Unilever Braces for Slower Sales Growth in 2026 Amid Weakness in US and Europe

Unilever (LSE: UL) has trimmed its sales growth forecast for 2026, citing cooling consumer markets in both the US and Europe. This cautious stance comes after the company posted a better-than-expected sales performance in emerging markets during the fourth quarter, highlighting a split regional picture.

The shift in strategy under CEO Fernando Fernandez, who stepped in in March 2025, revolves around doubling down on personal care, beauty, and wellbeing products-categories now making up over half of Unilever's revenue. This focus follows last year's spin-off of its Magnum Ice Cream business. Despite this reorientation, Fernandez flagged a slowdown in key developed markets as a significant drag on overall growth.

Unilever's guidance for 2026 points to underlying sales growth settling at the low end of its 4% to 6% range, a downgrade from previous optimism. Market conditions in the US and Europe have softened, with price increases expected to hover near 2%, below the company's decade-long average of 3%. This suggests consumers remain cautious amid ongoing cost-of-living pressures.

North American sales growth slowed to 2.8% in Q4, although Unilever claims it's still picking up market share there. Meanwhile, European sales barely inched upward by 0.1%, underscoring the region's sluggishness. The question remains whether the sales momentum seen in emerging markets like India, Indonesia, and China can sufficiently counterbalance this drag.

Despite the less upbeat top-line outlook, Unilever is planning a c1.5 billion (about $1.8 billion) share buyback program and anticipates a modest boost to its 2025 operating profit margin of 20%. However, underlying operating profits fell slightly by 1.1% to c10.1 billion, roughly in line with market expectations.

Analysts from RBC Capital Markets note that while Unilever's restructuring efforts are showing some early signs of effectiveness, it will take time for results to fully materialize. Barclays pointed out last month that 2026 would be a critical year for the company without the distractions of last year's major leadership change and asset spin-off.

Industry watchers highlight the difficulty of competing in mature markets where consumer spending feels the pinch. "The cost of living squeeze means shoppers in developed countries are more selective, and that makes growth in branded goods tougher," said a consumer staples analyst from Quilter Cheviot.

Finance chief Srinivas Phatak emphasized that 2025 was a transformative year for Unilever, marking a clear departure from its past business model. While the emerging markets continue to be growth engines, the real test now is navigating the patchy demand in the West without losing momentum.

Early trading reflected the cautious sentiment with shares dropping more than 3% before paring losses to finish modestly lower. Unilever's path forward looks anything but smooth, with growth prospects hinging on balancing a diverse geographical split and successfully leveraging its redefined product focus.