Unilever Plc surpassed sales growth expectations in the first quarter as consumer demand proved more resilient than expected in the face of price hikes.
(Bloomberg) — Unilever Plc surpassed sales growth expectations in the first quarter as consumer demand proved more resilient than expected in the face of price hikes.
Underlying sales grew 10.5% in the quarter, driven by OMO detergent and Hellmann’s mayonnaise, beating analyst expectations of 7.6%. Outgoing Chief Executive Officer Alan Jope said Unilever doesn’t see any particular downtrading by consumers to cheaper products.
The stock rose as much as 2% in morning trading in London.
Consumer goods companies have been grappling with the fastest inflation in decades. Yet many big consumer-goods groups including Nestle SA and Procter & Gamble Co. weathered the storm last quarter, delivering better-than-expected sales.
“The beats are across regions and categories. The message remains constant across companies: consumer packaged-goods companies can keep raising prices, without much impact on volumes,” Bernstein analyst Bruno Monteyne said.
Sales growth at Danone, Coca-Cola Co. and PepsiCo Inc. also beat analysts’ estimates.
Unilever Chief Financial Officer Graeme Pitkethly told reporters on a call that price increases will start to taper off in the coming quarters.
The company’s underlying volumes dropped 0.2%, much less than the 3.2% decline analysts were expecting.
In July, Royal FrieslandCampina CEO Hein Schumacher will replace Jope and will be under pressure to revive struggling brands, improve operational performance and sell brands that cannot do well under the Unilever umbrella.
What Bloomberg Intelligence Says:
“Unilever’s CEO Alan Jope will hand over a healthier asset in July to his successor Hein Schumacher, with double-digit price hikes in 1Q — without any loss of volume at the group level (vs. a 3% decline called for by consensus) — confirming a strengthening portfolio and market-share progress.”
—Deborah Aitken, consumer-products analyst
The company reiterated that full-year revenue growth should be at least in the high end of its 3% to 5% forecast range. With cost inflation expected to continue, the group expects to deliver only a modest improvement in its underlying operating margin this year.
(Updates with shares in third paragraph)
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