Unilever to Miss Sales Target, Putting Pressure on CEO--Update
December 17 2019 - 4:22AM
Dow Jones News
By Saabira Chaudhuri
LONDON -- Unilever PLC warned it would miss its sales target for
the year as it faces a host of problems in some of its key markets,
a surprise announcement that puts pressure on Chief Executive Alan
Jope less than a year into the role.
The owner of Dove body wash and Ben & Jerry's ice cream said
sales growth on an underlying basis -- which strips out currency
and acquisition impacts -- would be slightly below its guidance of
growth at the lower end of 3% to 5%. Earnings, margin and cash
aren't expected to be impacted, it said.
Unilever has struggled with slow growth in North America -- its
biggest market by sales -- where volumes declined in the third
quarter. However, on Tuesday the company said it was also facing
challenges in other key markets, like South Asia and West
Africa.
The unexpected update disappointed investors, with Unilever
shares falling more than 5% in early trading, and renewed the
debate as to whether the company should spend more to boost
sales.
Unilever must increase investment in its business, said RBC
analyst James Edwardes Jones, adding that Tuesday's figures imply
the company's lowest quarterly sales growth for over a decade.
The Anglo-Dutch company gave a disappointing outlook for next
year, saying growth would be at the low end of its 3% to 5%
range.
It said there were "early signs of improving performance" in
North America but a full recovery would take time.
Unilever has been battling intense competition in the U.S. from
Procter & Gamble Co. in categories like shampoo. P&G, which
makes Tide detergent and Bounty paper towels, has invested in
product quality, packaging, marketing and retail execution.
Earlier this month, Unilever said it was replacing its North
America head with the former chief executive of Revlon Inc.
That was the latest in a series of recent personnel changes,
including a new chairman and new beauty and personal care head this
year. Having new faces "leaves some uncertainty over the approach
and plans at the group, " wrote analysts at Société Générale in a
recent note. "Investors we speak to are increasingly uneasy about
an opaqueness of what Unilever thinks it can achieve in the medium
term and what is changing to get that delivered."
Some analysts have expressed concern that Mr. Jope, a marketeer
by training who took over in January, would be less focused on
financials than his predecessor Paul Polman.
At the same time, analysts have welcomed Mr. Jope's indication
that Unilever will pull back on doing more acquisitions, following
a long run of small deals that could prove hard to scale up, and
will instead focus on selling slower-growth businesses.
"CEO Alan Jope is more enthusiastic talking about
sustainability, digital and the talent agenda than the nuts and
bolts of growth drivers, cost savings and portfolio choices," wrote
Jefferies analyst Martin Deboo in a recent note. Unilever didn't
immediately respond to a request for comment on the recent comments
from analysts.
Aside from challenges in North America, the company is also
grappling with an economic slowdown in India -- its largest market
by volume. Cash shortage in rural areas along with a combination of
flooding and droughts over the monsoon season has hindered demand.
West Africa is another problem region, Unilever said.
Unilever is exposed to slow-growth categories across much of the
developed world like black tea which, despite acquisitions intended
to drive sales, remains a drag. Its likely to see more competition
from rival Nestlé SA in its ice cream business going forward after
the Swiss company last week said it would house ice cream in a
joint venture to grow more quickly.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
December 17, 2019 04:07 ET (09:07 GMT)
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