UNA Unilever PLC

By Peter Stiff 

LONDON -- Unilever PLC reported disappointing quarterly revenue growth and warned of a tough year ahead amid fierce competition in North America and volatile emerging markets, underscoring the challenge facing new Chief Executive Alan Jope.

The maker of Hellmann's mayonnaise and Dove soap, reporting its first earnings since Mr. Jope took charge, said Thursday its closely watched underlying sales rose 2.9% in the fourth quarter, below the 3.5% level expected by analysts.

For 2019, it forecast underlying growth at the lower half of its long-term guidance of 3% to 5%, citing uncertainty in several countries. The downbeat tone prompted the company's shares to fall more than 3%.

"Accelerating quality growth will be my No. 1 priority, we still have many untapped opportunities," Mr. Jope said on a call with analysts.

The Unilever veteran, who replaced longtime CEO Paul Polman at the start of the year, is trying to spur growth while raising the company's operating margin to 20% by 2020 -- a target set by his predecessor after fending off a takeover approach from Kraft Heinz Co. For 2018, the margin rose to 18.4%, with Mr. Jope saying Unilever was on track to meet its 2020 goals.

A challenging industry backdrop doesn't make the new CEO's task any easier.

Unilever, like its peers, is grappling with changing consumer tastes, competition from new brands and volatile emerging markets, which make up about 60% of the Anglo-Dutch company's revenue. The industry also faces rising commodity costs and growing competition from Amazon.com Inc. and discount chains that are launching own-label products.

In response, Unilever has focused more on higher-margin personal-care brands, pivoted away from slower-growing food and pushed into e-commerce with acquisitions such as online razor-delivery startup Dollar Shave Club.

Over 2018, competition was particularly intense in North America, where full-year underlying sales growth was 1%, excluding its recently sold spreads business. The company said categories such as ice cream, tea and dressings were challenging, with all growth in the region coming from beauty and personal-care products.

At its third-quarter update last year, Unilever cheered investors by saying it had been able to raise list prices. However, on Thursday the company said pricing gains had been washed away in the fourth quarter by a higher level of discounting.

One particularly competitive area is mayonnaise, where Unilever is engaged in a promotional battle with Kraft Heinz.

Unilever said its performance was encouraging in Europe, where a warm summer boosted sales of its ice cream brands like Magnum. But this was overshadowed by challenges in struggling economies such as Argentina, where it sold fewer products amid a bout of hyperinflation.

Overall, Unilever reported a fall of 5.1% in full-year revenue to EUR50.98 billion ($58.54 billion), which it attributed to the sale of its spreads business and currency headwinds. Net profit jumped to EUR9.39 billion from EUR6.05 billion, boosted by the sale.

--Carlo Martuscelli contributed to this article.

Write to Peter Stiff at peter.stiff@wsj.com

(END) Dow Jones Newswires

January 31, 2019 07:56 ET (12:56 GMT)

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