Unilever finds its footing as it sheds its cold baggage

Unilever PLC (LSE:ULVR) has had a shaky first half, but Barclays reckons the consumer goods heavyweight could be about to turn a corner.

The shares have been lagging, down nearly 6% this year, underperforming the broader European staples sector.

The company has been caught in the crossfire of a gloomy market mood, driven by slowing demand, shifting retail channels and nerves about the strength of the US consumer. But Barclays believes this pessimism might be overdone.

In a recent note, the bank reiterated its "overweight" rating on the stock, suggesting it is a good time to buy on weakness.

The analysts argue that if Unilever can deliver organic sales growth of more than 3.5% in the first half and restate its ambition for an Asia-led acceleration later this year, the company could start to claw back lost ground.

Asia is key to this story. India, Indonesia and China together make up more than a fifth of group sales, and Barclays thinks recent investment in these markets, including big brand revamps and product innovation, could lift growth in the second half.

The firm sees "mid-single digit" growth as achievable in India, supported by macro tailwinds and product refreshes.

In the US, Unilever appears to be weathering the storm better than most. It has trimmed underperforming brands, invested in premium health and wellness products, and avoided areas like laundry and home care where rivals are struggling.

Flagship brands like Dove are performing well, bolstered by a strong innovation pipeline.

Barclays also points to a wave of new product launches, including sugar-free hydration brand Liquid IV and “whole body” deodorants. It calls Unilever’s innovation strategy "better than it has been for years."

A major pivot is also underway. The planned spin-off of its ice cream division, home to Magnum, is expected to sharpen the company’s focus.

Once completed, the new-look Unilever will have a higher-growth, higher-margin profile, with a tilt towards premium products and stronger exposure to the US and India. Barclays believes this "strategic pivot" is not yet fully appreciated by the market.

Longer term, new chief executive Fernando Fernandez wants to double Unilever’s average volume growth and make half of its portfolio premium, up from 35% today.

It is an ambitious goal, but if he can pull it off, investors might find they have been offered a decent entry point.

Barclays sets a price target of 5,450p, implying meaningful upside from current levels.

The shares were up 0.7% at 4,416.5p.