Barclays has set out three preferred names in the European consumer goods and food sector as the market moves into first-quarter earnings season. The bank cautions that earnings will generally be weak and highlights the possibility that the U.S.-Israel war on Iran could create an inflation shock. Against that backdrop, Barclays prefers firms that can protect margins through further price increases while still sustaining volume growth.
L'Or e9al
Barclays keeps L'Or e9al as its leading pick in the sector. The bank says headline weakness in the first quarter masks a structurally strong growth story. Barclays forecasts Q1 organic sales growth of 3.5%, and attributes most of the shortfall versus prior estimates to the phasing in of a new SAP system in China rather than to a deterioration in underlying demand. After adjusting for the IT-related pull-forward, Barclays estimates that true underlying growth stands nearer to 5.7%.
North Asia is viewed as the main drag in the quarter, with continued luxury weakness weighing on results. Barclays expects the mechanical effect of the IT phasing to reverse in Q2, positioning the group for a markedly stronger second quarter. Over the full year, the bank singles out haircare and fragrance as the principal drivers of growth, while a recovery in skincare is framed as the key execution task.
Danone
Barclays describes Danone as one of the more defensive holdings among European staples. The bank projects Q1 organic growth of 3.0%, split roughly evenly between volume and price. A near-term overhang is the infant formula recall, which Barclays says will trim between 50 and 100 basis points from net sales due to temporary shelf disruption; the bank assumes the upper bound of that range in its modelling but notes recall-related newsflow has quieted recently.
Scanner data for infant formula in Europe remain weak, keeping the brand health of Aptamil under close observation. Barclays expects North America to remain soft through the first quarter amid ongoing coffee creamer weakness, but it anticipates a meaningful recovery beginning in Q2 as difficult shelf reset comparisons are lapped. China specialised nutrition is described as resilient, with no observed spillover from the recall. Barclays also judges the proposed Huel acquisition to be strategically sensible.
Unilever
Barclays forecasts Unilever's Q1 organic growth at 3.4%, modestly below consensus, and flags a U.S. growth gap attributable to Liquid IV alongside persistent softness in Europe. The bank notes that recovery in emerging markets is less certain given Asian energy concerns, but it retains a full-year organic sales growth estimate of 4.0% for the group.
Looking beyond near-term sales, Barclays highlights portfolio reshaping as the dominant medium-term theme for Unilever. The bank judges the separation of the Foods business to be more likely than not, and says McCormick's approach has materially altered the strategic calculus. Separately, Barclays records that Unilever's fourth-quarter revenue missed forecasts and that the company recently held discussions with Kraft Heinz about a potential merger of their food brands, according to reports.
Context and positioning
Across its preferred trio, Barclays is looking for companies that can better defend margins through another round of price increases while still holding on to volume. The bank's guidance and commentary reflect a cautious outlook for Q1, tempered by confidence that operational and portfolio strengths will support a recovery in subsequent quarters for selected names.