UL Unilever PLC

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)

Copyright (c) 2019 Dow Jones & Company, Inc.