* Sees 2009 LFL sales below previous forecast
* Q1 LFL revenues down 5.8 percent
* Operating margins ahead of budget, below 2008
* Shares fall 5 percent
(Adds background on job cuts, updates shares)
By Georgina Prodhan
LONDON, April 28 (Reuters) - British advertising group WPP said it would not meet its full-year forecasts after first-quarter like-for-like sales fell 5.8 percent as companies slashed marketing budgets, sending its shares down 5 percent.
The world's largest advertising group by revenue had previously said it expected like-for-like revenue to fall 2 percent this year after a 2.7 percent increase in 2008, and that operating margins would be slightly down to 14.3 percent.
"We're doing OK but it's very tough," Chief Executive Martin Sorrell told Reuters on Tuesday. "It'll be weaker than minus two. Margins won't be 14.3."
He said early signs were that like-for-like sales would be nearer recent industry forecasts of mid-single-digit declines.
Media agency ZenithOptimedia said earlier this month it expected global advertising spending to fall 6.9 percent this year, but WPP's scale and geographical and business diversity help it make the most of such opportunities as still do exist.
By 0751 GMT, WPP shares were down 5.1 percent to 426.75 pence, underperforming a 2.3 percent fall in the European media index.
Analysts said WPP's sales figures and revised forecasts were broadly in line with their expectations and the company remained attractive in view of its market position and price, at around 9 times 2009 earnings per share.
According to a survey of five analysts carried out by the company, like-for-like revenues had been expected to fall between 5.2 percent and 7.2 percent.
"We believe WPP, along with the other agencies, continue to look cheap," UBS analyst Alastair Reid wrote in a note. "We would expect a negative reaction initially today, but would view weakness as a particularly attractive entry point."
Rival Omnicom, the world's biggest agency by market value, on Monday reported that first-quarter revenue fell 14 percent as firms ditched marketing campaigns and cut budgets.
WPP said its short-term focus would be on balancing the likely fall in sales with headcount, which accounts for most of the company's costs. Sorrell said a sales drop of 5 percent would sooner or later entail a similar reduction in staff.
The company cut about 3 percent of its staff during the first quarter, two-thirds through severance and redundancy -- putting pressure on margins -- and the remainder through attrition, Sorrell said.
WPP, whose agencies include JWT and Ogilvy & Mather, felt most economic pressure on first-quarter sales in the United States, with Britain less affected. Latin America, Africa and eastern continental Europe still showed like-for-like growth.
Sorrell said the rate of decline had eased in March, notably in China where there was some growth on the mainland, although it was unclear whether this reflected stabilisation or merely restocking of inventories.
He said the improvement in China might be explained by foreign multinationals returning to the market, encouraged by local companies maintaining their spending.
First-quarter sales were 2.12 billion pounds, an increase of 36 percent including sales from TNS, or 11.1 percent adjusted for currency effects. ($1 = 0.6866 pound) (Reporting by Georgina Prodhan; Editing by Dan Lalor and Simon Jessop)