Publicis Groupe Cuts Organic Revenue Guidance

By Alexandra Bruell

Publicis Groupe SA said organic revenue is likely to decline 2.5% this year, lowering its guidance as it reported lower-than-expected results in the third quarter.

The French advertising giant, which in July said it expected organic revenue to be "broadly stable" this year, reported a 2.7% decrease in organic revenue in the third quarter, blaming cuts from a handful of U.S. advertising clients and softer-than-anticipated performance at its media agencies.

Publicis also attributed the decrease partly to an ongoing reorganization at digital agency Publicis Sapient -- an effort to take on bigger and broader business projects in the U.S. Those new projects haven't yet compensated for the decline in one-off and project-based digital assignments, the company said in a statement.

The company's organic revenue growth, a key metric that strips out currency effects and acquisitions, was 0.8% in 2018.

Stocks at rival ad holding companies, including Interpublic Group of Cos., Omnicom Group Inc. and WPP immediately dropped following Publicis' report.

"We could have chosen the easy route and taken advantage of the status quo to find small pockets of immediate growth," said Publicis Groupe CEO Arthur Sadoun in the statement. "Instead we are accepting this painful situation in the short-term, to be better prepared for the future."

Publicis has been pursuing a broad reorganization, including an investment in data capabilities and technology. It earlier this year agreed to acquire Alliance Data Systems Corp.'s marketing-services business, Epsilon, for $4.4 billion.

The ad business is facing a flurry of challenges as clients replace long-term agency contracts with short-term projects, cut agency fees and seek new expertise to help them resonate with ad-averse consumers who are spending more time online. Ad holding companies are also competing with consultancies that are aggressively acquiring ad services capabilities and agencies.

"We have clearly identified the challenges affecting our industry, and we haven't lost a second in addressing them," said Mr. Sadoun.

Publicis had already cut its organic revenue growth target in July. For 2020, the company expects its organic revenue growth to come in between -2% and +1%.

-- Olivia Bugault contributed to this article

Write to Alexandra Bruell at alexandra.bruell@wsj.com

(END) Dow Jones Newswires

October 10, 2019 15:36 ET (19:36 GMT)

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