Hindustan Unilever’s (HUL) shares dipped 2.58 per cent on Friday morning after the fast-moving consumer goods (FMCG) company reported weak volume growth in the first quarter.

According to Motilal Oswal, “During the quarter, volumes grew 3 per cent YoY versus the expectation of 7 per cent growth, as higher inflation is adversely impacting consumer spending.”

“In 1QFY24, the rural market delivered volume growth. While we expect this momentum to continue, weather patterns remain a critical factor to monitor. The company is normalising A&P spends to revive volume and bring it back to pre-COVID levels, which represents 9.8% of sales. Management mentioned about funnelling the gross margin expansion towards ad spends to drive volume growth. However, the 120bp YoY increase in ‘other expenses’ is due to a step-up in investments, the impact of new royalty incentives, and favourable benefits in the base quarter,” the brokerage said.

The shares went down by 2.58 per cent to Rs 2,632.70 at 11:20 a.m. on BSE.