Publicis shares crash by more than 10% after creative agencies slump

WPP, Interpublic, and Omnicom also saw stocks slide.

Procter & Gamble's Pampers is one of Publicis' CPG clients
Procter & Gamble's Pampers is one of Publicis' CPG clients

Publicis Groupe’s shares have crashed after it warned of a worse-than-expected slump for its traditional advertising business, also hitting the stock prices of rivals WPP, Interpublic Group, and Omnicom Group.

Shares of Publicis fell 12% this morning as Arthur Sadoun, global chief executive, said quarterly growth had slowed from 2.2% in Q3 to 0.5% in the final quarter of 2018. Shares of Publicis were down more than 10% on the day as of noon EST. 

WPP’s share price fell 6%. The stock prices of Interpublic and Omnicom both dropped by about 5%, on Thursday morning. 

Publicis took the unusual step of releasing its results at 6 p.m. Paris time on Wednesday after the French stock market closed and hosted an earnings call this morning.

Sadoun said Publicis had been "on track" during Q4 until large CPG clients reduced spending.

"The impact of attrition on traditional advertising has been stronger than expected," he said, explaining "a handful of U.S. clients" were largely to blame.

Sadoun warned "we continue to see some attrition in Q1."

CPG represents a quarter of the group's revenue, and traditional advertising represents 35% of the business, according to Sadoun.

"Clearly, we have the right model, which is outperforming the market," Sadoun insisted, pointing to strong growth in what he calls "game-changers" in data, dynamic creativity, and digital transformation services. "We have a clear plan for 2019 and beyond."

Sadoun pointed to growth from financial servcies clients. While they have been cutting traditional agency services at the same rate as CPGs, they have increased their overall spend by buying other digitial transformation services from Publicis, he said.

But he warned: "Client attrition obliges us to be more drastic with our cost base."

Steve King, newly promoted COO of Publicis, said it was not losing market share to rivals, rather that clients were cutting spend.

King added that clients taking marketing services in-house was not a major cause for the loss of revenue.

Paul Richards, head of research at Dowgate Capital Stockbrokers in London, said: "For Publicis shares to be down 12%, the market is not concerned about one particular area [of the business] but the traditional agency model in general."

"With WPP, IPG, and Omnicom down, investors are doing a ‘read-across," he added. "It shows that it’s not just an issue for Publicis, but for all the traditional agency groups...The world is changing and the big global companies are struggling to adapt."

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