Navigating Crosscurrents: Unilever's Turnover Slump and Asos's Tenuous Turnaround

Isaac LaneThursday, Apr 24, 2025 3:10 am ET
4min read

In a quarter marked by uneven performance, two major consumer-facing companies—Unilever and Asos—provided mixed signals to investors. Unilever’s Q1 2025 turnover declined slightly, underscoring the challenges of global trade tensions, while Asos’s narrower loss hinted at progress in its turnaround strategy. Both firms, however, remain focused on structural shifts to navigate their respective headwinds.

Unilever: Growth Amid Sectoral Contractions

Unilever reported a 0.9% year-on-year decline in turnover to EUR14.8 billion for Q1 2025, despite 3.0% underlying sales growth. The discrepancy reflects currency headwinds and category-specific struggles. Beauty & Wellbeing thrived, rising 2.9% to EUR3.3 billion, fueled by demand for premium skincare and haircare products. Meanwhile, Home Care and Personal Care posted declines of 4.2% and 4.4%, respectively, as consumers cut discretionary spending on cleaning and grooming products.

The Foods division barely eked out 0.1% growth, though ice cream sales surged 2.8%, a bright spot as the company prepares to spin off its ice cream business into Magnum Ice Cream Co by Q4 2025. The new entity, to be listed in Amsterdam, London, and New York, aims to unlock value through focused management of its fastest-growing category.

Unilever reaffirmed its full-year outlook of 3%-5% underlying sales growth and a "modest improvement" in operating margins. Investors will monitor whether the demerger helps offset pressures in slower-moving categories.

Asos: Cost Cuts Offset Revenue Slump

Online fashion retailer Asos narrowed its interim pretax loss to GBP241.5 million (down from GBP270 million a year earlier) despite a 14% revenue drop to GBP1.30 billion. The improvement stemmed from drastic cost reductions: cost of sales fell 21%, and distribution expenses dropped 20%, as the company slashed markdowns and streamlined logistics.

The Asos Design brand, a key pillar of its vertical integration strategy, saw UK sales rise 9%, signaling renewed consumer appetite for its in-house apparel. Partner brands also gained traction, though the broader retail sector remains burdened by overstocked inventories and shifting consumer preferences.

The company projects FY2025 adjusted EBITDA to grow by at least 60% to GBP130-150 million, even as full-year revenue is expected to land at the lower end of its previously guided 2%-9% decline. Management attributes this resilience to its new commercial model, which prioritizes full-price sales and speed-to-market, while emphasizing "advice-led" content to boost customer engagement.

Sector Dynamics and Investment Implications

Both firms are grappling with macroeconomic and industry-specific pressures. Unilever’s Home Care and Personal Care divisions reflect broader consumer belt-tightening, while Asos’s revenue decline underscores the retail sector’s struggle to adapt to post-pandemic spending shifts.

For Unilever, the demerger of its ice cream business is a strategic move to capitalize on premiumization trends in snacks, potentially boosting margins. However, its reliance on mature markets—where growth is sluggish—could limit upside unless emerging markets rebound.

Asos’s progress hinges on sustaining its cost discipline and leveraging its data-driven inventory management. The 9% rise in UK Design sales suggests its product pipeline is resonating, but global expansion risks remain.

Conclusion: Structural Shifts Overcome Temporary Headwinds

Unilever and Asos exemplify how consumer companies are navigating today’s challenges through asset reconfiguration and operational efficiency. Unilever’s 3%-5% full-year sales target, supported by its ice cream spinoff, aligns with its long-term margin goals. Asos’s ability to turn a deeper loss into a narrower one, while reducing debt, demonstrates the efficacy of its turnaround plan.

Crucially, both firms are prioritizing high-margin segments: Unilever’s premium ice cream and skincare, Asos’s in-house fashion. Investors should monitor execution risks—Unilever’s demerger timeline and Asos’s full-year revenue guidance—and compare these metrics against industry peers.

With Unilever’s operating margins targeting a modest 18.4% to 19% expansion and Asos’s EBITDA on track for a GBP130-150 million rebound, the path to profitability remains clear—but the journey will depend on whether these structural shifts outpace the cyclical slowdown.

In a market hungry for stability, these companies are betting that strategic bets—not just cost cuts—will deliver the growth needed to satisfy shareholders.