Unilever Sees Q1 Sales Rise From Ballooning Price Inflation
LONDON — Higher prices boosted Unilever’s first-quarter sales 7.3 percent to 13.8 billion euros, and the company is bracing for a further period of high inflation.
The company said Thursday in a trading statement that the underlying sales growth of 7.3 percent was due entirely to price hikes. Overall, sales were up 11.8 percent compared with last year.
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Unilever’s CEO Alan Jope said the company has been “executing well in a very challenging input-cost environment,” and against the backdrop of the war in Ukraine. He noted the underlying growth in the quarter was driven by “strong pricing,” rather than sales volumes.
Jope said the company has been maintaining robust investment in its top brands, and also grew its 13 brands which turn over a billion euros or more by 8.8 percent in the quarter. E-commerce sales, he added, now represent 14 percent of turnover following another quarter of strong double-digit growth.
“Our priority markets of the U.S., India and China all grew competitively. We continue to reshape our portfolio into high-growth spaces, with Prestige Beauty and Functional Nutrition again growing strongly,” said Jope, adding that the company remains “on track” to deliver the previously announced, simpler, more category-focused organization structure on July 1.
“There is more to do as we navigate our business through unprecedented cost inflation, but we are making good progress. We are committed to sustaining this step-up in our growth and competitiveness,” he added.
Looking ahead, the company said it expects input-cost inflation of around 2.1 billion euros in the first half. Russia’s invasion of Ukraine and the related increase in raw material inflation have raised Unilever’s cost forecast for the second half to around 2.7 billion euros.
As a result, prices will rise and sales volumes will suffer, the company said. Underlying sales growth in the full year will be toward the top end of the previously guided range of 4.5 percent to 6.5 percent.
Unilever said the greatest area of uncertainty and volatility is around costs, and that the company expects to restore margin through pricing, mix and cost savings during 2023 and 2024, “as market conditions normalize.”
In the three months to March 31, Unilever’s Beauty & Personal Care division grew 7.1 percent, driven by higher prices and strength in the Prestige Beauty division and vitamins, minerals and supplements.
Hair care posted mid-single-digit growth, while skin cleansing delivered high-single-digit growth with Dove, Lux and Lifebuoy performing well. Skin care grew low-single digit, driven by North Asia and South Asia while sales in North America were flat.
Prestige Beauty notched another quarter of double-digit growth, on top of a “very strong” prior year when the health and beauty channel reopened after lockdowns began to ease. The Hourglass and Living Proof brands started strongly into the year, supported by the premium hair and makeup categories bouncing back, Unilever said.
Earlier this week, Living Proof announced the “Emily in Paris” actress Lily Collins as its brand ambassador. To kick off the partnership, the beauty company said it will launch its latest brand campaign celebrating the mission of “science in action.” The campaign will run in North America and the U.K. this spring.
RBC Europe noted that sales growth in the quarter was ahead of the company-compiled consensus, in common with the rest of the European consumer staples sector so far.
It added that raw material costs are likely to remain “higher for longer than Unilever anticipated at the time of its full-year results in February,” and said that Unilever’s warning that margins will come in at the lower end of its guidance range was understandable.
RBC also pointed out that it is expecting job losses to be concentrated in the second quarter as Unilever reorganizes around its new category-focused structure. The bank said it is “somewhat nervous about the effect that this might have on the rest of the year’s performance, but [Unilever] management does not sound unduly concerned, in our opinion.”
Shares in the company were broadly flat at 35.92 pounds in mid-morning trading on Thursday.
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