What's going on?
Unilever – the Anglo-Dutch maker of consumer favorites like Ben & Jerry’s ice cream – announced on Tuesday that its half-baked sales growth would leave investors cold.
What does this mean?
As recently as October, Unilever had claimed it’d grow its sales this year by between 3% and 5%. But the company now believes they’ll fall short of even the low end of that forecast. That’d make this quarter’s sales just 1.5% higher than the same time a year ago – its slowest growth in over a decade.
Unilever thinks sales growth will languish below 3% until next summer, at which point it might finally start to pick up. That’d likely be thanks to an uplift in the company’s North American business, which has already shown early signs of improvement.
Why should I care?
For markets: Trade secrets.
Unilever blamed tough markets in West Africa and South Asia: those territories, combined with the Middle East, Turkey, Russia, Ukraine, and Belarus, make up almost half its revenue. And while some analysts think there might be more to the company’s troubles than meets the eye (which might explain why its stock fell 7%), they’ll have to wait until its full earnings report at the end of January to know for sure. In the meantime, rival Nestlé will likely woo Unilever-less investors by selling off parts of its businesses that don’t cut the mustard.
The bigger picture: Death by 1,000 cuts.
The European stock market has risen about 25% this year, but Unilever might signal the beginning of the end. Some analysts believe current predictions of 9% profit growth for European companies next year are too high, not least because it’s the same growth rate expected from US companies. Given there’s higher economic growth Stateside – as well as ongoing share buybacks, which reduce the number of shares in circulation and therefore boost profit per share – America’s profit growth should exceed Europe’s.