First-quarter sales highlight challenges in developed markets for the consumer goods giants

By Saabira Chaudhuri

BN-TB119_2SGGv_OR_20170420035709.jpgConsumer goods stalwarts Unilever UL +1.23% PLC and Nestlé SANSRGY +0.41% reported first-quarter sales that were weighed down by cautious spending in the U.S. and Western Europe on Thursday, forcing both companies to rely on emerging markets for growth.

Unilever, which is under pressure after rebuffing a $143 billion bid from Kraft Heinz Co, reported that underlying sales—which strip out the impact of currency volatility—grew by 2.9% from the same quarter a year earlier, beating analyst estimates for growth of 2%.

The growth was driven by emerging markets, where underlying sales climbed by 6.1%. In developed markets, sales declined by 1.5%, as Unilever confronted an array of troubles in North America, where sales dropped by 1%.

Unilever Chief Financial Officer Graeme Pitkethly described the decline as “somewhat unexpected,” citing a slowdown in tax refunds, concerns in the Hispanic community after President Donald Trump’s election, bad weather and gas prices as possible factors.

Nestlé said first-quarter revenue grew by 2.3% on an organic basis—which strips out the effects of currencies, acquisitions and divestments—but was roughly flat from a year earlier. The company is also struggling with sluggish consumer demand in North America where its confectionery and pet care sales declined.

Both companies had particular issues in the U.S.: Nestlé faced intense competition in bottled water that forced it to cut prices; Unilever sales were hit by the resurgence of ice cream rival Blue Bell Creameries LP. The Anglo-Dutch company also said it faced a tough U.S. hair care environment, with competition from companies like L’Oréal SA and Johnson & Johnson .

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