Unilever Defends Price Increases Amid Row with Tesco



Unilever has defended its decision to increase the prices of its household products – a move which has sparked a row with UK grocery retailer Tesco.

The consumer goods company’s Chief Financial Officer Graeme Pitkethly said on Thursday that there was nothing unusual about the price rises, considering the slump in the value of the sterling following Britain’s decision to exit the European Union. He said the increases were needed to offset rising costs and that they “have landed with” most of the company’s customers.

“We are taking price increases in the UK,” Graeme said. “That is a normal devaluation-led cycle.”

Tesco’s stock of a variety of Unilever household products, ranging from Marmite to Ben & Jerry’s ice cream and Persil, has been running low. This follows decision by the leading consumer goods company to stop making supplies to the UK’s largest grocery retailer as a result of disagreement over prices.

Unilever had reportedly requested Tesco to raise product prices by 10 percent on average, citing the decline of the pound in relation to the euro following the June 23 Brexit referendum. The British grocer refused the request.

Tesco has now removed several of Unilever’s products, including Marmite and Ben & Jerry’s ice cream, from its website. A spokesman for the grocer said these products are still available in stores, even when they may no longer be on its online site.

Pitkethly told the Wall Street Journal in an interview that pricing decisions are made in individual local markets. He noted that Unilever typically considers the effect prices rises could have on affordability by customers and if such are likely to induce a switch to cheaper products.

The chief financial officer said the consumer goods giant has noticed a €600 million ($660 million) surge in costs this year as a result of currency devaluation. He further stated that the changes in price that are being pushed for are considerably less than what the company would need to cover impact on profitability.

Pitkethly disclosed that Unilever and Tesco are working together to resolve their pricing row “pretty quickly.”

Shares of both companies opened lower on Thursday morning.

The Anglo-Dutch consumer goods giant posted third quarter results which came in better than expected, thanks to price increases effected across the globe. Underlying sales growth of 3.2 percent was recorded in the quarter, down from 5.7 percent in the same period a year ago, but higher than what analysts predicted. Sales growth on an underlying basis slowed to 5.6 percent from 8.4 percent a year ago as a result of price increases and increasing competition in emerging markets.

The WSJ, citing a person familiar with the matter, reports that Unilever has also approached UK’s second-largest consumer goods chain J Sainsbury about increasing prices by an average of about 10 percent.

Analysts believe how Unilever and Tesco settle the row between them will set the precedence on how price increases are passed across the industry.

Pitkethly said the UK market accounts for around 5 percent of sales made globally by Unilever.

Utility Stocks No Longer Safe Havens for Conservative Investors



According to CNBC, utility stocks are no longer safe choices for investors, especially stock investors who are, by nature, more conservative. Financial experts suggest that investors need to look elsewhere to realize a yield.

That is because the utilities-tracking Exchange Traded Fund or ETF (XLU) was down for an eighth time on Monday, when it fell more than one percent during morning trading. The fall sharply contrasts trading during the first part of the year when XLU rose more than 22%, heading into July. Because of the recent XLU decline, equity chief investment officer, Erin Gibbs, cautions investors not to buy stocks in utilities.

Gibbs made the following comment. “We’re getting used to lower interest rates, and we definitely see an investor behavior of more of a risk-on behavior going to more cyclical stocks.” Gibbs, who made the comment on CNBC’s “Trading Nation,” added, “I think the utilities are ripe for a pullback. Not only are their valuations very close to what the S&P already offers, they’re pretty much all close to their target prices on the underlying stocks.”

According to the CNBC report, XLU fell 9% since the beginning of July, which it its lowest drop in over four months. The fall, according to one strategist, can be directed to natural gas and electricity stocks. Phillip Streible, who works as a senior market strategist at RJO Futures, said that electricity has been hit, recently, with additional regulatory costs while natural gas rig counts have accelerated. The two developments could weigh heavily on the utilities sector – even ahead of the possible Federal Reserve rate hike for December.

Streible said, “A lot of people are playing [utilities] . . . for [the] dividend yield.” He added, “As the Fed raises rates here, you may see a shift [from] it.”

Currently, XLU is up more than 11% although the ETF has experienced its lowest level since the end of May.

According to financial experts, if you are currently investing in utility stocks or are investing in ETFs, you need to review your financial portfolio. If you are seeking a safe investment haven, you may have to direct your attention to a safer stock.

U.S. Senator Joins CFPB Fight Against Payday Loan Industry



By early next year, the Consumer Financial Protection Bureau (CFPB)’s new rules and regulations pertaining to the payday loan industry will likely take into effect. It’s only likely because there is growing opposition in Congress as many representatives want the proposal to be delayed by at least one or two years. But with President Obama finishing his term in a few months, he’ll sign it into law.

With an increasing number of congressional officials combating the CFPB’s federal regulatory framework, many leaders in Washington are taking a stand against the payday loan industry and supporting the CFPB’s mandate. The CFPB announced a number of changes early last month in Kansas City.

One of these is Ohio Democratic Senator Sherrod Brown, who supports anti-poverty organizations, consumer advocacy groups and the CFPB when it comes to financial reforms of “legalized loan sharks.”

Speaking at a press conference on Capitol Hill, Brown stood alongside Americans for Financial Reform American Federation of Teachers, the NAACP, Democracy for America and the Center for American Progress in support of the CFPB’s new provisions for payday loan businesses like Landmark Cash across the United States.

“Americans deserve protection from predatory payday lenders that have trapped many low income families in a vicious cycle of debt,” Brown said in a statement. “But the payday loan industry and its lobbyists will spend millions of dollars to try and roll back these protections.”

Brown added that he encourages consumers to make remarks to the CFPB’s 90-day comment period, which started on June 2.

The senator noted that there should be no loopholes added to the proposed regulations.

In addition to the U.S. senator, AFT president Randi Weingarten acknowledged that low-income consumers need access to other forms of credit, but she urged some common sense to enter into the conversation. She cited the fact that if someone needs to borrow money to pay for an unforeseen expense then it would be very difficult to pay back those funds 14 days later.

Despite the overwhelming endorsements for the CFPB’s 1,300-page rule, some feel that there should be a couple of additions to the initiative. Nick Bourke, director of Pew’s small-dollar loans project, for instance, recommended that the CFPB should insert lower prices, manageable installment payments and quick loan approval in its rules.

At the present time, the CFPB is putting forward a requirement that forces payday lenders to determine that borrowers can really repay the payday loan. The rationale behind the move is to protect consumers from entering a vicious cycle of debt because they were unable to pay back the loan.

CFPB director Richard Cordray has said that the federal consumer watchdog agency will likely announce more rules in the coming months. These additions will probably stem from the comment period.

Critics of the payday loan industry say these alternative financial products often send households into perpetual debt because of exorbitant interest rates and fees. Proponents of this niche argue that low- and middle-income need access to funds that they normally wouldn’t get from traditional modes of credit.

A new study found that personal finance habits of the U.S. population are horrible. It also discovered that black and Hispanic consumers are far more likely to use a payday loan than white and Asian clients.

Faith in Stocks at All Time Low



Today’s consumer is leery about investing in stocks. At least, that is what the current research shows. According to a recent news report on CNBC, most people in the US are following a 0% risk, 0% return type of mentality. In fact, a surprising number of Americans (about 54 million) said they preferred to save cash and avoid stock trading for any money they did not need for the next decade. That report recently was released by Bankrate.com.

Research shows that, overall, 25% of Americans said their most favored investment choice was real estate for long-term savings goals, followed closely by cash. Stocks and precious metals came in at a distant third while bonds were the least favored at 5%.

According to one chief financial analyst, “. . . [C]ash investments are entirely appropriate for short-term needs, such as an emergency fund. [However], they are completely inappropriate for long-term investment[s] . . . .” The Bankrate.com analyst added, “Returns on cash investments often trail the rate of inflation, with savers losing buying power as a result.”

According to the news summary, younger millennials, or individuals from 18 to 25 years old, selected cash as their preferred investment for any money they would not need for at least a decade. According to a separate finding from the Office of National Statistics in the UK, millennials are less likely to own real estate or a home because of the cost. Researchers found that older generations were more likely to choose real estate as their top pick for a long-term type investment.

Financial advisers add that a preference for real estate is helpful for long-term investment goals. However, stock market apathy is not good for anyone trying to achieve long-term financial objectives. The report indicates that, even with recent volatility in stock market trading, the S&P 500 has also gained 6% while cash investments have yielded, on average, under 1%.