In a move reflecting both personal investment strategy and broader market trends, an individual investor sold shares in Unilever (ULVR.L) last Wednesday, March 26, 2025. This decision comes amid a backdrop of fluctuating stock performance and shifting corporate strategies at the consumer goods giant, which has been a staple in many investment portfolios.
Unilever has seen its shares rise 17% over the past year, a figure that may seem promising at first glance. However, a deeper dive reveals a more complex picture; over a five-year period, the stock has only managed a 10% increase. Such lukewarm performance has raised eyebrows among investors, especially considering the company’s stature in the market.
In recent years, Unilever has been trying to regain focus by concentrating its efforts on 30 selected 'Power Brands'. Yet, the progress has been described as patchy, leaving investors questioning whether the stock has the potential for substantial growth. The author of the piece, who had around £4,500 invested in Unilever, expressed concerns about the company's price-to-earnings (P/E) ratio, which stands at approximately 24. This high ratio suggests that significant sales and profit increases are necessary to justify further share price growth.
Despite a decent dividend yield of 3.25%, the overall sentiment surrounding Unilever's stock seems to be one of caution. In an additional twist, the company recently announced that CEO Hein Schumacher would be replaced after just 18 months in the role, a change that some may interpret as a lack of confidence in the company's current direction.
As the investor weighed their options, they noted that the trading platform they used wouldn't automatically reinvest dividends due to Unilever's share price being around £45.52. This added a layer of frustration to their investment experience.
Meanwhile, analysts at Citi have maintained a positive outlook on Unilever, issuing a Buy rating and a price target of GBP52.00 as of March 28, 2025. Despite adjusting their expectations for the company's first-quarter organic sales growth (OSG) down by 0.40 percentage points to 2.5%, Citi's long-term perspective remains optimistic. They anticipate a recovery in Unilever's margins in the latter half of the year, driven by price increases that surpass the inflation of costs.
Citi analysts also pointed out that the company is expected to face challenges in the first half, including a predicted 20 basis point decline in margins. They flagged potential disruptions from the planned spin-off of Unilever's ice cream business, but remain hopeful about a recovery fueled by improved pricing power and mid-single-digit sales growth.
Despite these challenges, Citi believes that Unilever's strong free cash flow, particularly with accelerated food disposals, will enable the company to maintain a robust balance sheet and flexibility. This perspective underscores a broader belief in the long-term value of Unilever, even as the fast-moving consumer goods (FMCG) sector grapples with visibility issues.
In contrast, the author also shared their experience with JD Sports Fashion (JD.L), another stock in their portfolio that has not performed well. JD Sports shares have plummeted 55% over the last two years, with 35% of that decline occurring in the past year alone. The author, who has already incurred significant losses on this stock, remains cautiously optimistic about a potential recovery.
Despite the challenges JD Sports faces, including a slowdown in sales and profits, the author believes that the stock presents a compelling value opportunity with a P/E ratio of just 6.2. However, the volatility of the stock has made the decision to invest further a gamble. Following the purchase of additional shares, the stock dropped another 5%, further complicating the author's investment strategy.
As investors navigate the complexities of the current economic landscape, the experiences of both the individual investor and analysts at Citi highlight the delicate balance between optimism and caution in the stock market. The future of Unilever and JD Sports remains uncertain, yet the potential for recovery and growth keeps investors engaged.
In summary, while Unilever's recent performance and strategic shifts raise questions, analysts continue to express confidence in the company's long-term prospects. Conversely, JD Sports presents a cautionary tale of investment risk, emphasizing the importance of careful portfolio management in today’s volatile market.
