to the same period last year.

Total revenues, including the effect of acquisitions, rose 0.3 per cent – less than a tenth of the 3.6 per cent growth in the first quarter. On all measures, WPP underperformed analyst expectations.

The Financial Times says the update has "spooked" investors because they are already on alert for a potential slowdown caused by Facebook and Google rapidly gaining a share of direct marketing spending by companies.

Broader economic concerns could also be weighing on company marketing budgets, says Steve Clayton, manager of Hargreaves Lansdown Select UK Growth Shares fund.

He added: "Clients are keeping a tight lid on spending and procurement departments are ruthless in the way they push agencies to lower prices."

Sorrell also cites the struggles of the Trump administration in delivering on its low-tax, big-spending growth agenda. This means the "general atmosphere in relation to Trump and business has stuttered" and this will hurt corporate sentiment.

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.