WPP slashes outlook again as China slowdown adds to tech woes

LONDON: Ad group WPP cut its outlook for the second time in as many quarters on Thursday as tech clients continued to cut back on marketing, growth slowed sharply at its media buying agency GroupM and China disappointed.

The British company, whose agencies include Ogilvy, said it now expected like-for-like growth for 2023 of 0.5-1.0%, down from the 1.5-3.0% it forecast in August and the up to 5% it expected earlier in the year. "Our top-line performance in Q3 was below our expectations and continued to be impacted by the cautious spending trends we saw in Q2, particularly across technology clients with more impact from this felt in GroupM over the summer than the first half," CEO Mark Read said.

WPP's like-for-like revenue less pass-through costs fell 0.6% in the quarter while the market had expected 1.0% growth. The performance trailed rivals Interpublic, which reported a 0.4% decrease, Omnicom, which recorded 3.3% growth, and Publicis, the strongest of the big four, with 5.3% growth.

Read noted that Meta, which published results on Wednesday, had reduced marketing spend by 24%. "Technology companies (...) are looking very carefully at their marketing expenses," he said in an interview. "But I do think in the long run that will correct itself."

Its shares fell as much as 5% to a three-year low. Read said it was also a tougher quarter in China, where consumer spending had not returned as expected.

Analysts at Citi said it was striking that the step down was "not necessarily caused by an intensification of the pressures in the second quarter but by a broadening of pressure". Growth at GroupM slowed sharply to 1.6% from 6.1% in the previous quarter, reflecting the impact of clients losses in the United States, as well as the technology slowdown, WPP said.

WPP said this month it would merge Wunderman Thompson and VMLY&R to create the industry's largest creative agency.