WPP lowers 2023 outlook amid lingering spending caution

WPP (LSE: WPP), a global advertising agency, has once again revised its yearly outlook following a third-quarter performance that fell short of expectations, as cautious spending trends continue to weigh on the industry.

WPP shares saw a 3.3% decline in early morning trading, settling at 675.00 pence each. This decline compounds a challenging year for the company, with shares falling approximately 18% year-to-date and hitting a three-year low of 656.00p on Thursday.

During the third quarter, WPP reported a 1.8% year-on-year decrease in revenue, amounting to £3.51 billion. However, when accounting for like-for-like comparisons, revenue exhibited a more favourable growth of 2.3%. Notably, revenueless pass-through costs showed greater weakness, declining by 5.0% to £2.84 billion, with a 0.6% dip like-for-like.

Mark Read, WPP’s Chief Executive Officer, voiced concern over the Q3 performance, stating, “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.”

Despite the challenges, WPP managed to secure some noteworthy deals during the quarter, including creative and media assignments with Nestle SA and Verizon Communications Inc.

WPP has revised its outlook for 2023, now expecting like-for-like revenue, less pass-through costs, to grow in the range of 0.5% to 1.0%. This comes after a previous prediction of 1.5% to 3.0% growth. The revision in guidance follows an earlier adjustment made in August, where WPP had scaled back its growth projections from a 3% to 5% range.

In a bid to navigate these challenges and set a course for future growth, WPP has announced plans to host a capital markets day in January. During this event, the company will unveil its “strategic roadmap to drive growth, further efficiencies, and margin expansion over the next three to five years.”