Publicis Warns of Tough Time Ahead Despite Sales Gains
April 19 2016 - 3:50AM
Dow Jones News
PARIS—Publicis Groupe SA's first-quarter sales growth beat
analysts' expectations on Tuesday, but the advertising company
warned that a loss of key clients last year would erode revenue in
the coming months.
Publicis said sales over the first three months of the year rose
8.9% to €2.3 billion ($2.6 billion) from the same period last year
as the group benefited from a number of new account wins at the end
of last year and strong performances in the U.S. and Europe.
Stripping out acquisitions, disposals and currency swings, sales
grew 2.9%, exceeding analysts' expectations of 0.3%, but still far
away from the company's historic growth levels.
"The next two quarters will be more difficult," Publicis Chief
Executive Maurice Lé vy told reporters. "That's when we'll feel the
full brunt of the account losses from last year."
The French owner of agencies such as Saatchi & Saatchi had
warned investors to expect "modest growth" in 2016 as the company
focuses on an internal reorganization and the continued integration
of Sapient Corp., the U.S.-based digital agency that it bought last
year.
The company is straining to recover lost ground after being hard
hit by a wave of big advertisers reviewing their agency contracts
in 2015. Publicis was a net loser of the reviews as long-standing
clients including Procter & Gamble Co. and Coca-Cola Co.
switched their accounts to competitors.
Publicis said sales from its digital operations—now accounting
for 55% of revenue—grew 7.6% in the first quarter. Mr. Lé vy is
betting that the recent addition of U.S.-based digital agency and
consultancy Sapient to its roster of digital agencies will position
the company at the vanguard of the digital transformation that is
upending the ad industry and help the group return to faster
growth.
Mr. Lé vy said the "uncertain" global economic environment could
cause some clients to withhold advertising spending, but he expects
all of his company's key financial indicators to expand this year,
including revenue and earnings per share.
"We have made a promising start to 2016, both in terms of
performance and our own transformation," Mr. Lé vy said.
Publicis' shares have fallen 15% over the last 12 months and are
trading at a significant discount compared with key rivals like WPP
and Omnicom.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
April 19, 2016 03:35 ET (07:35 GMT)
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