Unilever’s reported first-quarter sales of €12.6bn, reflecting underlying growth of 3.8% (3.6% expected). The uplift was driven by a 2.9% increase in volumes, with higher prices making up the remainder. Growth was broad-based across all business divisions.
By region, Emerging Markets continued to grow at a faster pace than Developed Markets, driven by a strong performance in India.
Full-year guidance remains unchanged, with underlying sales growth expected to be toward the lower end of its 4-6% mid-term target level.
A quarterly dividend of €0.4664 per share was announced, up 3.0%. A new €1.5bn share buyback programme begins today and is expected to complete by 6 July 2026.
The shares rose 1.5% in early trading.
Our view
Unilever had a good start to the year, with all business divisions in growth territory over the first quarter. With comparables in some key markets set to get easier over the rest of the year, full-year sales growth guidance remains on track, which buoyed markets on the day.
Unilever’s accelerating its shift toward a more focused home and personal care business. It’s already spun off its Ice-Cream business, and the sale of its Foods business is now expected to be completed in 2027 at an attractive price tag. Taken together, these moves should improve the group’s mix and strategic clarity.
But it’s a part-cash, part-stock deal for Foods. If it does go ahead, we would expect some short-term pressure on any newly received McCormick shares as investors decide whether to keep their new US-listed holding.
We’re supportive of Unilever’s sharper focus, which is concentrated on doing fewer things but doing them better. Driving sales higher from here will require gaining market share, and on that front, Unilever is starting to deliver thanks to its recent advertising initiatives – more on that later.
Emerging markets are the real growth lever in our view. Despite some unfavourable tax changes in India, digital initiatives and a shift in focus towards more premium products are helping to grow the top line. And with these end-markets generally improving, we see a long runway of growth ahead if Unilever can execute well.
The group’s collection of 30 so-called ‘Power Brands’ is its beating heart, making up the majority of group sales. We expect continued investment behind these names, with brand and marketing investment now standing at 16.1% of last year’s revenue, its highest in a decade.
Margins have been trending higher for some time, and that’s forecast to continue this year too. This is a clear sign that strategic actions and cost-cutting initiatives are starting to take effect, despite some unhelpful currency headwinds.
The Middle East conflict is likely to bring inflationary cost pressures this year. Unilever's strong brands should help to offset this through higher prices, without denting demand too much. The 4.0% forward dividend yield is supported by strong free cash flow and a robust balance sheet. But, as ever, potential returns can't be relied on.
With a handful of asset sales and macroeconomic challenges, Unilever’s valuation’s come under major pressure in recent times. But there are clear signs that management is executing well on its strategy, and with a long-term view in mind, the current valuation looks attractive. In the short term, though, there is a softer market to contend with, and the sale of its Foods business brings additional execution risk.
Environmental, social and governance (ESG) risk
The retail industry is low/medium in terms of ESG risk but varies by subsector. Online retailers are the most exposed, as are companies based in the Asia-Pacific region. The growing demand for transparency and accountability means human rights and environmental risks within supply chains have become a key risk driver. The quality and safety of products as well as their impact on society and the environment are also important considerations.
According to Sustainalytics, Unilever’s overall management of material ESG issues is strong.
Unilever's latest sustainability efforts followed global reporting standards, with the board overseeing progress and a dedicated committee tracking risks and goals. The company focuses on three main areas: improving planet health, enhancing people’s wellbeing, and fostering social inclusivity, with ambitious targets like 100% recyclable packaging by 2025 and biodegradable ingredients by 2030. However, Unilever faces criticism for its plastic pollution and struggles to meet some of its plastic-related goals, suggesting there's still work to be done.
Unilever key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.