Unilever chief executive Hein Schumacher has set out his ambition for underlying sales growth of 3% to 5% over the coming years, focusing chiefly on the group's 'power brands', and investors will be eager to see a turnaround after a number of lacklustre quarters, analysts have said.
Announcing Unilever's third quarter results last week, Schumacher noted that the group's "performance in recent years has not matched [its] potential," and the most recent quarter underlines this, with the consumer goods giant's sales growth entirely coming from price increases.
In a briefing note, Barclays Equity Research said '3-5% organic sales growth and modest margin expansion may not seem ambitious, but is better than what has been delivered in the preceding six years. Unilever has the potential to do better but will need to do its talking through delivery, not words.'
Barclays added that 'it will take time for momentum to build' at Unilever, adding, 'For us it's simply about execution and delivering the credible plan consistently and with real urgency. Whilst some may have expected more ‘fireworks’, the reality is this was always unlikely given the CEO is only 90 days in to the job.
'In the cold light of day Unilever's track record doesn't stack up well over the past six years against global peers'.
'Weighed Down'
These thoughts were echoed by Charlie Huggins, manager of the quality shares portfolio at Wealth Club, who noted that for too long, "Unilever has been too slow-moving, too complex and too weighed down by too many mediocre brands. A strategy to simplify and refocus on core strengths, perhaps augmented by some non-core brand disposals, feels like the right way to go.
"From here it's all about the execution," he added, noting that previous strategy updates have promised greater agility and productivity, but have ultimately fallen short.
Pricing Power
Elsewhere, Roberto Rivero, market analyst at Admirals, noted that Unilever's price growth in the period, of 5.8% compared to 9.4% in the first half of the year, is an indication that the group's "incredibly high pricing power has its limits, a fact reinforced by falling sales volumes over the last year or so.
"As inflation falls, this will continue to filter through to consumers in the form of slower price growth. This should be welcome news to both consumers and Unilever, who could see improved volume growth as prices stabilise."
