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LONDON (Reuters) - WPP, the world's largest advertising group, reported first-quarter net sales growth just below expectations as a weak performance in North America added to downward pressure on the stock.
The British company, led by founder and CEO Martin Sorrell, 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 advertising spending.
From 3.1 percent net sales growth in 2016, WPP cut its 2017 target to a "conservative" 2 percent to reflect "tepid" economic growth and weaker net new business trends.
On Thursday it reported a 0.8 percent rise in first-quarter like-for-like net sales growth, slightly shy of expectations at 1 percent, after 2016 contract losses took their toll.
However it said it had seen an improvement in the amount of new business it was winning, enabling it to reiterate its full-year target.
It won $2.1 billion of net new work in the first three months of the year, compared with $1.8 billion in the same quarter last year.
"We had challenges on the new business front last year but it's picked up now," Sorrell told Reuters. "But it's a tough environment."
Net sales on an organic basis were down 1.1 percent in North America while western continental Europe was up 4.3 percent and Britain up 3.7 percent.
Its shares were down 2.5 percent in early trading, adding to a 10 percent fall since it cut its outlook in March.
Having outperformed rivals for several years, WPP lost contracts from the likes of VW and AT&T in 2016 and could suffer this year after consumer goods giant Unilever, its third-biggest customer, said it planned to cut advertising spending.
Like all advertising groups, the owner of agencies including JWT and Ogilvy & Mather is being squeezed by clients who are struggling to raise prices, forcing them to cut costs.
Unilever, which is looking to raise growth after recently fighting off a takeover bid, has said it intends to cut the number of advertisements it makes by a third and the number of agencies it works with by half.
Analysts at Citi said the numbers were a little weak, but unlikely to affect forecasts.
"If the company can convincingly argue that the Q1 should be the nadir in terms of growth ... it may even be seen as a turning point given valuation is clearly depressed," they said.
"Our own view is that growth will recover and, with it, so will the multiple. We rate WPP as a Buy."
Reporting by Kate Holton; editing by David Goodman and Jason Neely