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Prices hikes have helped Unilever (ULVR) increase underlying sales in the past three months despite falling volumes, a trading update this morning has revealed.

The consumer goods giant behind Marmite, Ben & Jerry’s and Hellmans is currently embroiled in a row with Tesco after demanding a 10% price increase for its entire range to offset the 17% fall in the value of the pound since the Brexit vote – as reported by The Grocer yesterday.

Underlying sales between July and September grew 3.2% thanks to a 3.6% jump in prices – mostly driven by strong pricing in Latin America – but volumes slipped 0.4% year on year as consumer demand remained weak.

Unilever recorded growth in the quarter for all four of its categories: personal, home care, refreshments and foods.

However, currency headwinds around the world of -3.4% left group turnover virtually flat at €13.4bn.

Europe proved the most challenging market in the quarter, with subdued volume growth and continued price deflation in many countries, including notably the UK. Underlying sales in Europe declined 1.1% compared with 3.9% growth in Asia and 5.8% in the Americas.

Unilever said ice cream performed strongly against an “outstanding” season in the prior year but high promotional intensity adversely impacted its home care and personal care performances. The contraction of the margarine market also weighed on the food division, most notably in the UK and France, which will fuel rumours that Unilever will sell off the spreads division as soon as it’s able.

Underlying sales growth in emerging markets was 5.6% while in developed markets it was flat.

CEO Paul Polman said: “Our business continues to demonstrate its resilience by growing competitively and consistently in tough market conditions.

“Underlying sales growth of 4.2% in the first nine months, including over 7% in emerging countries, was ahead of our markets across all four categories. This was driven by strong innovations in support of our category strategies. During the third quarter, we have made further progress in reshaping our portfolio, adding businesses in fast-growing segments with the acquisitions of Dollar Shave Club, Blueair and Seventh Generation.

“With markets remaining soft and volatile, we have continued to transform our business at an accelerated pace. We are progressing well with the fast implementation of our change programmes: net revenue management, zero based budgeting and ‘Connected 4 Growth’, making our organisation more agile and responsive to market needs. These actions keep us on track for another year of volume growth ahead of our markets, steady improvement in core operating margin and strong cash flow.”

There was no mention of the row with Tesco, which has yet to accept the price increase. Until an agreement is reached, Unilever has stopped supplying Tesco. The supermarket has typically one to two weeks’ stock, which is expected to see availability deteriorate, with some products temporarily delisted online.

Bernstein analyst Bruno Monteyne said the row meant Brexit-linked inflation was a step closer and it was good news for the industry.

“It’s the supplier’s role to pass on increased cost and it is retailer’s job to challenge price increases,” Monteyne added.

“It happens all the time and in the end they settle for what seems a fair cost allocation. However, those discussions rarely spill open in public and rarely lead to de-listings. Clearly the scale of the negotiation is much bigger than usual, but so is the event. Brexit-sized events are rare.

“This is such a large event that it may simply be that the two gorillas on both sides have decided to go through the motions of the negotiation on behalf of the industry. This isn’t about Tesco or Unilever but about all UK retailers and suppliers.”

Shares in Unilever have fallen 2.2% this morning to 3,642p. Tesco’s shares have fallen 2.2% to 196.8p today.

Morning update

Booker (BOK) sales leapt 13% to £2.5bn in the first half thanks to its acquisition of Budgens and Londis. Like-for-like sales for the 13 weeks to 9 September of non-tobacco products were also up 0.1%, but the display ban weighed heavily on tobacco revenues, which fell 5.6%. Booker internet sales jumped 10% to £506m (excluding Budgens and Londis). The group said integration of Londis and Budgens was going well and India was performing as expected.

Operating profits at the wholesale group rose 9% to £81.4m and pre-tax profits increased 9% to £81m.

CEO Charles Wilson added: “This was a good half. Our plans to ‘Focus, Drive and Broaden’ the business remain on track. We strive to improve choice, prices and service for our catering, retail and small business customers. Londis and Budgens joined the group last September and the turnaround of the businesses is going well. We look forward to helping our customers prosper in the second half.”

Trading in the first four weeks of the second half is ahead of the same period last year, but Booker warned that the challenging consumer and market environment would persist – with the UK’s food market remaining “very competitive”.

Booker increased its interim dividend to shareholders by 11% to 0.63p a share. Shares were up 1.7% on opening today at 178.5p.

An expanded food-to-go range has helped WH Smith (SMWH) increase pre-tax profits 8% to £131m in the past year. The travel business in airports and train stations sold more than ten million meal deals in the 12 months to 31 August. Revenues in the division increased 10% – 4% like for like – as all channels performed well and profits rose 9% to £87m. Smiths won a further 32 stores internationally in the year, giving it a total of 232 across 25 countries.

Revenues on the beleaguered high street fell 3% – 2% like for like – but trading profits were up 5% to £62m as the retailer concentrated on sustainable growth. CEO Stephen Clarke said stationery sales had been strong and the Zoella Book Club, launched in the summer, had been a success.

Total group sales were up 3% at £1.2bn, with like-for-like figures up 1%.

“We have delivered a good performance across the group with earnings up 10%,” Clarke added. “This performance is only possible through the ongoing hard work and commitment of our 14,000 colleagues across the business and I am grateful for their continued support. Looking ahead, we will continue to focus on profitable growth, cash generation and investing in new opportunities. While the economic environment is uncertain, we are well positioned for the current year and beyond.”

The board proposed a 12% increase in the final dividend to 43.9p per share and also announced a further share buyback of up to £50m to reflect the strong cashflow and positive outlook for the future.

The stock has jumped 2.4% to 1,562p so far this morning.

Applegreen (APGN) has announced the appointment of John Diviney as MD of UK operations. He will replace Michael O’Loughlin who is to step down from the role effective 1 December 2016 to return home to Ireland. Diviney is a chartered accountant and has been with the company since 2013, most recently as head of food systems and trading. “He has extensive commercial experience and is well placed to lead the development of our UK business,” the petrol forecourt operator said in a short statement.

Yesterday in the City

A disastrous second quarter update for Premier Foods (PFD) sent shares slumping as much as 13% yesterday as the Indian summer in the UK cooled sales of gravy and puddings. After gathering momentum at Premier, with like-for-like increases in the previous two quarters, the supplier went into reverse as a result of an unusually hot September. Branded grocery sales fell 12.4% as Bisto, Oxo and its puddings volumes declined. The shares recovered in the afternoon to finish the day 6.4% down at 48.9p.

The FTSE 100 slipped 0.7% from record highs to 7,024.01 points as currency moves weighed on some of its global companies.

Unilever fell 0.7% to 3,728.9p ahead of this morning’s Q3 update. As reported by The Grocer yesterday Unilever and Tesco are understood to be at loggerheads after the retail giant snubbed its demand for price hikes, leading to a raft of household name goods becoming unavailable via Tesco.com.

Booker finished the day 2.2% higher at 175.6p ahead of this morning’s interims and WH Smith slipped 0.6% to 1,524.9p.

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