WPP, the world’s biggest advertising company, has reported a drop of 3.3% in its net sales in the first quarter. In March the net sales of the holding company dropped by 7.9% owing to the impact of the COVID-19 pandemic.
21.3% drop in Greater China business in Q1 dragged the overall sales down while there was a drop of 29.9% in the region in March.
However, the owner of the Ogilvy, GroupM, Grey and Hill+Knowlton agencies grew by 6.1% in India during the January to March quarter of 2020. In March alone, its net sales dropped by 1.1%, the company said in its investor update report.
Net sales in US dropped by 1.9% in Q1 (March -3.7%); UK -4.2% (March -9.8%) and Germany -4.3% (March -14.9%).
After announcing massive cost-cutting measures on March 31 in order to deal with the COVID-19 impact on business, WPP has said it implemented a range of additional measures, including voluntary salary sacrifice and part-time working. Over 3,000 people with salaries above certain levels have already committed to give up 10-20% of their salary for an initial three-month period.
The company has also accepted that it laid off employees under the cost-cutting measures. “While we continue to protect our people as much as possible from redundancy, as well as ensure our ability to serve clients and grow when markets recover, we have had to reduce headcount in certain areas,” it said.
WPP hinted it could go for even tougher cost-cutting measures to manage profit and cash flow if the situation worsens further. It said, “Given the significant uncertainty over the immediate outlook, we have modelled a number of economic scenarios and developed detailed cost actions against each of these, using a combination of the cost savings outlined above. Owing to the flexibility of the cost base, we are able to respond quickly and will reduce cost further if the depth and length of the downturn requires it, as well as ensure the business is ready to take advantage of any market recovery.”
Mark Read, Chief Executive Officer of WPP, said, “After a good start to the year, with growth outside of China in January and February, our business started to be materially impacted by COVID-19 in March. Our response has focused on four areas: the health of our people, serving our clients, helping to mitigate the impact of the virus on our communities and ensuring WPP is financially strong.
“Close to 95% of our 107,000 people are working from home, providing uninterrupted service to clients, helping them to communicate their own actions, sustain their brands and develop new ways to market their products. We have also won $1 billion of new business in the first quarter, including the global integrated Intel account, creative duties for Discover and the media accounts for Hasbro and Novo Nordisk.
“We have witnessed a decade’s innovation in a few short weeks, with the way people meet, shop, work and learn increasingly reliant on technology. We are seeing clients rapidly shift emphasis and budget into digital media and direct-to-consumer channels and continue marketing technology investments. And, while many clients are significantly impacted by a reduction in consumer demand, other sectors such as packaged goods, technology and food retail brands have been more resilient. As in previous downturns, those who are most prepared and most far-sighted will be at an advantage when we come through the current situation.
“At a time of great uncertainty, I am very proud of how our people and clients have responded. Despite the economic challenges that will, no doubt, be with us for some time, the way we have come together gives us real confidence in our future.”