Unilever PLC (LON: ULVR) stock price slipped around 4% this week after the CEO of the consumer goods firm said the economic downturn seems “inevitable” in the current coronavirus-driven environment.
Fundamental analysis: Strong sales reported
Unilever reported better-than-expected sales growth in the third quarter on Thursday, however, the company’s Chief Executive said the outlook remains uncertain.
The London-based company reported an increase in year-over-year sales of 4.4%, much higher than consensus estimates of 1.3%.
The boost in sales was driven by emerging markets which account for around 60% of the company’s revenue. Sales in emerging markets advanced 5.3% compared to last year, while developed markets moved up by 3.1%.
Still, Unilever didn’t provide any short-term outlook and its CEO Alan Jope said he was “perplexed by talk of a quick recovery” from the coronavirus crisis and the consequent economic collapse.
“We’ve moved from response mode to now living with COVID-19, but the environment that we’re operating in remains highly unpredictable and we believe, an economic downturn is inevitable,” he said.
Unilever said elevated coronavirus-induced costs, commodity prices, marketing expenses as well as currency swings will weigh on the gross margins in the second half of the year.
Just like some of its competitors, Unilever has also been acquiring assets to broaden its portfolio and gain higher exposure to fast-developing categories like vegan foods and premium beauty while putting less focus on slower products such as margarine and tea.
The company revoked its yearly sales growth goal back in April.
Unilever reported growth of 9.1% in the United States, its largest market by revenue, thanks to a surge in demand for foods and drinks consumed at home.
“The shift of consumption towards in-home seems to be providing a strong tailwind to the sector and is outweighing any exposure to the out-of-home market,” analysts at Bernstein said in a note.
Technical analysis: Shares slip
Shares of Unilever are trading about 4% lower since the beginning of this week despite better-than-expected quarterly sales. Still, the CEO’s claims have increased worries on the investors’ side.
Unilever stock price logged £46.60 this morning which is a fresh 1-month low for the stock. Last week, shares climbed to £49.44, which is the highest level recorded since September last year. The sellers are now testing the multi-week support near £46.50.
Unilever’s sales growth beat analysts’ estimates by far in the third quarter of this year but the company’s CEO warned that outlook remains very unpredictable. As a result, shares trade around 4% in the red on a weekly basis.