Consumer goods giant Unilever (LSE: ULVR) used to be a UK stock market star. Today, not so much. What went wrong?
Investors loved Unilever because it sold everyday products such as Dove, Persil, Hellmann’s, and Ben & Jerry’s to around 3.8bn billion consumers in almost 200 countries. It rode the rise of the emerging markets middle class and delivered steady growth year after year.
Investors happily paid a premium for that reliability. The price-to-earnings ratio was a reassuringly expensive 23 or 24. The dividend yield hovered between 2% and 3%. That was seen as reassuring too. The board lifted shareholder payouts every year, but the shares climbed faster. Then things changed.
Why did investors fall out of love with Unilever?
The group started to look sprawling and bureaucratic, with too many brands and too little focus. Critics complained management spent too much time talking about corporate purpose instead of products and profits. Activist investors circled. As the arguments raged, investors drifted away. I joined them.
I haven’t regretted selling. The Unilever share price is down almost 11% over the last year. At roughly 4,138p, it’s trading around levels last seen in 2017.
The shares haven’t collapsed. They’ve simply gone nowhere for years. Underlying profits have also underwhelmed, as my table shows:
- 2025 – €10.1bn
- 2024 – €11.2bn
- 2023 – €9.91bn
- 2022 – €9.7bn
- 2021 – €9.7bn
The 2025 results were hit by sales slippage in Europe, Brazil, and the US, and adverse currency movements. Heavy marketing spending behind the group’s designated 30 ‘Power Brands’ also squeezed margins. Yet, Unilever still generated healthy free cash flow, of €5.9bn in 2025, and boasts a solid balance sheet. The P/E has fallen to around 15.5, while the trailing dividend yield nears 4.2%. I’m now wondering if the sell-off has been overdone.
Could this recovery story finally gain traction?
Management is working hard to simplify the business, spinning off its ice cream division last year, which includes Magnum and Ben & Jerry’s. It floated at $9.1bn. In March, it struck a deal to sell its food business, which includes Knorr and Hellmann’s, for $44.8bn. The board plans to use proceeds to reduce debt and fund €6bn of share buybacks between 2026 and 2029. Makes sense.
There are still risks. The cost-of-living crisis is back, squeezing shoppers, while higher oil prices raise manufacturing and transport costs. Consumer stocks move in cycles, and the current downturn surely has longer to run.
I think Unilever shares still look worth considering at today’s reduced price. Although, investors may have to be patient while we wait for the global economy to kick on. Will I buy it?
I think we’re looking at an exciting long-term buying opportunity, but having said that, I’m not quite excited enough to buy back in myself. I may regret that one day but I’ve made my decision and will stick with it. Investors seeking recovery potential should also check out Unilever’s FTSE 100 rival Reckitt Benckiser. It’s endured an even rougher spell and could offer better long-term value as a result.
Should you invest £5,000 in Unilever right now?
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Harvey Jones does not hold any positions in the companies mentioned.
