Publicis Posts Better-Than-Expected Organic Growth as Ad Industry Appears Resilient
The advertising holding company says first-quarter net revenue rose 10% from a year earlier
Publicis Groupe SA reported higher-than-expected organic growth of 7.1% in the first quarter, and the advertising holding company said demand for its services continues despite the choppy macroeconomic environment.
Analysts expected 5.89% growth in the quarter, according to FactSet.
Paris-based Publicis, which owns agencies such as Saatchi & Saatchi, Leo Burnett and Zenith, also said it expects to hit organic growth this year in the top half of its previously stated range of 3% to 5%. Organic growth refers to the change in net revenue excluding the effects of acquisitions, disposals and currency fluctuations.
The firm also reported first-quarter net revenue of 3.08 billion euros, equivalent to $3.37 billion, up 10% year-over-year.
Despite mixed signals for the U.S. economy, advertising is still expected to grow in 2023, according to forecaster Magna, a media research and investment firm that is part of Interpublic Group of Cos.’ Mediabrands. The economic climate would have typically led Magna to expect advertising to fall, but growth in areas including ad-supported streaming video are bringing new spending into the marketing field, the company said when it released its forecast last month.
Publicis echoed that perspective, citing continuing growth while acknowledging caution from some marketers.
“We have seen, so far, some local cuts in traditional advertising, but not material enough to have an impact,” said Publicis Chief Executive Arthur Sadoun. “We are also starting to see some delay in decisions for bigger investments like business transformation. That has not been so much the case in [the first quarter], but it could be the case later in the year.”
According to Publicis, a third of its revenue comes from data and technology services. The company and its competitors in recent years have developed consulting businesses to help clients adapt their businesses digitally, whether to build apps or develop new e-commerce strategies.
“There is no way our clients are going to stop investing in that transformation, because if they do, they die,” Mr. Sadoun said. “Maybe they’re going to do it at a slower pace, but they will continue to do it.”
Rival Omnicom Group on Tuesday said its organic revenue grew 5.2% in the first quarter from the same quarter a year earlier.
Along with Omnicom, Publicis competes with Interpublic and WPP PLC. Analysts from research firm MoffettNathanson wrote in a note this week that the agencies are well-positioned to weather the broader macroeconomic environment because their clients include many larger companies that can absorb rising costs from inflation.
“If one were to want to be in any part of the broader media [and] advertising landscape at the moment, there are far worse places to be than an agency,” the analysts wrote.