Unilever to Miss Sales Target, Putting Pressure on CEO -- 2nd Update
December 17 2019 - 8:11AM
Dow Jones News
By Saabira Chaudhuri
LONDON -- Unilever PLC warned it would miss its sales target for
the year, blaming difficulties in the U.S. and other key markets
and setting up an early challenge for Chief Executive Alan Jope,
less than a year in the top job.
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.
The surprise announcement prompted Unilever shares to fall more
than 5% in recent trading in London.
The company 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.
RBC analyst James Edwardes Jones estimated the figures imply the
company's lowest quarterly sales growth for over a decade and said
Unilever must increase investment. "This is what happens when a
company cuts marketing, while its competitors are increasing
theirs," he said.
Mr. Jope, on a call with reporters, said Unilever was
accelerating its cost-savings plan to fund greater investment in
its business, and that it would also consider selling slow-growing
units.
While he didn't specify, analysts have long suggested the
company might look to sell some of its food brands. Rival Nestlé
SA, after missing sales targets for several quarters, has sharpened
its focus on high-growth categories like coffee and petfood, while
exiting slower-growth units like U.S. confectionery, a strategy
that is paying off.
Mr. Jope also said the company was working to attract new
consumers to its brands and come up with new products. He said
investments in U.S. ice cream, hair care and dressings -- lately
problem categories in America -- had already started to pay
off.
"We are far from crisis conditions," he said. "This is just a
little bit more turbulent than normal."
Unilever has also shuffled top management as part of its efforts
to jumpstart sales.
Earlier this month, Unilever said it was replacing its North
America head with the former chief executive of Revlon Inc. That
followed the naming of a new chairman and new beauty and personal
care head this year.
However, 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 also 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.
"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. A Unilever
spokesman declined to comment on recent analyst remarks.
At the same time, others have welcomed Mr. Jope's indication
that Unilever will pull back on acquisitions. Under Mr. Polman,
Unilever made a string of small buys to boost exposure to
high-growth categories, but growing those has proved difficult.
Aside from challenges in North America, the company is also
grappling with an economic slowdown in India -- its largest market
by volume. Cash shortages in rural areas along with a combination
of flooding and droughts over the monsoon season has hindered
demand. Growth is currently trending at less than 5%, down from
about 10% last year, Mr. Jope said Tuesday.
The company also flagged West Africa as a problem area. In
Nigeria and Ghana -- Unilever's two largest markets in the region
-- Mr. Jope said the company is facing "a double whammy" of slowing
demand and disruptions to distribution.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
December 17, 2019 07:56 ET (12:56 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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