ULVR Unilever Plc

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)

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