Unilever’s Sales, Profits Rise in First Half as Company Moves to Slash Jobs

Updated July 25 at 12:15 p.m. ET

LONDON — Unilever surprised the markets on Thursday with a 3.5 percent uptick in first-half net profit, despite lackluster sales growth and softening demand in the U.S.

That bottom-line growth boosted the shares, which closed up more than 6 percent at 46.73 pounds.

In the first six months, the owner of brands including Dove, Dermalogica and Hellmann’s saw profit reach 4 billion euros despite a modest 2.3 percent uptick in sales to 31.1 billion euros. Underlying sales were up 4.1 percent in the six months to June 30.

In the second quarter, turnover rose 2.2 percent to 16.1 billion euros, and 3.9 percent.

While the profit growth wowed analysts, sales fell short of expectations. RBC Capital Markets said in a report there was “little to criticize, and much to admire” about Unilever’s first-half performance.

“Consumer staples companies don’t often beat underlying [profit] expectations by 12 percent as Unilever has just done. We are impressed that CEO Hein Schumacher’s action plan is working, with the important proviso that competitiveness remains dismal,” wrote James Edwardes Jones in a report on Thursday.

In response, the bank increased its price target for the shares to 47 pounds from 44 pounds.

It wasn’t all rosy: He also pointed to Unilever’s “disappointing competitiveness, which has shown no improvement,” and estimated that the company’s market share had fallen in the period.

Jefferies described the profit performance as “staggering,” in a good way, despite Unilever falling short of analysts’ sales expectations for the second quarter.

Hein Schumacher, Unilever’s chief executive officer, said the company is focused on driving “high-quality sales growth and gross margin expansion, led by our power brands. Over the first half, we made progress on those ambitions.”

The 30 power brands are the company’s biggest money-spinners and account for around 75 percent of turnover. In beauty, they include Dove and Vaseline.

He said the gross margin progression in the first half reflected “volume leverage, mix and net productivity, but also factors that will not repeat in the second half such as, a low prior-year comparator affected by high input costs, and carryover pricing from a period of higher inflation.”

Schumacher emphasized that the company would continue “doing fewer things, better and with greater impact,” and said there was more profit growth to come.

Unilever’s new, “comprehensive productivity program” and the previously announced separation of the Ice Cream Division will transform Unilever into a “consistently higher-performing business,” he argued.

As part of that productivity program, Unilever plans to make 7,500 office-based layoffs globally and achieve total cost savings of around 800 million euros over the next three years.

Earlier this month, British media outlets reported that, as part of the layoff plan, Unilever is set to cut a third of all office roles in Europe by the end of 2025, or around 3,200 roles.

Chief financial officer Fernando Fernandez did not confirm the numbers or the timing of the European cuts.

He said the company began a consultation process with European staff on July 10, “and we are making good progress. You will see the benefits of productivity coming more in 2025 than during this year and beyond that, of course.”

Looking ahead, Schumacher said underlying sales growth for the rest of the fiscal year would fall between a previously announced, multiyear range of 3 to 5 percent, with the majority of growth driven by volume.

Underlying operating margin for the full year is expected to be at least 18 percent, with Unilever increasing the investment behind its top brands.

Unilever’s Beauty and Wellbeing division saw the highest revenue growth in the first half. Reported sales climbed 5.1 percent to 6.5 billion euros, while underlying sales growth was 7.1 percent.

The division benefited from double-digit growth in health, well-being and prestige beauty combined, although prestige sales saw “softer growth,” in the six months, reflecting a slowdown in the U.S. beauty market, Unilever said.

According to the company, Liquid IV grew in the strong double digits with the continued success of its sugar-free variant, launch of new flavors supported by prominent social media campaigns, and ongoing international rollout.

Olly and Nutrafol contributed double-digit volume growth. Tatcha and Hourglass grew in the double digits, while Paula’s Choice was impacted by the market slowdown in the U.S., the company said.

Unilever’s prestige business is also losing a well-regarded leader. As reported, Vasiliki Petrou, head of the Prestige Division, abruptly announced her departure last month after a decade at Unilever. She built the division, which sits within Beauty and Wellbeing, from scratch, through a flurry of M&A activity.

Under Petrou’s leadership, Unilever became known for successfully integrating founder-led brands into the company with a method that respected the vision of the founder while allowing the brands to capitalize on the operational expertise and scale of the parent company.

Priya Nair, business group president, Beauty and Wellbeing, described Petrou as “a tremendous force behind the growth of Unilever Prestige, and we are grateful for all she has done to make it into the business it is today. Unilever Prestige is a pivotal force within the beauty industry and an integral part of our Beauty and Wellbeing strategy.”

Nair told WWD that Unilever is committed to growing the prestige business and is looking forward “to building on the foundations of the past 10 years to serve our consumers, and our customers.” She said Petrou’s successor will be announced in due course.