Unilever Q3 Growth Declines Due to Currency, Sells Dollar Shave Club
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LONDON — Unilever reported revenues declined 3.8 percent in its third quarter to 15.2 billion euros amid a flurry of announcements, including the sale of Dollar Shave Club to U.S. private equity firm Nexus Capital Management and the promotion of Fernando Fernandez to the role of chief financial officer.
Unilever said reported sales were down due mainly to currency headwinds and disposals in the period. On an underlying basis, sales rose 5.2 percent in the three months to Sept. 30.
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The new chief executive officer Hein Schumacher is also due to present his strategy for the company, which will focus on faster growth, greater productivity and simplicity, “powered by a stronger performance culture.”
The consumer giant, parent of brands including Dove, Magnum and Hellmann’s, said the focus would be on the 30 “power brands” in its portfolio, which represent more than 70 percent of turnover.
The company left its outlook for the full financial year unchanged, with underlying sales growth in excess of 5 percent, and underlying price growth continuing to moderate due to a decrease in cost inflation.
Unilever noted that cost inflation has been moderating throughout the year, and said its expectation for net material inflation remains unchanged at around 2 billion euros.
The company said it will deliver a “modest improvement” in underlying operating margin for the full year, reflecting higher gross margin and increased investment behind its brands.
In the three months, the Beauty & Wellbeing division accounted for 20 percent of turnover, and grew 7.4 percent on an underlying basis to 3.1 billion euros. Turnover was down 4.9 percent on a reported basis.
Prestige, health and well-being brands grew “strongly” said the consumer giant, with drivers including Dermalogica, Tatcha and Hourglass. Other top performers were Nutrafol and Liquid IV, which launched a range extensions into sugar-free formulas and hydration solutions for children.
Schumacher, who stepped into the role on July 1, said Unilever “is a company with strong fundamentals; a portfolio of great brands; an unrivalled global footprint, and a team of talented people.”
He said that despite those strengths, “our performance in recent years has not matched our potential. The quality of our growth, productivity and returns have all under-delivered.”
Going forward, his plan is to drive faster growth by stepping up innovation and investment behind Unilever’s “power brands”; drive simplicity and productivity; leverage the operating model, and sharpen performance culture “through strong leadership and stretching goals.”
Some of that strategy is already in action with the sale of a majority stake in Dollar Shave Club. Unilever will keep a 35 percent share in the company, which sells razors, electric trimmers and male grooming products.
On Thursday, Fabian Garcia, president of Unilever Personal Care, said the sale “marks another step in our journey to transition our portfolio towards core strategic growth areas. Dollar Shave Club has a loyal membership and following, and I am confident the brand will thrive under its new ownership and continue to serve consumers across North America and beyond.”
Unilever’s shares on the London Stock Exchange were down 2.7 percent to 39.07 pounds in morning trading following the third-quarter announcement.
RBC Capital Markets said in a report that Schumacher’s action plan “seems sensible enough. It hasn’t blown our socks off, but it seems reasonable and realistic.”
He noted that the plan is intended to deliver, on a multiyear basis, 3 to 5 percent organic sales growth and modest margin expansion.
“While the 3 to 5 percent might strike some as disappointing, we regard it as realistic — at least for now. Previously, incoming CEOs at Unilever have tended to over-promise on growth,” he wrote.
Jefferies’ Molly Wylenzek wrote “there is not much here to excite. The new CEO’s strategy update looks light on numbers [and] change,” she said, adding that it came on the back of a third-quarter volume miss and further drop in market share growth.
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