Consumer goods colossus Unilever (ULVR) has missed analyst expectations despite growth accelerating in the third quarter across the business.
The company, which sells popular products under brands such as Magnum and Hellman’s, delivered underlying sales growth of 3.8% in the three months to 30 September.
That's an improvement on the 2.5% revenue rise reported for the first six months of this year but analysts were expecting growth of 4.2%. Shares in the company fell 1.5% to a six-month low of £39.65.
Overall sales fell 4.8% to €12.5bn with currency impacts and the sale of its spreads business are blamed.
FAILED HQ SHIFT WEIGHS ON SENTIMENT
Earlier this year, Unilever attempted to shift its headquarters to the Netherlands, and potentially leave the FTSE 100, a move that could have forced some investors to sell stakes in a business that has delivered fantastic wealth creation for years.
The plan was ditched after frustrated investors kicked up a stink. That botched plan may fuel renewed calls for change at the top and the most effective way for management to get investors back onside will be to deliver stronger growth down the line.
Investors should be reassured by the company’s ability to hike average prices by 1.4% during the period, which shows that Unilever still has some pricing power levers to pull. That could be increasingly important in future in the face of emerging discount retailers (think Aldi and Lidl) offering cheaper alternatives to traditionally popular brands of the sort Unilever makes.
At least emerging markets are still seeing firmer sales growth, coming in at 5.6% largely thanks to growth in Asia and the cooling off of strike action in Brazil.
SOFTER GROWTH IN EUROPE
But it is the company's maturer markets that are causing investors the most concern, Europe especially. Growth here fell short of expectations, with a increasingly competitive market for fabric conditioners flagged by the company.
This could be an interesting trend to track over the coming months in light of media reports which claim younger millennial consumers are not buying in the same volumes as their parents.
UBS analyst Pinar Ergun says Unilever needs at least 3.1% sales growth in the fourth quarter to hit the lower range of its stated 3% to 5% full year target. Investors will get the answer to that challenge when full year results are announced, probably in early February 2019.
