×

UPDATE 2-Ad group WPP cuts sales forecast on weak client demand

(Adds reaction, share price)

LONDON, Aug 23 (Reuters) - WPP, the world's largest advertising group, cut its full-year sales target on Wednesday after consumer goods giants slashed their spending, forcing it to miss half-year targets and sending its shares tumbling.

Led by the high profile businessman Martin Sorrell, WPP said it had been hit in June and July as the likes of Unilever, Nestle and others cut their spending, while demand in the United States deteriorated further, in line with peers.

As a result, the London-based group reported first-half like-for-like net sales down 0.5 percent, below a consensus of 0.7 percent growth. It cut its full-year underlying net sales target to between 0 and 1 percent growth, from a previous forecast of 2 percent growth.

Its shares fell 12 percent in early trading.

"July was weak, June was tough," Sorrell told Reuters.

"The weakest part was the U.S. (And in terms of categories), we have activist investors in consumer goods groups putting pressure on companies to perform."

Despite the slowdown in the top line, tight cost controls helped the group to reiterate its target for a 0.3 point improvement in its operating margin.

"All regions, except the United Kingdom, Latin America and Central and Eastern Europe showed lower revenue than the prior year and all sectors were down," it said.

WPP rattled investors in March when it cut its 2017 sales forecast, citing an ultra competitive environment in which rivals were having to scrap for every dollar of ad spend.

From 3.1 percent net sales growth in 2016, WPP had set a 2017 target of 2 percent to reflect "tepid" economic growth and weaker net new business trends, before it cut it again on Wednesday.

The group has seen a particular slowdown in the U.S., in line with the other major ad groups, where underlying net sales fell by 2.2 percent in the first half of the year.

Consumer goods group have also been on a quest to cut costs as growth has slowed, with activist investors and a failed takeover attempt at client Unilever shaking up the industry and forcing companies to rethink how they spend.

WPP said a cyber attack in June had not affected revenue or its data and could not be blamed for the slowdown. (Reporting by Kate Holton; Editing by Paul Sandle and Keith Weir)