By Shares of Hindustan Unilever Limited (HUL) fell by 7% on Thursday, marking the company’s worst performance in nine months. This decline followed the release of quarterly earnings that fell short of analysts’ expectations, attributed to a slowdown in urban consumer spending. Analysts predict that this trend may continue in the near future.
Earnings Report Highlights
Hindustan Unilever, which generates two-thirds of its revenue from urban markets, reported a nearly 4% decrease in profit, totaling 26.12 billion rupees (approximately $310.8 million) for the second quarter. This figure was below the estimated 26.88 billion rupees, according to data from LSEG. Antique Stock Broking expressed disappointment, noting, “A visible recovery remains elusive.”
Market Challenges
The consumer goods sector is currently facing challenges, particularly in urban areas, where growth has lagged compared to rural markets over the past three quarters. Axis Securities analyst Preeyam Tolia indicated that Hindustan Unilever might experience “short-term pain,” forecasting a revenue growth of only 5%-6% for the remainder of the fiscal year, down from a historical average of around 10%.
In addition, competition is intensifying as smaller brands continue to launch new products and expand their presence in rural India. Tolia noted, “Competition has increased… The regional players have become bigger.”
Industry Trends
Hindustan Unilever’s shares, which have seen little movement this year and are generally rated as “buy,” were trading at 2,470 rupees, making them the second-biggest loser on the Nifty 50 index. Other major consumer brands, including Nestle India, Britannia Industries, and Dabur India, also saw their stock prices decline between 1.5% and 3%.
