Publicis, the world’s third-largest advertising group by revenues, sparked a sell-off in marketing groups when it missed analyst estimates on a key sales metric, raising concerns about a slowdown in spending by big consumer companies.
Shares in the owner of Starcom, Zenith and other agencies, fell almost 15 per cent on Thursday after the group said organic revenue growth had fallen 0.3 per cent in the fourth quarter. Analysts had been expecting a 2.5 per cent rise.
The miss sparked declines at the group’s rivals and concerns of a structural slowdown in advertising. WPP fell more than 8 per cent and Dentsu closed down 4.4 per cent in Tokyo. US group Omnicom fell by 5 per cent in afternoon trading in the wake of the results, announced after market close on Wednesday.
Publicis pointed to a slowdown in spending by big consumer packaged goods companies, which are some of the biggest spenders on advertising. “It is not atypical for a CPG client to have 25 agencies working for them and this dynamic is clearly not efficient,” said Neil Campling, an analyst with Mirabaud.
Across the advertising landscape brands are putting pressure on agency holding companies such as WPP to simplify their structures. Publicis has streamlined its offering, while WPP began to take similar steps last year in the wake of Martin Sorrell’s departure as chief executive, merging some of its big agencies, such as Wunderman and J Walter Thompson.
Publicis said that organic growth in the final quarter had been hit by “the usual year-end volatility” as well as “the higher than expected rate of attrition in the traditional advertising business”.
But despite the slowdown in organic revenue growth, Publicis reported better than expected profits for 2018.
Ad groups have been battling a shift in spending by global consumer groups — traditionally its best customers — towards digital platforms such as Google and Facebook.
Chris Collett, an analyst at Deutsche Bank, cut his rating on Publicis’ shares to hold in the wake of the results.
“We didn’t have high expectations for the Publicis [fourth quarter] . . . The scale of the miss in [the fourth quarter] took us by surprise, with attrition among existing accounts negating new business gains,” he said.
The trend looked likely to continue into the first three months of 2019, Mr Collett said, with weak marketing spending by clients unlikely to let up.
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