Unilever’s Volumes Surprise, But Currency and Costs Cloud the Outlook

Unilever beats sales forecasts with 3.8% growth driven by volume, but currency drag and rising costs keep stock under pressure amid a $1.2B wellness acquisition.

The consumer goods giant is selling more products than expected, yet its stock continues to languish. Unilever’s first-quarter results painted a picture of operational strength undermined by external headwinds, leaving investors to weigh strong volume growth against a mounting cost burden and persistent currency drag.

Volumes Lead the Charge

Unilever’s underlying sales rose 3.8% in the first three months of 2026, edging past analyst forecasts. The standout driver was a near-3% increase in volumes — a shift from recent quarters where price hikes did the heavy lifting. This marks a notable change in consumer behaviour, with shoppers buying more units rather than simply paying more.

The company’s so-called Power Brands — its top-tier labels — delivered underlying sales growth of 5%, underscoring the strength of its core portfolio. Emerging markets proved particularly potent. India posted a 7% gain, while Latin America returned to positive volume territory. In Asia and Africa, sales volumes climbed 5%, and even China notched mid-single-digit percentage growth.

Currency Clouds the Picture

For all the operational momentum, the reported numbers tell a different story. Currency headwinds wiped out much of the progress, with the strong euro shaving nearly eight percentage points off potential growth. Reported revenue fell 3.3% to €12.6 billion.

That disconnect between operational reality and reported performance is mirrored in the share price. The stock closed Monday at €49.95 in Frankfurt, leaving it roughly 10% lower since the start of the year and trading about 7% below its 50-day moving average. A €1.5 billion share buyback programme, launched in late April and running until early July via Morgan Stanley, has so far failed to lift sentiment.

A $1.2 Billion Bet on Wellness

Management is not standing still. Unilever has agreed to acquire US nutritional supplements company Grüns in a deal valued at $1.2 billion. The purchase bolsters the group’s health and wellness division, adding a fast-growing brand to a segment the company sees as a long-term growth driver.

At the same time, the separation of the food business is gathering pace. The planned merger with spice maker McCormick is expected to close by mid-2027. Restructuring costs tied to the overhaul will hit the income statement to the tune of roughly €500 million.

Cost Inflation Looms Large

The second half of the year is shaping up to be more challenging. Unilever now expects cost inflation to run significantly higher than initially budgeted, with additional expenses of up to €900 million. That represents a near-€500 million increase from the original forecast.

The household care division is bearing the brunt of the pressure. Management is preparing to raise prices again, though the approach will be gradual rather than abrupt. Chief Executive Fernando Fernandez is betting on stepped-up marketing spend, including sponsorship activity around the upcoming football World Cup, to keep brands top of mind as prices edge higher.

Dividends and Deadlines

Shareholders have a busy calendar ahead. The quarterly dividend of €0.46 per share carries a record date of May 14, with the annual general meeting taking place the day before. The buyback programme, meanwhile, is set to run through early July.

Despite the gathering cost storm, the company is holding its full-year guidance. Unilever continues to expect underlying sales growth of between 4% and 6%, with a modest improvement in operating margin. The question is whether volumes can keep pace if prices start climbing again.

Elsewhere, the legacy margarine business — now operating as Flora Food Group — is back in the spotlight. Reports suggest private equity firm KKR is exploring a sale that could value the unit at around $10 billion, offering another potential catalyst for the stock.