Unilever, Nestle slow price rises but the struggle for consumers remains
By Barbara Kollmeyer
While price rises are starting to slow for companies like Nestle and Unilever after months of heading higher, the battle to win back consumers is far from over.
Shares of Nestle (NSRGY) (CH:NESN) tumbled 3% on Thursday after reporting a 1.4% rise in organic sales growth in the first quarter, widely missing the consensus of 2.9%. The owner of Kit Kat and Häagen-Dazs said prices rose 3.4% in the period, well down from the nearly 10% last year.
Analysts were jarred as Nestle's North American organic sales slid 2.2%, with prices moderating to a 3.3% rise. The company said frozen pizza and snacks were a big culprit, due to a combination of "soft consumer demand, intense price competition and a reduction in retailer inventories."
Mark Schneider, Nestle's chief executive officer, said the last few quarters have been marked by "bifurcation of the consumer market," as lower-income shoppers traded down for cheaper labels. Those shoppers "saw a significant hit to their purchasing power, between rising prices and reduced government support," he said in a statement.
"The lower-income consumer remains a large and important part of theU.S. and was the main area of the weak demand that impacted some of our product lines towards the end of 2023 and in the first quarter," he said.
The company expects a "strong rebound" to come in real internal growth (RIG), which tumbled 2.2%, but analysts appeared uneasy. A team of Deutsche Bank analysts led by Tom Sykes noted that "every product line saw RIG decline apart from confectionery and every zone saw a decline apart from zone Greater China."
Also reporting on Thursday was Unilever (UK:ULVR) (UL), whose shares popped 5.6% after the Ben & Jerry's owner reported forecast-beating underlying sales growth of 4.4% and a 2.2% rise in volume growth. The company said its so-called "power brands" led the growth as consumers traded up to premium labels.
Last October, Unilever announced a turnaround plan that would boost marketing investment for those 30 top "power brands," such as Dove, Knorr, Rexona and Sunsilk, which account for around 75% of its overall revenues.
Unilever's underlying prices in the quarter grew 2.2%, moderating slightly from 2.8%.
"All its categories and regions are doing well, but specifically beauty and personal care are sectors which are seeing long-term structural growth," said Chris Beckett, head of equity research at Quilter Cheviot, in a note. "Unilever is making the correct decision to move away from the commodity-like food and nutrition industry, although it should be noted that these products did well despite declining volumes."
On a conference call with analysts, Unilever noted that its Dove brand saw both volume and price growth with the launch of a premium range of body washes in the U.S.
The company said it expects full-year underlying sales growth within its multiyear range of 3% to 6%, and a higher contribution from volume, "a critical indicator of the quality of our growth, especially after a period of elevated pricing."
-Barbara Kollmeyer
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
04-25-24 0702ET
Copyright (c) 2024 Dow Jones & Company, Inc.-
These Stocks Are (Still) Powering the Bull Market
-
5 Undervalued Energy Stocks to Play the AI Data Center Demand Boom
-
After Earnings, Is Lowe’s Stock a Buy, Sell, or Fairly Valued?
-
5 Stocks With the Largest Fair Value Estimate Cuts After Q1 Earnings
-
10 Stocks With the Largest Fair Value Estimate Increases After Q1 Earnings
-
Markets Brief: Inflation Back in the Spotlight
-
AI Is Booming, but Consumer Spending Is Slowing. Which Will Prevail in the Stock Market?
-
What’s Happening In the Markets This Week
-
3 Dividend Stocks for June 2024
-
After Earnings, Is Alibaba Stock a Buy, Sell, or Fairly Valued?
-
MongoDB Earnings: Slashing Valuation as Execution and Macro to Blame for Lower Guidance
-
Marvell Earnings: We Raise Our Medium-Term AI Forecast and Bring Our Valuation Up to $75
-
Zscaler Earnings: Impressive Traction in Emerging Products Drives Sales Growth for the Quarter
-
Dell Earnings: Raising Valuation on Strong AI, but the Stock Remains Severely Overvalued
-
After Earnings, Is Nvidia Stock a Buy, Sell, or Fairly Valued?
-
The 10 Best Companies to Invest in Now