Opening Quote: Unilever bids to show resilience; Debenhams has a rethink

Unilever – or, to use its new name, Unileverageduptobuybacksharesandpacifyshortterminvestors – had already indicated its new strategy ahead of today’s trading update. And, as its new name suggests, it basically involves doing what a private equity bidder might do, in order to deter a private equity bidder. But performing well in difficult markets would not do any harm, either. And that is what the group seems to have done in the last quarter.

This morning, Unilever warned that market conditions for consumer goods companies remain challenging, with sales volumes – generally – turning negative and growth down to around 2 per cent. Its markets in Europe and North America declined in the first quarter, while Brazil was still adversely affected by its economic crisis.

Against this, Unileveraged managed underlying sales growth of 2.9 per cent, against a strong comparator last year.Its refreshment, home care and personal care divisions grew ahead of their respective markets, while sales in foods were flat. Total revenue grew by 6.1 per cent to €13.3bn boosted by a positive currency impact of 2.4 per cent. Excluding the spreads business, which Unilveraged plans to sell, underlying sales growth was 3.4 per cent with volumes up 0.3 per cent.

In comparison, revenue growth in the first half of last year was much stronger, at 4.7 per cent.

Chief executive Paul Polman said:

The first quarter shows growth once more ahead of our markets. This reflects our continued investment in both innovations and brand support, and reconfirms the strength of our long term sustainable compounding growth model. The change programme ‘Connected for Growth’ which we started implementing in the autumn last year is starting to bear fruit and is making Unilever more agile and closer to the local markets, unlocking both further growth and margin.

Department store group Debenhams is another company rethinking its strategy, as it struggles in difficult market place. This morning, Sergio Bucher, the former Amazon executive brought in to turn round its fortunes, set out his plan, called “Debenhams Redesigned”.

This redesign involves:

• Making its stores a destination for “social shopping”, by offering new products, services and (unspecified) experiences
• Improving online sales by focusing on mobile
• Switching c2,000 more staff to customer-facing roles
• Reducing stock by 10 per cent
• Closing up to 10 UK stores over the next 5 years
• Exiting some brands and non-core international markets.

Its half year performance showed why this is all so needed. Debenhams’ group gross margin fell 30 bps, reducing pre-tax profit by 6.4 per cent to £87.8m. UK earnings before nasties were down 6 per cent, but international earnings rose 13 per cent. Net debt was down, though, to £217m, and dividend was maintained.

Mr Bucher said:

Our customers are changing the way they shop and we are changing too. Shopping with Debenhams should be effortless, reliable and fun whichever channel our customers use. We will be a destination for “Social Shopping” with mobile the unifying platform for interacting with our customers.

And, finally, Sky made a drama out of its nine-month results – by announcing a new $250m ‘production partnership’ with HBO, the business behind such TV hits as Game of Thrones. Their deal is a partnership to jointly commission and produce “quality” drama series, the first of which will air in 2018.

It seems to have been doing a little less well with drama of a lower quality, and football of decidedly mixed standards. Sky said its operating profits fell by 11 per cent in the nine months to the end of March, largely as a result of a £494m rise in the costs of screening live Premier League matches.

Although revenues rose by 5 per cent on a constant currency basis to £9.64bn in the period, profits were down to £1.013bn, from £1.142bn in the same period last year.

Chief executive Jeremy Darroch said:

Looking forward, we enter the final quarter of our fiscal year in good shape. Despite the broader consumer environment remaining uncertain, we continue to deliver on our strategy and are on track for the full year.

For more commentary on Burberry, Henderson and Premier League football clubs, see this morning’s Lombard column.

FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.