Unilever Reports Less-Than-Expected Sales

Blames First-Quarter Drop to U.S. Inventory De-stocking

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CINCINNATI (AdAge.com) -- Unilever today reported first-quarter organic sales up a less-than-expected 2.9%, below analyst expectations of a 3.3%-3.8% jump and making it the second big package-goods player in as many days to face questions about its top-line momentum.
The downshift ended a roll in sales growth for Unilever.
The downshift ended a roll in sales growth for Unilever.

Rival Procter & Gamble Co. yesterday posted a much-better 6% organic sales growth rate, at the top end of both its March guidance and its long-term organic-growth target, but still below what Wall Street has come to expect from P&G in recent years.

Inventory de-stocking
Without mentioning Wal-Mart by name, Unilever said inventory de-stocking in the U.S. trimmed about 0.2 percentage points off its global sales of $11.5 billion. Sales of Suave, long a big seller at Wal-Mart, rose about 3% at retail to consumers but only about 1% out Unilever's door to retailers in the quarter, reflecting U.S. inventory de-stocking issues, said Chief Financial Officer Rudy Markham on a conference call yesterday.

The sales downshift ended a roll in which Unilever sales growth had accelerated steadily quarter by quarter last year, topping 5% in the fourth quarter, under the company's "One Unilever" restructuring. Unilever earnings rose 6% to $1.3 billion for the first quarter.

Overall, sales growth in the U.S. would have been about 1 percentage point above the 1.1% Unilever reported without retailer inventory de-stocking, Mr. Markham said. Deodorant and personal wash continues to perform well in the U.S., he said, though he acknowledged less stellar results for laundry and hair-care, categories he termed "more competitive."

American depository receipts of Unilever's U.K. shares closed down 2.3% to $41.73. American depository receipts of Dutch Unilever shares were off 1.8% to $70.62.

Feeling the pinch
Wal-Mart's two-year effort to trim about $6.5 billion of inventory from its system is hitting home- and personal-care marketers particularly hard, according to industry watchers and executives, as Wal-Mart consolidates distribution centers for its discount stores and supercenters over two years.

Unilever's sales growth still fell within its 2%-4% annual target, but some analysts felt much more than Wal-Mart was at play in top-line results they found disappointing.

"Most of your food and [home- and personal-care] peers have enjoyed quite robust growth in the first quarter," said Andrew Wood, analyst with Alliance Capital Management's Sanford C. Bernstein, to Mr. Markham. In Europe, he noted, "Nestle [was] growing at 3%. You had L'Oreal growing at 4%, you had [Group] Danone growing at 4%. You've reported minus 0.5%, which suggests that you're losing share and losing it big time."

"Market shares, as we've said in our announcement, they're in aggregate broadly in line with last year," Mr. Markham said. "We've seen obviously within that some ups and some downs, depending on which part of the world and which category."
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